Document ID: SEC-2015-1397-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2015-08-20T04:00Z

[Federal Register Volume 80, Number 161 (Thursday, August 20, 2015)]
[Notices]
[Pages 50685-50689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-20546]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75702; File No. SR-Phlx-2015-68]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Customer Rebate Program

August 14, 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 August 3, 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 pricing in section B, entitled 
``Customer Rebate Program,'' \3\ of the Pricing Schedule. In 
particular, the Exchange proposes to: (i) Indicate that Category A 
rebates for certain Customer Simple Orders in Penny Pilot \4\ and non-
Penny Pilot Options will increase specifically for Tiers 3, 4, and 5; 
(ii) establish new Category B for rebates for certain electronic 
Customer PIXL\SM\ \5\ Orders; (iii) rename Category B to Category C 
regarding certain electronic Complex \6\ and Complex PIXL \7\ Orders; 
and (iv) update and clarify the explanatory notes applicable to 
Categories A, B, and C to match the proposed changes.
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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 broker or dealer or for the account of a 
``Professional'' (as that term is defined in Rule 1000(b)(14).
    \4\ The Penny Pilot was established in January 2007 and was last 
extended in 2015. See Securities Exchange Act Release Nos. 55153 
(January 23, 2007), 72 FR 4553 (January 31, 2007) (SR-Phlx-2006-74) 
(notice of filing and approval order establishing Penny Pilot); and 
75286 (June 24, 2015) (SR-Phlx-2015-54) (notice of filing and 
immediate effectiveness extending the Penny Pilot through June 30, 
2016). Non-Penny Pilot Options are options other than Penny Pilot 
Options listed on the Exchange (e.g. AAPL, BAC, EEM, FB, FXI, IWM, 
QQQ, TWTR, VXX and XLF), which can be found at http://www.nasdaqtrader.com/Micro.aspx?id=phlx.
    \5\ PIXL is the Exchange's price improvement mechanism known as 
Price Improvement XL or PIXL. See Rule 1080(n).
    \6\ A Complex Order is any order involving the simultaneous 
purchase and/or sale of two or more different options series in the 
same underlying security, priced at a net debit or credit based on 
the relative prices of the individual components, for the same 
account, for the purpose of executing a particular investment 
strategy. Furthermore, a Complex Order can also be a stock-option 
order, which is an order to buy or sell a stated number of units of 
an underlying stock or Exchange Traded Fund (``ETF'') coupled with 
the purchase or sale of options contract(s). See Exchange Rule 1080, 
Commentary .07(a)(i).
    \7\ A transaction resulting from an order that was 
electronically delivered utilizes Phlx XL. See Exchange Rules 1014 
and 1080. Electronically delivered orders do not include orders 
transacted on the Exchange floor. A transaction resulting from an 
order that is non-electronically-delivered is represented on the 
trading floor by a floor broker. See Exchange Rule 1063. All orders 
are either electronically or non-electronically delivered.
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    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 purpose of this filing is to amend pricing in section B, 
entitled ``Customer Rebate Program,'' of the Pricing Schedule. In 
particular, the Exchange proposes to: (i) Indicate that Category A 
rebates for certain Customer Simple Orders in Penny Pilot and non-Penny 
Pilot Options will increase specifically for Tiers 3, 4, and 5; (ii) 
establish new Category B for rebates for certain electronic Customer 
PIXL Orders; (iii) rename Category B to Category C regarding certain 
electronic Complex and Complex PIXL Orders; and (iv) update and clarify 
the explanatory notes applicable to Categories A, B, and C to match the 
proposed changes. The Exchange proposes these amendments in order to 
more clearly delineate how rebates apply to different types of Customer 
orders: Customer Simple Orders (Category A), Customer PIXL Orders 
(Category B), and Customer Complex Orders and Customer Complex PIXL 
Orders (Category C).
Section B--Customer Rebate Program
    Currently, the Exchange has a Customer Rebate Program consisting of 
five Tiers of Customer Rebates on two categories, A and B, of 
transactions. A Phlx member qualifies for a certain rebate Tier based 
on the percentage of total national customer volume in Multiply Listed 
equity and ETF options classes, excluding SPY \8\ options that it 
transacts monthly on Phlx. The Exchange calculates Customer volume in 
Multiply Listed Options (including SPY options) by totaling 
electronically-delivered and executed volume, excluding volume 
associated with electronic Qualified Contingent Cross (``QCC'') 
Orders,\9\ as defined in Exchange Rule 1080(o).\10\
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    \8\ SPY is the SPDR[supreg] S&P 500[supreg] ETF Trust. 
S&P[supreg], S&P 500[supreg], SPDR[supreg], and Standard & 
Poor's[supreg] are registered trademarks of Standard & 
Poor's[supreg] Financial Services LLC.
    \9\ A QCC Order is comprised of an order to buy or sell at least 
1000 contracts that is identified as being part of a qualified 
contingent trade, as that term is defined in Rule 1080(o)(3), 
coupled with a contra-side order to buy or sell an equal number of 
contracts. The QCC Order must be executed at a price at or between 
the National Best Bid and Offer and be rejected if a Customer order 
is resting on the Exchange book at the same price. A QCC Order shall 
only be submitted electronically from off the floor to the PHLX XL 
II System. See Rule 1080(o). See also Securities Exchange Act 
Release No. 64249 (April 7, 2011), 76 FR 20773 (April 13, 2011) (SR-
Phlx-2011-47) (a rule change to establish a QCC Order to facilitate 
the execution of stock/option Qualified Contingent Trades (``QCTs'') 
that satisfy the requirements of the trade through exemption in 
connection with Rule 611(d) of the Regulation NMS).
    \10\ Members and member organizations under common ownership may 
aggregate their Customer volume for purposes of calculating the 
Customer Rebate Tiers and receiving rebates. Common ownership means 
members or member organizations under 75% common ownership or 
control. See Preface to Pricing Schedule.
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    The Exchange now has rebate categories Category A and Category B to 
cover all rebates pursuant to the

[[Page 50686]]

Customer Rebate Program. The Exchange proposes to add new Category B. 
This allows the Exchange to more clearly delineate how rebates apply to 
three types of orders: Customer Simple Orders, which will be covered in 
Category A; Customer PIXL Orders, which will be covered in Category B; 
and Customer Complex Orders and Customer Complex PIXL Orders, which 
will be covered in Category C.
    Currently, a Category A rebate is 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.\11\ Rebates are 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 are paid a rebate of $0.14 per contract. Rebates 
on Customer PIXL Orders are currently capped at 4,000 contracts per 
order for Simple PIXL Orders.
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    \11\ This refers to section II of the Pricing Schedule.
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    Currently, a 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. Rebates are paid on 
Customer PIXL Complex Orders in section II symbols that execute against 
non-Initiating Order interest. Customer Complex PIXL Orders that 
execute against a Complex PIXL Initiating Order will not be paid a 
rebate under any circumstances. The Category B rebate will not be paid 
when an electronically-delivered Customer Complex Order, including a 
Customer Complex PIXL Order, executes against another electronically-
delivered Customer Complex Order. Rebates on Customer PIXL Orders are 
capped at 4,000 contracts per order leg for Complex PIXL Orders. 
Moreover, the Exchange will pay a $0.02 per contract Category A rebate 
and a $0.03 per contract Category B rebate in addition to the 
applicable Tier 2 and 3 rebate to a Specialist \12\ or Market Maker 
\13\ 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.
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    \12\ A ``Specialist'' is an Exchange member who is registered as 
an options specialist pursuant to Rule 1020(a).
    \13\ 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)).
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    Now, the rebates in all Tiers (Category A and Category B) are as 
follows:

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                                                    Percentage thresholds of
                                                   national customer volume in
             Customer rebate tiers               multiply-listed equity and ETF     Category A      Category B
                                                 options classes, excluding SPY
                                                        options (monthly)
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Tier 1........................................  0.00%-0.60%.....................           $0.00           $0.00
Tier 2........................................  Above 0.60%-1.10%...............           *0.10           *0.17
Tier 3........................................  Above 1.10%-1.60%...............           *0.12           *0.17
Tier 4........................................  Above 1.60%-2.50%...............            0.16            0.22
Tier 5........................................  Above 2.50%.....................            0.17            0.22
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    Several notes now explain the rebate schedule. Currently, there is 
an explanatory note regarding Category A,\14\ an explanatory note 
regarding Category B,\15\ and also an asterisked note that applies to 
certain sections of Category A and Category B.\16\ These are discussed 
below.
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    \14\ 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. Rebates on Customer PIXL Orders will 
be capped at 4,000 contracts per order for Simple PIXL Orders.
    \15\ 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. Customer Complex 
PIXL Orders that execute against a Complex PIXL Initiating Order 
will not be paid a rebate under any circumstances. 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. 
Rebates on Customer PIXL Orders will be capped at 4,000 contracts 
per order leg for Complex PIXL Orders.
    \16\ *The Exchange will pay a $0.02 per contract Category A 
rebate and a $0.03 per contract Category B 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.
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    As proposed, the rebates in all Tiers (Category A, Category B, and 
Category C) are as follows:

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                                        Percentage thresholds of
                                        national customer volume
                                           in multiply-listed
         Customer rebate tiers           equity and ETF options     Category A      Category B      Category C
                                         classes, excluding SPY
                                            options (monthly)
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Tier 1................................  0.00%-0.60%.............           $0.00           $0.00           $0.00
Tier 2................................  Above 0.60%-1.10%.......           *0.10           *0.10           *0.17
Tier 3................................  Above 1.10%-1.60%.......            0.15           *0.12           *0.17
Tier 4................................  Above 1.60%-2.50%.......            0.20            0.16            0.22
Tier 5................................  Above 2.50%.............            0.21            0.17            0.22
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    The Exchange proposes in Category A to change the Tier 3 Customer 
Rebate from $0.12 to $0.15.\17\ The Exchange also proposes to change 
the Tier 4 Customer Rebate from $0.16 to $0.20, and the Tier 5 Customer 
Rebate from $0.17 to $0.21. The Exchange believes that the proposed 
increased Category A rebates will continue to encourage members to send 
Customer liquidity to Phlx. The Exchange believes that the proposed 
three or four cent rebate increase in Tiers 3, 4, and 5 is reasonable 
and fair, and retains the existing structure of increasingly higher 
rebates in increasingly higher Tiers to encourage members to send 
greater liquidity while giving members an

[[Page 50687]]

opportunity to receive higher Customer rebates. Moreover, as stated in 
the explanatory note to Category A, rebates will continue to 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. The remaining provisions in the Category 
A explanatory note regarding Customer PIXL Orders (Customer PIXL Orders 
that execute against a PIXL Initiating Order are paid a rebate of $0.14 
per contract, and rebates on Customer PIXL Orders are capped at 4,000 
contracts per order for Simple PIXL Orders) are simply moved to 
proposed Category B.
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    \17\ The Exchange notes that the asterisked note will continue 
to apply to Tier 2, but not to Tier 3, of Category A. It will also 
continue to apply to Tiers 2 and 3 of Categories B and C.
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    The Exchange proposes new Category B regarding Customer PIXL orders 
that are not complex orders (these are covered in Category C). The 
proposed Tiers in Category B are exactly like the current Tiers in 
Category A. Thus, the proposed Category B Tiers include Tier 1 at 
$0.00, Tier 2 at $0.10, Tier 3 at $0.12, Tier 4 at $0.16, and Tier 5 at 
$0.17. In addition, as noted the Exchange is re-numbering the last two 
sentences of the explanatory note now applicable to Category A so that 
it becomes the new note applicable to Category B. This new note will 
state that a 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. 
Rebates on Customer PIXL Orders will be capped at 4,000 contracts per 
order for Simple PIXL Orders. The addition of Category B establishes 
three different Categories for three different types of orders. This 
allows the Exchange to more clearly delineate how rebates apply to 
three types of orders: Customer Simple Orders that will be dealt with 
in Category A, Customer PIXL Orders that will be dealt with in Category 
B, and Customer Complex Orders and Customer Complex PIXL Orders that 
will be dealt with in Category C. Moreover, the Tiers in Category B, as 
also the explanatory note, are not new but rather are simply taken 
directly from current Category A. And, as discussed below, the current 
explanatory note regarding Category B, which now discusses Complex 
Orders, is moved to Category C.
    Proposed Category C is simply current Category B that is re-named 
Category C. There are no changes as Category B becomes Category C. 
Thus, the Category C proposed Tiers include Tier 1 at $0.00, Tier 2 at 
$0.17, Tier 3 at $0.17, Tier 4 at $0.22, and Tier 5 at $0.22. As 
discussed, all of the Tiers in Category C apply to Customer Complex 
Orders and Customer Complex PIXL Orders only. In addition, the current 
Category B explanatory note is re-named to Category C so that as 
proposed it reads as follows: 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. Customer Complex PIXL Orders 
that execute against a Complex PIXL Initiating Order will not be paid a 
rebate under any circumstances. The Category C 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. Rebates on Customer PIXL Orders will 
be capped at 4,000 contracts per order leg for Complex PIXL Orders.
    Finally, the asterisked explanatory note, which currently applies 
to Categories A and B but does not apply to category C as it currently 
does not exist, will be amended to properly reflect all three 
Categories. This note discusses certain rebates in addition to the 
applicable Tier 2 and Tier 3 rebate to a Specialist or Market Maker or 
its member or member organization affiliate under Common Ownership. The 
portion of the note that now applies to Category A only will be 
expanded to Category A and B; and the portion of the note that now 
applies to Category B will apply to new Category C. Thus, the 
asterisked note would read as follows: The Exchange will pay a $0.02 
per contract Category A and B rebate and a $0.03 per contract Category 
C 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. The Exchange believes that, similarly to the other proposed 
changes, this adds clarity to the proposed new three-Category rebate 
structure where each Category applies to a different type of Customer 
Order.\18\
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    \18\ Id.
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    The Exchange believes that by making the proposed changes, 
clarifying the rebate structure, and increasing certain rebates, the 
Exchange will continue to encourage market participants to direct a 
greater number of Customer orders to the Exchange.
2. Statutory Basis
    The Exchange believes that its proposal to amend the Pricing 
Schedule is consistent with section 6(b) of the Act \19\ in general, 
and furthers the objectives of section 6(b)(4) and (b)(5) of the Act 
\20\ 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 or system which Phlx operates or 
controls, and is not designed to permit unfair discrimination between 
market participants to whom the Exchange's fees and rebates are 
applicable.
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    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(4), (5).
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Section B--Customer Rebates
    The Exchange believes that its proposal in Category A to change the 
Tier 3 Customer Rebate from $0.12 to $0.15, the Tier 4 Customer Rebate 
from $0.16 to $0.20, and the Tier 5 Customer Rebate from $0.17 to $0.21 
is reasonable. These proposed changes will allow the Exchange to 
continue to attract Customer liquidity to the Exchange. Customer orders 
bring valuable liquidity to the market, which liquidity benefits other 
market participants. 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. The Exchange believes that the proposed increased 
Category A rebates will continue to encourage members to send Customer 
liquidity to Phlx despite moving to Category B the cap on PIXL Complex 
Order rebates at the proposed 4,000 contracts per order leg. The 
Exchange believes that the proposed increase of three or four cents is 
reasonable. Additionally, the CBOE has similar [sic] rebates.\21\ 
Similarly, the Exchange believes that moving the cap regarding Customer 
PIXL Orders from Category A to proposed Category B, which deals with 
Customer PIXL Orders, is likewise reasonable under the three-Category 
structure according to

[[Page 50688]]

Customer order type. Category A rebates will continue to 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.
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    \21\ CBOE's VIP credit for certain orders in Tier 3 is $0.22 per 
contract. See CBOE's Fees Schedule. See also Securities Exchange Act 
Release No. 371588 (June 17, 2015), 80 FR 36021 (June 23, 2015) (SR-
CBOE-2015-058) (rule change increasing VIP credit for certain orders 
in Tier 3 from $0.16 per contract to $0.22 per contract, also in 
Tier 2 from $0.16 per contract to $0.21 per contract and in Tier 4 
from $0.17 per contract to $0.23 per contract).
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    The Exchange believes that its proposal to amend Category A is 
equitable and not unfairly discriminatory because these proposed 
amendments to Category A apply uniformly to all market participants to 
whom Category A applies. Moreover, the Exchange believes that the 
proposed modest Tiers increases (to $0.15, $0.20, and $0.21) retain the 
existing structure of increasingly higher rebates in increasingly 
higher Tiers to encourage members to send greater liquidity while 
giving members an opportunity to receive higher Customer rebates.
    The Exchange believes that its proposal to establish new Category B 
is reasonable. The Exchange proposes new Category B regarding Customer 
PIXL orders that are not complex orders (these are covered in Category 
C), and the proposed Tiers in Category B are exactly like the current 
Category A Tiers. In addition, the Exchange believes that it is 
reasonable to re-number the last two sentences of the explanatory note 
now applicable to Category A, which discusses Customer PIXL Orders, so 
that it becomes the new note applicable to Category B, which deals with 
Customer PIXL Orders. The Exchange believes that its proposal to add 
new Category B, which is applicable to Complex PIXL orders only, adds 
clarity to the rebate structure. The addition of Category B establishes 
three different Categories for three different types of orders. This 
allows the Exchange to more clearly delineate how rebates apply to 
three types of orders: Customer Simple Orders that will be dealt with 
in Category A, Customer PIXL Orders that will be dealt with in Category 
B, and Customer Complex Orders and Customer Complex PIXL Orders that 
will be dealt with in Category C. Moreover, the Tiers in Category B, as 
also the explanatory note, are not new but rather are simply taken 
directly from current Category A. The Exchange believes that it is 
reasonable to move the current explanatory note regarding Category B, 
which discusses Complex Orders, to Category C, which discusses Customer 
Complex Orders and Customer Complex PIXL Orders.
    The Exchange believes that its proposal to amend Category B is 
equitable and not unfairly discriminatory because these proposed 
amendments to Category B apply uniformly to all market participants to 
whom Category B applies.
    The Exchange believes that its proposal to re-name Category B as 
Category C, which as proposed deals with Customer Complex Orders and 
Customer Complex PIXL Orders, and to ensure that the explanatory note 
to Category B is properly applicable to Category C, is reasonable under 
the three-Category structure according to Customer order type. These 
proposed changes will allow the Exchange to continue to attract 
Customer liquidity to the Exchange. Customer orders bring valuable 
liquidity to the market, which liquidity benefits other market 
participants. 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. 
The Exchange believes that it is reasonable to move the cap on PIXL 
Complex Order rebates at the proposed 4,000 contracts per order leg 
from Category B to Category C, which applies to Complex Orders.
    The Exchange believes that its proposal to amend Category C is 
equitable and not unfairly discriminatory because these proposed 
amendments to Category C apply uniformly to all market participants to 
whom Category C applies.
    The Exchange also believes that amending the asterisked explanatory 
note, which currently applies to Categories A and B, to reflect all 
three Categories is reasonable under the three-Category system as 
discussed. The portion of the note that now applies to Category A only 
will be expanded to Category A and B; and the portion of the note that 
now applies to Category B will apply to new Category C. The Exchange 
believes that, similarly to the other proposed changes, this adds 
clarity to the proposed new three-Category rebate structure (Customer 
Simple Orders in Category A, Customer PIXL Orders in Category B, and 
Customer Complex Orders and Customer Complex PIXL Orders in Category 
C). In addition, The Exchange believes that it is reasonable to give 
Specialists and Market Maker or its member of member organization 
affiliate under Common Ownership to earn an additional rebate under 
certain circumstances. An increase in the activity of these market 
participants may facilitate tighter spreads, which may cause an 
additional corresponding increase in order flow from other market 
participants. Moreover, Specialists and Market Makers have obligations 
to the market and regulatory requirements, which normally do not apply 
to other market participants.\22\ They have obligations to make 
continuous markets, engage in a course of dealings reasonably 
calculated to contribute to the maintenance of a fair and orderly 
market, and not make bids or offers or enter into transactions that are 
inconsistent with a course of dealings. The differentiation as between 
Specialists and Market Makers and other market participants (e.g., 
Professionals, Broker-Dealers, and Firms) recognizes the differing 
contributions made to the liquidity and trading environment on the 
Exchange by these market participants.
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    \22\ See Rule 1014 titled ``Obligations and Restrictions 
Applicable to Specialists and Registered Options Traders.''
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    The Exchange believes that these last-discussed amendments are 
equitable and not unfairly discriminatory because they would apply 
uniformly to all market participants.
    The Exchange believes that the proposed amendments to the rebate 
structure in the Pricing Structure enables the Exchange to continue to 
incentivize members to send order flow to the Exchange to the benefit 
market participants.

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 Customer Rebate Program amendments in section B of the Pricing 
Schedule, for example, do not create an undue burden on competition 
and, like all of the amendments proposed by the Exchange, will apply 
uniformly to all market participants. Moreover, the section B 
amendments will enable the Exchange to continue to attract liquidity, 
which benefits all market participants by providing more trading 
opportunities, which attracts Specialists and Market Makers. The 
Exchange's proposal will allow it to continue to incentivize market 
participants to bring liquidity to the Exchange, as described herein.
    The Exchange operates in a highly competitive market, comprised of 
twelve exchanges, in which market participants can easily and readily 
direct order flow to competing venues if they deem fee levels at a 
particular venue to be excessive or rebates to be inadequate. 
Accordingly, the fees that are assessed and the rebates paid by the

[[Page 50689]]

Exchange, as described in the proposal, are influenced by these robust 
market forces and therefore must remain competitive with fees charged 
and rebates paid by other venues and therefore must continue to be 
reasonable and equitably allocated to those members that opt to direct 
orders to the Exchange rather than competing venues.
    The Exchange believes that its changes are pro-competitive. The 
proposed rebate changes, which are part of the Exchange's overall fee 
structure, are designed to ensure a fair and reasonable use of Exchange 
resources by allowing the Exchange to recoup costs while continuing to 
attract liquidity and offer connectivity at competitive rates to 
Exchange members and member organizations.

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.\23\ 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 necessary or appropriate in the public interest, 
for the protection of investors, or 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.
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    \23\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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-2015-68 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-2015-68. 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-2015-68 and 
should be submitted on or before September 10, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-20546 Filed 8-19-15; 8:45 am]
BILLING CODE 8011-01-P