Document ID: SEC-2014-1375-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2014-08-15T04:00Z

[Federal Register Volume 79, Number 158 (Friday, August 15, 2014)]
[Notices]
[Pages 48269-48274]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-19333]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72806; File No. SR-Phlx-2014-51]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Singly Listed Options

August 11, 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 August 1, 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend Section III of the Pricing Schedule 
which pertains to Singly Listed Options fees.\3\
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    \3\ Singly Listed Options fees includes options overlying 
currencies, equities, ETFs, ETNs treasury securities and indexes not 
listed on another exchange.
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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 Section III of the 
Exchange's Pricing Schedule entitled ``Singly Listed Options'' to: (1) 
Amend Options Transaction Charges; (ii) delete NASDAQ OMX Alpha 
Indexes\(TM)\ (``Alpha Indexes''),\4\ MSCI Index Options,\5\ and 
Treasury Securities \6\

[[Page 48270]]

pricing; (iii) adopt new pricing for FX Options \7\ (currencies); and 
(iv) make other technical amendments to the Pricing Schedule to clarify 
text and remove outdated text.
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    \4\ Alpha Indexes measure relative total returns of one stock 
and one exchange-traded fund share (``ETF'') underlying options 
which are also traded on the Exchange (each such combination of two 
components is referred to as an ``Alpha Pair''). The first component 
identified in an Alpha Pair (the ``Target Component'') is measured 
against the second component identified in the Alpha Pair (the 
``Benchmark Component''). Alpha Index Options contracts will be 
exercised European-style and settled in U.S. dollars. See Securities 
Exchange Act Release No. 63860 (February 7, 2011), 76 FR 7888 
(February 11, 2001) (SR-Phlx-2010-176).
    \5\ The Exchange filed to list options on the MSCI EM Index. The 
MSCI EM Index is a free float-adjusted market capitalization index 
consisting of large and midcap component securities from countries 
classified by MSCI as ``emerging markets,'' and is designed to 
measure equity market performance of emerging markets. The index 
consists of component securities from the following 21 emerging 
market countries: Brazil, Chile, China, Colombia, Czech Republic, 
Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, 
Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, 
and Turkey. See Securities Exchange Act Release No. 66420 (February 
17, 2012), 77 FR 11177 (February 24, 2012) (SR-Phlx-2011-179) (an 
order granting approval of the proposal to list and trade options on 
the MSCI EM Index). The Exchange also filed to list options on the 
MSCI EAFE Index. The MSCI EAFE Index is a free float-adjusted market 
capitalization index that is designed to measure the equity market 
performance of developed markets, excluding the U.S. and Canada. The 
MSCI EAFE Index consists of component securities from the following 
twenty-two (22) developed market countries: Australia, Austria, 
Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, 
Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, 
Portugal, Singapore, Spain, Sweden, Switzerland, and the United 
Kingdom. See Securities Exchange Act Release No. 66569 (March 9, 
2012), 77 FR 15409 (March 15, 2014) (SR-Phlx-2012-28).
    \6\ Subsection (a)(1) of Phlx Rule 1001D states that the term 
``Treasury securities'' (also known as Treasury debt securities) 
means a bond or note or other evidence of indebtedness that is a 
direct obligation of, or an obligation guaranteed as to principal or 
interest by, the United States or a corporation in which the United 
States has a direct or indirect interest (except debt securities 
guaranteed as to timely payment of principal and interest by the 
Government National Mortgage Association). Securities issued or 
guaranteed by individual departments or agencies of the United 
States are sometimes referred to by the title of the department or 
agency involved (e.g., a ``Treasury security'' is a debt instrument 
that is issued by the United States Treasury).
    \7\ For purposes of pricing of Singly Listed FX Options, this 
includes the following U.S. dollar-settled foreign currency options: 
XDB, XDE, XDN, XDS, XDA, XDM, XEH, XEV, XDZ, XDC and XDV.
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    Today, the Exchange assesses an Options Transaction Charge for 
Customers of $0.40 per contract, for Professionals,\8\ Firms \9\ and 
Broker-Dealers \10\ of $0.60 per contract and for Specialists \11\ and 
Market Makers \12\ of $0.40 per contract. These fees apply to options 
overlying currencies,\13\ equities, exchange-traded notes 
(``ETNs''),\14\ exchange-traded fund (``ETF'') \15\ and indexes.\16\ 
Today, these fees do not apply to Alpha Index Options, MSCI Index 
Options or Treasury Securities, which have separate pricing listed in 
Section III of the Pricing Schedule. The Exchange proposes to increase 
the Professional, Broker-Dealer and Firm Options Transaction Charges 
from $0.60 to $0.70 per contract for Singly Listed Options. The 
increase aligns these fees with electronic Non-Penny Pilot fees in 
Section II of the Pricing Schedule.\17\ Despite the fee increase, the 
proposal will allow the Exchange to incentivize market participants to 
transact Singly Listed Options.
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    \8\ 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).
    \9\ 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.
    \10\ The term ``Broker-Dealer'' applies to any transaction which 
is not subject to any of the other transaction fees applicable 
within a particular category.
    \11\ A Specialist is an Exchange member who is registered as an 
options specialist pursuant to Rule 1020(a).
    \12\ 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)).
    \13\ U.S. dollar-settled foreign currency options include XDB, 
XDE, XDN, XDS, XDA, XDM, XEH, XEV, XDZ, XDC and XDV.
    \14\ ETNs are also known as ``Index-Linked Securities,'' which 
are designed for investors who desire to participate in a specific 
market segment by providing exposure to one or more identifiable 
underlying securities, commodities, currencies, derivative 
instruments or market indexes of the foregoing. Index-Linked 
Securities are the non-convertible debt of an issuer that have a 
term of at least one (1) year but not greater than thirty (30) 
years. Despite the fact that Index-Linked Securities are linked to 
an underlying index, each trade as a single, exchange-listed 
security. Accordingly, rules pertaining to the listing and trading 
of standard equity options apply to Index-Linked Securities.
    \15\ An ETF is an open-ended registered investment company under 
the Investment Company Act of 1940 that has received certain 
exemptive relief from the Commission to allow secondary market 
trading in the ETF shares. ETFs are generally index-based products, 
in that each ETF holds a portfolio of securities that is intended to 
provide investment results that, before fees and expenses, generally 
correspond to the price and yield performance of the underlying 
benchmark index.
    \16\ The following index symbols will be assessed the Options 
Transaction Charges in Section III for Singly Listed Options: SOX, 
HGX and OSX.
    \17\ Professionals, Broker-Dealers and Firms are assessed a 
$0.70 per contract electronic Options Transaction Charge in Multiply 
Listed Options.
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    The Exchange proposes to delete pricing related to Alpha Indexes, 
MSCI Index Options and Treasury Securities because the Exchange no 
longer lists options on Alpha Indexes, MSCI Index Options or Treasury 
Securities. The separate pricing related to these products is not 
relevant to any product currently listed on Phlx. The Exchange proposes 
to remove the words ``treasury securities'' from the title of Section 
III.
    The Exchange proposes to adopt new pricing for FX Options 
(currently referred to as currencies in the Pricing Schedule in Section 
III and including XDB, XDE, XDN, XDS, XDA, XDM, XEH, XEV, XDZ, XDC and 
XDV). Today, as noted above, the Exchange assesses an Options 
Transaction Charge for Customer of $0.40 per contract, for 
Professional, Firm and Broker-Dealer of $0.60 per contract and for 
Specialist and Market Maker of $0.40 per contract and these fees apply 
to options overlying FX Options. The Exchange is proposing to adopt new 
pricing for FX Options to incentivize market participants to transact a 
greater number of FX Options. The Exchange also proposes to refer to 
``currencies'' as ``FX Options'' in the Pricing Schedule.
    Specifically, the Exchange proposes to pay the following Rebates 
for Adding Liquidity and assess the following per contract Fees for 
Removing Liquidity in Singly Listed FX Options for Simple Orders:

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                                                             Customer       Specialist     Market maker        Firm        Broker-dealer   Professional
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Rebate for Adding Liquidity.............................           $0.00           $0.20           $0.20           $0.00           $0.00           $0.00
Fee for Removing Liquidity..............................            0.40            0.40            0.40            0.40            0.40            0.40
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    The Exchange would add the above pricing to Section III as Part A. 
The Exchange also proposes to assess the following per contract Fees 
for Adding and Removing Liquidity in Singly Listed FX Options for 
Complex Orders:\18\
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    \18\ 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 .08(a)(i).

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                                                             Customer       Specialist     Market maker        Firm        Broker-Dealer   Professional
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Fee for Adding Liquidity................................           $0.40           $0.40           $0.40           $0.40           $0.40           $0.40
Fee for Removing Liquidity..............................            0.40            0.40            0.40            0.40            0.40            0.40
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    Simple Singly Listed FX Options Orders that are executed against 
the individual components of Complex Singly Listed FX Options Orders 
will be assessed the fees and paid the rebates in Part A. However, the 
individual components of Complex Singly Listed FX Options Orders will 
be assessed the fees in Part B. Transactions in Singly Listed FX 
Options originating on the Exchange floor will be subject to the Fee 
for Removing Liquidity. However, if one side of the transaction 
originates on the Exchange floor and any other side of the trade was 
the result of an electronically submitted order or a quote, then the 
Fees for Removing Liquidity will apply to the transactions which 
originated on

[[Page 48271]]

the Exchange floor and the contracts that are executed electronically 
will be subject to the rebates and fees, as applicable, for Simple and 
Complex Orders. The fees for FX Options executions in all electronic 
auctions including, but not limited to, the Quote Exhaust auction,\19\ 
the opening process and Complex electronic auction, including the 
Complex Order Live Auction (``COLA''),\20\ will be $0.40 per contract 
for Customer, Professional, Firm, Broker-Dealer, Specialist and Market 
Maker. PIXL \21\ Executions in FX Options will be as follows: 
Initiating Order: \22\ $0.20 per contract and all other participants: 
$0.40 per contract. The Exchange believes the proposed competitive 
pricing will incentivize market participants to transact Singly Listed 
FX Options orders on Phlx.
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    \19\ A Quote Exhaust occurs when the market at a particular 
price level on the Exchange includes a quote, and such market is 
exhausted by an inbound contra-side quote or order (``initiating 
quote or order''), and following such exhaustion, contracts remain 
to be executed from the initiating quote or order. See Exchange Rule 
1082(a)(ii)(B)(3).
    \20\ The Complex Order Live Auction (``COLA'') is the auction 
for eligible Complex Orders. See Phlx Rule 1080, Commentary .08.
    \21\ PIXL is the Exchange's price improvement mechanism known as 
Price Improvement XL or (PIXL\SM\). See Phlx Rule 1080(n).
    \22\ A member may electronically submit for execution an order 
it represents as agent on behalf of a public customer, broker-
dealer, or any other entity (``PIXL Order'') against principal 
interest or against any other order (except as provided in Rule 
1080(n)(i)(E)) it represents as agent (``Initiating Order'') 
provided it submits the PIXL order for electronic execution into the 
PIXL Auction (``Auction'') pursuant to Rule 1080. See Exchange Rule 
1080(n).
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    Finally, the Exchange proposes to remove certain notes in the 
Pricing Schedule. The Exchange proposes to remove the note applying to 
Treasury Securities, ``The Options Transaction Charges and Rebates for 
Treasury Securities will be effective as of March 1, 2013,'' because 
this note is outdated. The Exchange also proposes to delete the note 11 
in the Pricing Schedule that was applicable to MSCI Index Options and 
states, ``Non-Customer executions in MSCI Index Options will be 
assessed a surcharge of $0.05 per contract,'' because the Exchange no 
longer lists MSCI Index Options. The Exchange proposes to delete note 
12 in the Pricing Schedule, ``Options Transaction Charge--Floor will 
apply to the first 500 contract only. Each additional contract will be 
assessed an options transaction charge--floor of $0.00.'' Note 12 is 
associated with Treasury Securities, which are not currently listed on 
Phlx.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Pricing 
Schedule is consistent with Section 6(b) of the Act \23\ in general, 
and furthers the objectives of Section 6(b)(4) and (b)(5) of the Act 
\24\ 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 
customers, issuers, brokers, or dealers.
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    \23\ 15 U.S.C. 78f(b).
    \24\ 15 U.S.C. 78f(b)(4), (5).
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Singly Listed Options Transaction Charge
    The Exchange believes that increasing the Professional, Firm and 
Broker-Dealer Options Transaction Charges is reasonable because the 
Exchange is seeking to conform fees to electronic Non-Penny Pilot 
Options \25\ pricing for Multiply Listed Options \26\ in order to 
recoup the operational costs \27\ for Singly Listed Options. Also, the 
Exchange believes the fees are reasonable because the proposed fees are 
within the range of similar fees assessed at other exchanges.\28\
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    \25\ All Singly Listed Options are Non-Penny Pilot Options.
    \26\ See Section II of the Pricing Schedule.
    \27\ By way of example, in analyzing an obvious error, the 
Exchange would have additional data points available in establishing 
a theoretical price for a Multiply Listed Option as compared to a 
Singly Listed Option, which requires additional analysis and 
administrative time to comply with Exchange rules to resolve an 
obvious error.
    \28\ The Chicago Board Options Exchange, Incorporated (``CBOE'') 
assesses an $0.80 per contract fee to Customers, Broker-Dealers, 
Non-Trading Permit Holder Market Makers and Professional, Voluntary 
Professional and Joint Back-Office market participants for SPX Range 
Options (SRO) transactions, a proprietary index, in addition to a 
surcharge fee. SPX refers to options on the Standard & Poor's 500 
Index. See CBOE's Fees Schedule. In addition, NASDAQ Options Market 
LLC (``NOM'') assesses Non-Penny Pilot Fees for Removing Liquidity 
ranging from $0.85 to $0.89 per contract depending on the market 
participant. See Chapter XV, Section 2 of NOM's Rules. The Exchange 
also assesses a Professional, Broker-Dealer and Firm an electronic 
options transaction charge (Non-Penny Pilot Options) of $0.70 per 
contract for transactions in Multiply Listed Options. See Section II 
of the Exchange's Pricing Schedule.
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    The Exchange believes that increasing the Professional, Firm and 
Broker-Dealer Options Transaction Charges is equitable and not unfairly 
discriminatory because the pricing will be comparable among similar 
categories of market participants, as is the case today. Professionals, 
Firms and Broker-Dealers will be assessed the same rates ($0.70 per 
contract) and Customers, Specialists and Market Makers will continue to 
be assessed lower rates as compared to other market participants. 
Customer order flow is assessed the lowest fee because incentivizing 
members to continue to offer Customer trading opportunities in Singly 
Listed Options benefits all market participants through increased 
liquidity. The Exchange notes that Specialists and Market Makers are 
assessed lower options transaction charges as compared to other market 
participants, except Customers, because they have burdensome quoting 
obligations\29\ to the market which do not apply to Customers, 
Professionals, Firms and Broker-Dealers. The proposed differentiation 
as between Customers, Specialists and Market Makers as compared to 
Professionals, Firms and Broker-Dealers recognizes the differing 
contributions made to the liquidity and trading environment on the 
Exchange by these market participants.
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    \29\ See Rule 1014 titled ``Obligations and Restrictions 
Applicable to Specialists and Registered Options Traders.''
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Alpha Indexes, MSCI Index Options and Treasury Securities
    The Exchange's proposal to delete pricing related to Alpha Indexes, 
MSCI Index Options and Treasury Securities is reasonable because the 
Exchange no longer lists options on Alpha Indexes, MSCI Index Options 
or Treasury Securities. The Exchange's proposal to delete pricing 
related to Alpha Indexes, MSCI Index Options and Treasury Securities is 
equitable and not unfairly discriminatory because the pricing will not 
apply to any market participant.
FX Options
    The Exchange's proposal to adopt new pricing for Singly Listed FX 
Options is reasonable, equitable, and not unfairly discriminatory 
because pricing by symbol is a common practice on many U.S. options 
exchanges as a means to incentivize order flow to be sent to an 
exchange for execution in particular products. Other options exchanges 
price by symbol.\30\
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    \30\ See CBOE's Fees Schedule and the International Securities 
Exchange LLC's Fee Schedule.
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    The Exchange's proposed new Simple and Complex Order pricing in 
Singly Listed FX Options is reasonable because the Exchange desires to 
incentivize market participants to transact a greater number of Singly 
Listed FX Options on Phlx. The Exchange is offering pricing specific to 
Singly Listed FX Options because the Exchange believes that 
incentivizing Specialists and Market Makers to add increased liquidity 
in Singly Listed FX Options by offering Simple Order rebates to these 
participants will benefit all market participants through tighter 
markets and

[[Page 48272]]

order interaction. Also, providing Specialists and Market Makers an 
opportunity to earn a rebate will incentivize Specialists and Market 
Makers to interact with a greater number of Simple Orders in Singly 
Listed FX Options on the Exchange. The Exchange believes it is 
reasonable to assess lower fees to transact Singly Listed FX Options, 
as compared to other Singly Listed products, because the Exchange seeks 
to incentivize these market participants to transact a greater number 
of FX Options.
    With respect to Simple Orders, the Exchange would only pay a Rebate 
for Adding Liquidity to Specialists and Marker Makers to encourage 
order interaction in Singly Listed FX Options. All market participants 
would be assessed a $0.40 per contract Fee for Removing Liquidity in 
Singly Listed FX Options. The Exchange believes that the Simple Order 
Singly Listed FX Options Fees are equitable and not unfairly 
discriminatory because all market participants would be assessed the 
same Fees for Removing Liquidity. Also, offering only Specialists and 
Market Makers a Rebate for Adding Liquidity when transacting FX Options 
is equitable and not unreasonably discriminatory because Specialists 
and Market Makers have obligations to the market and regulatory 
requirements, \31\ which normally do not apply to other market 
participants. 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. With respect to Complex Orders, the Exchange would assess all 
market participants a $0.40 per contract Fee for Adding and Removing 
Liquidity in Singly Listed FX Options. The Exchange believes that the 
Complex Order Singly Listed FX Options Fees are equitable and not 
unfairly discriminatory because all market participants would be 
assessed the same Fees for Adding and Removing Liquidity.
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    \31\ See note 29.
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    The Exchange's proposal to assess the fees and pay the rebates in 
Part A for Simple FX Options Orders that are executed against the 
individual components of Complex FX Options Orders and assess the fees 
in Part B to the individual components of Complex FX Options Orders is 
reasonable, equitable and not unfairly discriminatory because the 
Exchange is seeking to assess fees and pay rebates for Singly Listed 
Options in a manner comparable to the current Pricing Schedule.\32\ For 
example, today, the Exchange assesses fees and pays rebates for Simple 
and Complex Orders for SPY transactions in a similar manner as proposed 
herein. Additionally, all market participants would be assessed fees 
and paid rebates for Singly Listed Options in a uniform manner.
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    \32\ See Section I of the Pricing Schedule.
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    The Exchange's proposal to assess transactions in Singly Listed FX 
Options originating on the Exchange floor the proposed FX Options Fees 
for Removing Liquidity in Section III, unless one side of the 
transaction originates on the Exchange floor and any other side of the 
trade was the result of an electronically submitted order or a quote, 
then the FX Options Fees for Removing Liquidity would apply to 
transactions which originated on the Exchange floor and electronically 
executed contracts would be subject to the rebates and fees, as 
applicable, for Simple and Complex Orders is reasonable, equitable and 
not unfairly discriminatory for the reasons which follow. The Exchange 
proposes to assess fees and pay rebates for Singly Listed FX Options in 
a manner comparable to the current Pricing Schedule.\33\ For example, 
today, the Exchange assesses fees and pays rebates for SPY transactions 
for transaction originating on the Exchange floor and electronically 
submitted transactions in a similar manner as proposed herein. The 
Exchange intends to uniformly apply its fees in the manner described 
herein to all market participants. The Exchange believes that the 
addition of this rule text in the Pricing Schedule will add clarity to 
the manner in which the Exchange will impose fees.
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    \33\ Id.
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    The Exchange's proposal to treat FX Options executions in Singly 
Listed Options which occur as part of an electronic auction, including, 
but not limited to, the Quote Exhaust Auction, opening process and 
Complex electronic auction, including COLA, in the same manner by 
assessing $0.40 per contract for all market participants is reasonable, 
equitable and not unfairly discriminatory because the Exchange is 
proposing to assess the same fee \34\ for these auctions as other 
transactions and is proposing to uniformly assess these fees to all 
market participants.
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    \34\ The proposed Singly Listed FX Options Fees for Removing 
Liquidity in Simple and Complex Options is $0.40 per contract.
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    The Exchange's proposal to assess PIXL pricing for Singly Listed FX 
Options of $0.20 per contract for the Initiating Order and $0.40 per 
contract for all market participants for all PIXL transactions is 
reasonable because the fees should encourage market participants to 
transact a greater number of PIXL Orders for the purpose of obtaining 
price improvement with respect to their orders. The $0.40 per contract 
fee is comparable to the FX Options Fees for Removing Liquidity in 
Simple and Complex Options. The Exchange's proposal to assess $0.20 per 
contract for the Initiating Order is discounted by half to encourage 
market participants to submit Initiating PIXL Orders. The Exchange 
similarly lowered the fee for the Initiating Order for options in SPY 
in order to encourage market participants to submit a greater number of 
Initiating Orders.\35\ The Exchange believes that an Initiating Order 
of $0.20 per contract is reasonable given the $0.40 per contract rate 
for all other orders in PIXL and the differential between the 
Initiating Order and all other orders is within the range of 
differentials existing on the Exchange's Pricing Schedule ($0.05 vs. 
$0.38 for SPY and $0.05 or $0.07 per contract vs. $0.30 for all other 
PIXL Orders).\36\
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    \35\ See Section I of the Pricing Schedule.
    \36\ See Section I and Section IV, Part A of the Pricing 
Schedule.
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    The Exchange's proposal to assess PIXL pricing for Singly Listed FX 
Options of $0.20 per contract for the Initiating Order and $0.40 per 
contract for all market participants for all PIXL transactions is 
equitable and not unfairly discriminatory because the Exchange proposes 
to assess all market participants transacting Singly Listed FX Options 
in PIXL these rates. Under the proposal, all market participants would 
be treated in a uniform manner with respect to FX Options Singly Listed 
PIXL orders.
    The Exchange's proposal to delete various notes from the Pricing 
Schedule is reasonable, equitable and not unfairly discriminatory 
because the notes are outdated or apply to products no longer listed on 
Phlx. By removing outdated rule text which is no longer applicable, the 
Pricing Schedule will be less confusing and refer to only current 
pricing in Section III.

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 believes that 
increasing the Professional, Firm and Broker-Dealer Options Transaction 
Charges does not create an undue burden on competition because the 
Exchange incurs higher

[[Page 48273]]

costs to list Singly Listed Options as compared to Multiply Listed 
Options and the Exchange proposes to recoup these operational costs by 
assessing uniform fees for all market participants except Customers, 
Specialists and Market Makers. Customer order flow is assessed the 
lowest fee because incentivizing members to continue to offer Customer 
trading opportunities in Singly Listed Options benefits all market 
participants through increased liquidity. Specialists and Market Makers 
are assessed lower options transaction charges as compared to other 
market participants, except Customers, because they have burdensome 
quoting obligations \37\ to the market which do not apply to Customers, 
Professionals, Firms and Broker-Dealers. The proposed differentiation 
as between Customers, Specialists and Market Makers as compared to 
Professionals, Firms and Broker-Dealers recognizes the differing 
contributions made to the liquidity and trading environment on the 
Exchange by these market participants.
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    \37\ See note 29.
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    The Exchange's proposal to delete pricing related to Alpha Indexes, 
MSCI Index Options and Treasury Securities does not create an undue 
burden on competition because the Exchange no longer lists options on 
Alpha Indexes, MSCI Index Options or Treasury Securities and the 
pricing will not apply to any market participant.
    The Exchange's proposal to adopt new pricing for Singly Listed FX 
Options does not create an undue burden on competition because pricing 
by symbol is a common practice on many U.S. options exchanges as a 
means to incentivize order flow to be sent to an exchange for execution 
in particular products.\38\ Further, incentivizing Specialists and 
Market Makers to add increased liquidity in Singly Listed FX Options by 
offering Simple Order rebates to these participants will benefit all 
market participants through tighter markets and order interaction. 
Also, by providing Specialists and Market Makers an opportunity to earn 
a rebate will incentivize Specialists and Market Makers to interact 
with a greater number of Simple Orders in Singly Listed FX Options on 
the Exchange. The Exchange believes it is reasonable to assess lower 
fees to transact Singly Listed FX Options, as compared to other Singly 
Listed products, because the Exchange seeks to incentivize these market 
participants to transact a greater number of FX Options. Specialists 
and Market Makers have obligations to the market and regulatory 
requirements,\39\ which normally do not apply to other market 
participants. With respect to Complex Orders, the Exchange would 
similarly assess all market participants a $0.40 per contract Fee for 
Adding and Removing Liquidity in Singly Listed FX Options.
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    \38\ See note 30.
    \39\ See note 29.
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    The Exchange's proposal to assess the fees and pay the rebates in 
Part A for Simple FX Options Orders that are executed against the 
individual components of Complex FX Options Orders and assess the fees 
in Part B to the individual components of Complex FX Options Orders is 
comparable to the manner in which pricing is currently applied today 
for SPY pricing \40\ and does not create an undue burden on competition 
because the Exchange uniformly applies this treatment to all market 
participants. Similarly, the Exchange's proposal to assess transactions 
in Singly Listed FX Options originating on the Exchange floor the 
proposed FX Options Fees for Removing Liquidity in Section III, unless 
one side of the transaction originates on the Exchange floor and any 
other side of the trade was the result of an electronically submitted 
order or a quote, then the Fees for Removing Liquidity will apply to 
the transactions which originated on the Exchange floor and the 
contracts that are executed electronically will be subject to the 
rebates and fees, as applicable, for Simple and Complex Orders, does 
not create an undue burden on competition because this treatment is 
comparable to the manner in which pricing is currently applied today 
for SPY pricing \41\ and does not create an undue burden on competition 
because the Exchange uniformly applies this treatment to all market 
participants. The Exchange's proposal to treat FX Options executions in 
Singly Listed Options which occur as part of an electronic auction, 
including, but not limited to, the Quote Exhaust Auction, opening 
process and Complex electronic auction, including COLA, in the same 
manner by assessing $0.40 per contract for all market participants does 
not create an undue burden on competition because the Exchange is 
proposing to assess the same fee \42\ for these auctions as other 
transactions and is proposing to uniformly assess these fees to all 
market participants.
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    \40\ See Section I of the Pricing Schedule.
    \41\ Id.
    \42\ The proposed Singly Listed FX Options Fees for Removing 
Liquidity in Simple and Complex Options is $0.40 per contract.
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    The Exchange's proposal to assess PIXL pricing for Singly Listed FX 
Options of $0.20 per contract for the Initiating Order and $0.40 per 
contract for all market participants for all PIXL transactions does not 
create an undue burden on competition because the Exchange proposes to 
assess all market participants transacting Singly Listed FX Options in 
PIXL these rates. Under the proposal, all market participants would be 
treated in a uniform manner with respect to FX Options Singly Listed 
PIXL orders.
    The Exchange operates in a highly competitive market, comprised of 
twelve options 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 described in the above proposal are 
influenced by these robust market forces and therefore must remain 
competitive with fees charged 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.

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.\43\ 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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    \43\ 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:

[[Page 48274]]

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-2014-51 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-2014-51. 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 such 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-2014-51, and should be 
submitted on or before September 5, 2014.
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    \44\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\44\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-19333 Filed 8-14-14; 8:45 am]
BILLING CODE 8011-01-P