Document ID: SEC-2014-1969-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2014-11-24T05:00Z

[Federal Register Volume 79, Number 226 (Monday, November 24, 2014)]
[Notices]
[Pages 69963-69966]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-27710]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73629; File No. SR-Phlx-2014-75]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
the Pricing Schedule

November 18, 2014.
    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 November 14, 2014 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 its Pricing Schedule to conform 
certain terminology to Rule 507, Application for Approval as an SQT, 
RSQT, RSQTO and Assignment in Options'' as it relates to Remote Market 
Makers or ``RMMs.'' The Exchange also proposes to make other clarifying 
and corrective amendments to various sections of the Pricing Schedule.
    The text of the proposed rule change is set forth below. Proposed 
new language is italicized; deleted text is in brackets.
NASDAQ OMX PHLX LLC \1\ PRICING SCHEDULE
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 OMX PSX FEES, 
PROPRIETARY DATA FEED FEES AND CO-LOCATION SERVICES FEES. AS OF JANUARY 
3, 2011, THE EXCHANGE WILL CALCULATE FEES ON A TRADE DATE BASIS.

------------
    \1\ PHLX[supreg] is a registered trademark of The NASDAQ OMX 
Group, Inc.
* * * * *
PREFACE
    For purposes of assessing fees, the following references should 
serve as guidance.
    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 Rule 1000(b)(14)). \2\
    The term ``Specialist'' applies to transactions for the account of 
a Specialist \3\ (as defined in Exchange Rule 1020(a)).
    The term ``ROT, SQT and RSQT'' applies to transactions for the 
accounts of Registered Option Traders\4\ (``ROTs''), Streaming Quote 
Traders (``SQTs''),\5\ and Remote Streaming Quote Traders (``RSQTs''). 
\6\ For purposes of the Pricing Schedule, the term ``Market Maker'' 
will be utilized to describe fees and rebates applicable to ROTs, SQTs 
and RSQTs. RSQTs may also be referred to as Remote Market Markers 
(``RMMs'').
    The term ``Firm'' applies to any transaction that is identified by 
a member or member organization for clearing in the Firm range at OCC.
    The term ``Professional'' applies to transactions for the accounts 
of Professionals (as defined in Exchange Rule 1000(b)(14)).
    The term ``Broker-Dealer'' applies to any transaction which is not 
subject to any of the other transaction fees applicable within a 
particular category.
    The term ``Joint Back Office'' or ``JBO'' \7\ applies to any 
transaction that is identified by a member or member organization for 
clearing in the Firm range at OCC and is identified with an origin code 
as a JBO. A JBO will be priced the same as a Broker-Dealer. [as of 
September 1, 2014.]
    The term ``Common Ownership'' shall mean members or member 
organizations under 75% common ownership or control.
    For purposes of determining average daily volume or volume-based 
pricing hereunder, any day that the market is not open for the entire 
trading day will be excluded from such calculation.

    \2\ Rule 1000(b)(14) provides in relevant part: ``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).
    \3\ A Specialist is an Exchange member who is registered as an 
options specialist pursuant to Rule 1020(a). An options Specialist 
includes a Remote Specialist which is [a] defined as an options 
specialist in one or more classes that does not have a physical 
presence on an Exchange floor and is approved by the Exchange 
pursuant to Rule 501.
    \4\ A Registered Option Trader is defined in Exchange Rule 
1014(b) as a regular member of the Exchange located on the trading 
floor who has received permission from the Exchange to trade in 
options for his own account. A ROT includes SQTs and RSQTs as well 
as on and off-floor ROTS.
    \5\ A Streaming Quote Trader is defined in Exchange Rule 
1014(b)(ii)(A) as an ROT who has received permission from the 
Exchange to generate and submit option quotations electronically in 
options to which such SQT is assigned.
    \6\ A Remote Streaming Quote Trader is defined in Exchange Rule 
in 1014(b)(ii)(B) as an ROT that is a member affiliated with an 
RSQTO with no physical trading floor presence who has received 
permission from the Exchange to generate and submit option 
quotations electronically in options to which such RSQT has been 
assigned. A Remote Streaming Quote Trader Organization or ``RSQTO,'' 
which may also be referred to as a Remote Market Making Organization 
(``RMO''), is a member organization in good

[[Page 69964]]

standing that satisfies the RSQTO readiness requirements in Rule 
507(a).
    \7\ A JBO participant is a member, member organization or non-
member organization that maintains a JBO arrangement with a clearing 
broker-dealer (``JBO Broker'') subject to the requirements of 
Regulation T Section 220.7 of the Federal Reserve System as further 
discussed at Exchange Rule 703.
* * * * *

A. Mini Options Fees

    The following fees will apply to Mini Options as specified in Rule 
1012, Commentary .13.

[Mini Options symbols are AAPL7, AMZN7, GLD7, GOLG7, SPY7]

----------------------------------------------------------------------------------------------------------------
                                                                  Specialist and
                                     Customer      Professional    market maker    Broker-dealer       Firm
----------------------------------------------------------------------------------------------------------------
Mini Options Transaction Fee--             $0.00           $0.03           $0.02           $0.03           $0.03
 Electronic Adding Liquidity....
Mini Options Transaction Fee--              0.00            0.09            0.04            0.09            0.09
 Electronic Removing Liquidity..
Mini Options Transaction Fee--              0.00            0.09            0.09            0.09            0.09
 Floor and QCC..................
----------------------------------------------------------------------------------------------------------------

    For executions that occur as part of PIXL, the following fees and 
rebates will apply:
     Initiating Order: $0.015 per contract
     PIXL Order (Contra-party to the Initiating Order): 
Customer is $0.00 and all others will be assessed a transaction fee of 
$0.03 per contract.
     PIXL Order (Contra-party to other than the Initiating 
Order): Customer will be assessed a transaction fee of $0.00 and all 
others will be assessed a transaction fee of $0.03 per contract. The 
contra-party will be assessed a transaction fee of $0.03 per contract.
    Payment for Order Flow fees will be as follows:
     Penny Pilot Options: $0.02
     All Other Options: $0.06

    QCC Transaction Fees and rebates defined in Section II do not apply 
to Mini Options. Routing Fees set forth in Section V apply to Mini 
Options.
    The Monthly Market Maker Cap and the Monthly Firm Fee Cap set forth 
in Section II as well as other options transaction fee caps, discounts 
or rebates will not apply to transactions in Mini Options.
    Mini Options volume will be included in the calculations for the 
Customer Rebate Program eligibility but will not be eligible to receive 
the rebates associated with the Customer Rebate Program.

B. Customer Rebate Program

    The Customer Rebate Tiers described below will be calculated by 
totaling Customer volume in Multiply Listed Options (including SPY) 
that are electronically-delivered and executed, except volume 
associated with electronic QCC Orders, as defined in Exchange Rule 
1080(o). Rebates will be paid on Customer Rebate Tiers according to the 
below categories. Members and member organizations under Common 
Ownership may aggregate their Customer volume for purposes of 
calculating the Customer Rebate Tiers and receiving rebates.

------------------------------------------------------------------------
                           Percentage        Category        Category
                          thresholds of  -------------------------------
                            national
                         customer volume
                          in multiply-
 Customer rebate tiers    listed equity
                        and ETF  options         A               B
                            classes,
                          excluding SPY
                             options
                            (monthly)
------------------------------------------------------------------------
Tier 1................  0.00%-0.60%.....           $0.00           $0.00
Tier 2................  Above 0.60%-               *0.10           *0.17
                         1.10%.
Tier 3................  Above 1.10%-               *0.12           *0.17
                         1.60%.
Tier 4................  Above 1.60%-                0.16            0.19
                         2.50%.
Tier 5................  Above 2.50%.....            0.17            0.19
------------------------------------------------------------------------
Category A: Rebate will be paid to members executing electronically-
  delivered Customer Simple Orders in Penny Pilot Options and Customer
  Simple Orders in Non-Penny Pilot Options in Section II symbols. Rebate
  will be paid on Customer PIXL Orders in Section II symbols that
  execute against non-Initiating Order interest. In the instance where
  member organizations qualify for Tier 4 or higher in the Customer
  Rebate Program, Customer PIXL Orders that execute against a PIXL
  Initiating Order will be paid a rebate of $0.14 per contract.
Category B: Rebate will be paid to members executing electronically-
  delivered Customer Complex Orders in Penny Pilot Options and Non-Penny
  Pilot Options in Section II symbols. Rebate will be paid on Customer
  PIXL Complex Orders in Section II symbols that execute against non-
  Initiating Order interest. In the instance where member organizations
  qualify for Tier 4 or higher in the Customer Rebate Program, Customer
  Complex PIXL Orders that execute against a Complex PIXL Initiating
  Order will be paid a rebate of $0.17 per contract. The Category B
  Rebate will not be paid when an electronically-delivered Customer
  Complex Order, including Customer Complex PIXL Order, executes against
  another electronically-delivered Customer Complex Order.
* The Exchange will pay a $0.02 per contract rebate in addition to the
  applicable Tier 2 and 3 rebate to a Specialist or Market Maker or its
  member or member organization affiliate under Common Ownership
  provided the Specialist or Market Maker has reached the Monthly Market
  Maker Cap, as defined in Section II.

* * * * *
VI. MEMBERSHIP FEES
* * * * *

                B. Streaming Quote Trader (``SQT'') Fees
------------------------------------------------------------------------
    Number of Option Class
       Assignments \22\                         SQT Fees
------------------------------------------------------------------------
Tier 1: Up to 200 classes....  $0.00 per calendar month.
Tier 2: Up to 400 classes....  $2,200 per calendar month.
Tier 3: Up to 600 classes....  $3200.00 per calendar month.
Tier 4: Up to 800 classes....  $4200.00 per calendar month.
Tier 5: Up to 1000 classes...  $5200.00 per calendar month.

[[Page 69965]]

 
Tier 6: Up to 1200 classes...  $6200.00 per calendar month.
Tier 7: All equity issues....  $7,200 per calendar month.
------------------------------------------------------------------------
\22\ In calculating the number of option class assignments, equity
  options including ETFs and ETNs will be counted. Currencies and
  indexes will not be counted in the number of option class assignments.

 C. [Remote Streaming Quote Trader Organization (``RSQTO'') Fee] Remote
                   Market Maker Organization (RMO) Fee
------------------------------------------------------------------------
    Number of Option Class
       Assignments \23\                      [RSQTO]RMO Fee
------------------------------------------------------------------------
Tier 1: less than 100 classes  $5,000 per month.
Tier 2: More than 100 classes  8,000 per month.
 and less than 999 classes.
Tier 3: 1000 or more classes.  11,000 per month.
Remote Specialist Fee \24\...  200 per option allocation per month.
------------------------------------------------------------------------
\23\ In calculating the number of option class assignments, equity
  options including ETFs and ETNs will be counted. Currencies and
  indexes will not be counted in the number of option class assignments.
\24\ The Remote Specialist Fee will be capped at $4,500 per month.

* * * * *

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 is proposing to amend various sections of the Pricing 
Schedule, which applies to options, to add rule text to clarify the 
Pricing Schedule. Each change will be discussed in more detail below.
Preface--Joint Back Office (``JBO'')
    The Exchange notes in the Preface to the Pricing Schedule that a 
JBO will be priced the same as a Broker-Dealer. [sic] as of September 
1, 2014. The Exchange believes that the date is no longer necessary and 
proposes to remove this reference.
Preface--RMM Amendment
    The Exchange proposes to add a sentence to the term ``ROT, SQT and 
RSQT'' to state that ``RSQTs may also be referred to as Remote Market 
Makers (``RMMs'').'' The Exchange already includes this statement in 
note 6 of the Preface. The Exchange proposes to add this in the 
definition of the term for ease of reference.
Chapter VI--RMO Amendment
    The Exchange also proposes to utilize this term to describe the 
fees at Chapter VI, Membership Fees, Section C, currently titled 
``Remote Streaming Quote Trader Organization Fee.'' The Exchange 
believes that titling this fee as ``Remote Market Maker Organization 
(RMO) Fee'' more specifically defines the fee. The Exchange also 
proposes to add the term ``RMO'' in place of ``RSQTO'' throughout 
Section C fee table for consistency.
Chapter VI--Adding Tier Numbers
    The Exchange proposes to amend Chapter VI, Section B, Streaming 
Quote Trader (``SQT'') Fees and Section C to assign tier numbers before 
each tier in each of those fees for ease of reference in referring to 
the fees.
    The Exchange believes that each of the aforementioned amendments 
will make the Pricing Schedule easier to understand and reference.
Section A--Mini Options Symbols
    The Exchange is also proposing to delete the Mini Options symbols 
listed in Section A, Mini Options Fees and instead note that the 
pricing applies to all Mini Options as specified in Rule 1012, 
Commentary .13. The Exchange believes this will assist the Exchange in 
maintaining a current, accurate Pricing Schedule.
Section B--Customer Rebate Program
    The Exchange is proposing to clarify rule text in Section B, 
Customer Rebate Program, related to Category B rebates. Currently the 
Category B rebate is paid to members executing electronically-delivered 
Customer Complex Orders in Penny Pilot Options and Non-Penny Pilot 
Options in Section II symbols. The rebate will be paid on Customer PIXL 
Complex Orders in Section II symbols that execute against non-
Initiating Order interest. In the instance where member organizations 
qualify for Tier 4 or higher in the Customer Rebate Program, Customer 
Complex PIXL Orders that execute against a Complex PIXL Initiating 
Order will be paid a rebate of $0.17 per contract. The Category B 
Rebate will not be paid when an electronically-delivered Customer 
Complex Order executes against another electronically-delivered 
Customer Complex Order. The Exchange proposes to amend the last 
sentence to state, ``The Category B Rebate will not be paid when an 
electronically-delivered Customer Complex Order, including Customer 
Complex PIXL Order, executes against another electronically-delivered 
Customer Complex Order.'' The Exchange believes that this sentence 
helps further clarify the manner in which the Category B rebate is 
applied today.
    The Exchange is also making other clarifying amendments in the 
definitions to correct typographical errors.
 2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \3\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \4\

[[Page 69966]]

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, in that the amendments 
will provide greater clarity to the Pricing Schedule.
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    \3\ 15 U.S.C. 78f(b).
    \4\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that removing the historical reference date 
to the JBO definition in the Preface will provide greater clarity to 
the Pricing Schedule.
    The Exchange believes that the amendments provide greater 
specificity and conforms word usage with the Rulebook with respect to 
the usage of the terms RMM and RMO. Also, by adding tier numbers, it 
will be easier to reference the various streaming fees.
    The Exchange believes that generally referring to Mini Options as 
specified in the Rulebook will assist the Exchange in maintaining a 
current list of Mini Options which are subject to Section A pricing. 
The NASDAQ Options Market LLC pricing for Mini Options does not 
specifically reference the Mini Options symbols.\5\
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    \5\ See Chapter XV, Section 2(4).
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    The Exchange believes that further clarifying the manner in which a 
Category B Customer Rebate is paid by stating that a Customer Complex 
PIXL Order is excluded in the same manner as other Customer Complex 
Orders adds further clarity to the rule text. The Exchange excludes 
Customer Complex PIXL Orders today from the Category B rebate. The 
Exchange will not change the manner in which the Exchange pays a rebate 
as a result of this filing. Customer Complex PIXL Orders will continue 
to be excluded.

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 Exchange is merely seeking 
to add greater clarity to the Pricing Schedule by conforming the RMM 
and RMO language to the current usage in Rule 507 of the Rulebook. The 
Exchange also believes that the addition of tiers provides greater 
clarity and transparency to the Pricing Schedule which benefits all 
market participants. Generally citing to all Mini Options provides 
greater accuracy to the Pricing Schedule. Specifically stating that 
Customer Complex PIXL Orders are excluded in a manner similar to 
Customer Complex Orders adds more specificity to the manner in which 
the Exchange pays the Category B Customer Rebate. Finally, correcting 
typographical errors and removing historical dates avoid confusion.

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)(ii) of the Act \6\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\7\
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    \6\ 15 U.S.C. 78s(b)(3)(a)(ii).
    \7\ 17 CFR 240.19b-4(f)(6).
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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.

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-2014-75 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-2014-75. 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-2014-75 and should be 
submitted on or before December 15, 2014.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-27710 Filed 11-21-14; 8:45 am]
BILLING CODE 8011-01-P