Document ID: SEC-2013-0982-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2013-05-28T04:00Z

[Federal Register Volume 78, Number 102 (Tuesday, May 28, 2013)]
[Notices]
[Pages 31989-31993]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-12548]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69612; File No. SR-Phlx-2013-52]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing of Proposed Rule Change and Amendment No. 1 Thereto To Establish 
a Lead Market Maker Program on the NASDAQ OMX PSX Market and To Make 
Related Changes to the Schedule Fees and Rebates for Execution of 
Quotes and Orders

May 21, 2013.
    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 May 7, 2013, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change, which filing was amended by Amendment No. 1 
thereto on May 15, 2013, as described in Items 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 establish a Lead Market Maker (``LMM'') 
program on its NASDAQ OMX PSX (``PSX'') market and to make related 
changes to its schedule of fees and rebates for execution of quotes and 
orders on PSX. Phlx proposes to implement the proposed rule change as 
soon as practicable following Commission approval. The text of the 
proposed rule change is available on the Exchange's Web site at http://nasdaqomxphlx.cchwallstreet.com/nasdaqomxphlx/phlx/, at the Exchange's 
principal office, 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 Commission recently approved modifications to the rules 
governing the operation of Phlx's PSX trading platform in order to 
replace its price/size/pro rata allocation model with a price/time 
model, and to permit member organizations to register as market makers 
in securities traded on PSX.\3\ Phlx is now proposing to adopt a 
program for designating Lead Market Makers in particular securities, 
and adopting associated pricing changes. The overall purpose of these 
changes is to use financial incentives to encourage member 
organizations to become LMMs on PSX and adhere to rigorous standards of 
market quality.\4\ In doing so, the Exchange hopes to increase the 
attractiveness of PSX as a trading venue and benefit all of its market 
participants by increasing the extent to which liquidity is available 
on PSX at or near the national best bid and national best offer 
(``NBBO'').
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    \3\ Securities Exchange Act Release No. 69452 (April 25, 2013), 
78 FR 25512 (May 1, 2013) (SR-Phlx-2013-24).
    \4\ In its ``Recommendations Regarding Regulatory Responses to 
the Market Events of May 6, 2010'' (February 18, 2011) (available at 
http://www.cftc.gov/ucm/groups/public/@aboutcftc/documents/file/jacreport_021811.pdf), the Joint CFTC-SEC Advisory Committee on 
Emerging Regulatory Issues recommend that the Commission ``consider 
encouraging, through incentives or regulation, persons who regularly 
implement market maker strategies to maintain best buy and sell 
quotations which are `reasonably related to the market,' '' noting 
that such ``measures could certainly include differential pricing.'' 
Phlx believes that this proposed rule change is responsive to this 
recommendation.
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    An NMS stock that has been selected by the Exchange as a security 
for which it wishes to designate a Lead Market Maker will be known as a 
``Qualified Security.'' Initially, the Exchange expects that Qualified 
Securities will be limited to trust-issued receipts, portfolio 
depository receipts, managed fund shares, and other forms of exchange-
traded products (``ETPs''). Phlx has the discretion, however, to 
designate any NMS stock eligible for trading on PSX as a Qualified 
Security for which an LMM may be designated. The Exchange will select 
Qualified Securities based on factors that include, but may not be 
limited to, historical trading patterns and the interest expressed by 
member organizations in making a market in particular securities. 
Depending on its

[[Page 31990]]

trading volume in a particular month, a Qualified Security may be 
categorized as an ``LMM Category 1 Security'' (a Qualified Security 
with an average daily volume on all exchanges and trade reporting 
facilities during the prior three months of at least 50 million shares 
per day); an ``LMM Category 2 Security'' (a Qualified Security with an 
average daily volume on all exchanges and trade reporting facilities 
during the prior three months of at least 5 million but less than 50 
million shares per day); an ``LMM Category 3 Security'' (a Qualified 
Security with an average daily volume on all exchanges and trade 
reporting facilities during the prior three months of at least 1 
million but less than 5 million shares per day); or an ``LMM Category 4 
Security'' (a Qualified Security with an average daily volume on all 
exchanges and trade reporting facilities during the prior three months 
of less than 1 million shares per day).
    For liquidity-providing displayed quotes/orders entered by a member 
organization in a Qualified Security for which it has been designated 
as the Lead Market Maker, the Exchange proposes to pay the following 
rebates: $0.0032 per share executed for an LMM Category 1 Security, 
$0.0038 per share executed for an LMM Category 2 Security, $0.0042 per 
share executed for an LMM Category 3 Security, and $0.0048 per share 
executed for an LMM Category 4 Security.\5\
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    \5\ The Exchange notes that these rebates are being added to the 
PSX fee schedule only with respect to transactions in securities 
listed on exchanges other than NYSE. This is the case because at 
this time, the Exchange expects to designate LMMs only for ETPs, and 
NYSE does not list a significant number of ETPs at this time. Thus, 
if the Exchange proposed to designate an LMM for a NYSE-listed 
security, it would amend the fee schedule at that time to add the 
applicable pricing.
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    In order to qualify for the foregoing pricing for a given Qualified 
Security, an LMM must, through the MPID in which is registered as a PSX 
Market Maker, adhere to the following performance standards with 
respect to that Qualified Security:
     The LMM must at all times during regular market hours \6\ 
maintain a displayed quote/order on each side of the market that is 
within at least 5% of the NBBO and that has a size of at least 500 
shares; and
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    \6\ 9:30 a.m. through 4:00 p.m., Eastern Time, or such shorter 
period as may be designated by the Exchange on a day when PSX closes 
early (e.g., the day after Thanksgiving).
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     The LMM must maintain a displayed bid quotation and/or 
displayed offer quotation of at least 100 shares at the national best 
bid and/or the national best offer at least 25% of the time during 
regular market hours.
     For a period of six months following initial designation 
as an LMM for a ``Group'' of Qualified Securities,\7\ the LMM must 
adhere to such additional commitments with respect to size and/or 
percentage time at the national best bid and/or national best offer as 
to which the LMM agreed when it was selected as an LMM, measured as an 
average across all Qualified Securities in the Group. The selection 
process, and the process for an LMM to make additional market quality 
commitments, is discussed below.
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    \7\ A ``Group'' means one or more Qualified Securities 
designated from time to time by the Exchange for purposes of being 
assigned to an LMM. As discussed below, an LMM may be assigned to a 
Group of Qualified Securities through a competitive bidding process.
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    In addition, an LMM will not qualify for the pricing for LMMs for 
any Qualified Security unless the LMM, through the MPID in which it is 
registered as a PSX Market Maker (i) provides an average daily volume 
of 5 million or more shares of liquidity in all securities during the 
month and (ii) adheres to the foregoing performance standards with 
respect to at least 90% of the Qualified Securities for which it is the 
LMM. Any period of time for which an LMM has received an excused 
withdrawal under Rule 3219 will not be considered in determining an 
LMM's compliance with performance requirements.\8\
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    \8\ PSX Rule 3219 provides that a member organization may be 
temporarily excused from market making obligations based on a range 
of factors, such as equipment or connectivity problems, illness, 
vacation, non-voluntary suspension of a member organization's 
clearing arrangement, or advice of legal counsel.
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    In order to designate an LMM for a particular Qualified Security, 
the Exchange will engage in the following process:
    (1) Qualified Securities will be assigned to a ``Group,'' defined 
as one or more Qualified Securities designated from time to time by the 
Exchange for purposes of being assigned to an LMM. As with the 
determination that a particular security will be a Qualified Security, 
the assignment of Qualified Securities to a Group will be based on 
factors that include, but may not be limited to, historical trading 
patterns and the interest expressed by member organizations in making a 
market in particular securities.
    (2) Following the selection of a Group by the Exchange, the 
Exchange shall publicly announce an auction for that Group. Under such 
an auction, member organizations that are registered PSX Market Makers 
may submit a bid to become the LMM for all of the Qualified Securities 
in such Group. Bids must be submitted within the time frame specified 
by the Exchange, which time frame shall not be less than five business 
days from the date on which the auction is announced. Each bidder must 
agree to adhere to the minimum performance standards described above, 
and may, in addition, offer to adhere to heightened standards as 
follows:
     Percentage of time at which the LMM's bid quotation and/or 
offer quotation is at the national best bid and/or national best offer 
during regular market hours, in increments of 5% of the trading day 
above the base percentage of 25% of the trading day; and
     Size of bid quotation at the national best bid and offer 
quotation at the national best offer, in increments of 100 shares on 
each side above the base size of 100 shares on each side.
    The LMM for a group of Qualified Securities will be designated on 
the basis of submitted bids, as follows:
     The bidder with the highest commitment to percentage of 
time at the national best bid and/or national best offer will be 
designated as the LMM. In the event of a tie, the bidder with the 
highest commitment to size at the national best bid and national best 
offer will be designated as the LMM. In the event of a tie with respect 
to both criteria, the bidder with the highest total volume on PSX 
during the prior twelve calendar months will be designated.
    The designation will be effective on the first day of the month 
following the completion of the bidding process. If the Exchange is 
unable to allocate one or more Qualified Securities based on a bidding 
process because no member organization submits bids for it, the 
Exchange will assign the Qualified Security to the first registered 
market maker that expresses in interest in becoming the LMM. To allow 
member organizations to become aware of opportunities to become an LMM, 
the Exchange will publish on its Web site a list of Qualified 
Securities that have not been assigned an LMM.
    After serving as an LMM for a particular group of Qualified 
Securities for a period of six months, an LMM may withdraw from serving 
as LMM for any or all such Qualified Securities, by providing the 
Exchange three months' notice (or such shorter notice period as to 
which the Exchange may consent). In the event of an LMM withdrawal, the 
affected Qualified Securities will be reassigned through the auction 
process described above. In addition, the Exchange may determine that a 
particular security will cease to be a Qualified Security, but shall 
provide at

[[Page 31991]]

least three months' advance notice of such a determination.
    In the event an LMM fails to meet the performance standards 
detailed above with respect to a particular Qualified Security during a 
particular month, the Exchange will notify the LMM of such 
deficiency.\9\ If the LMM fails to meet these performance standards 
with respect to the same Qualified Security during a second consecutive 
month, the Exchange may reassign such Qualified Security to another LMM 
by conducting an auction in the manner described above.\10\
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    \9\ In addition, as noted above, the LMM will not receive LMM 
rebates with respect to that Qualified Security.
    \10\ Thus, although an LMM is required to meet market quality 
requirements with respect to only 90% of the Qualified Securities to 
which it is assigned in order to receive the rebates associated with 
being a LMM in any security, it may lose its LMM designation with 
respect to Qualified Securities for which it does not meet these 
requirements.
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    If a registered market maker for a Qualified Security that is not 
the LMM for such Qualified Security wishes to become the LMM for such 
Qualified Security, it may initiate a challenge by notifying the 
Exchange of its intention to initiate a challenge.\11\ If this occurs, 
the incumbent LMM will be notified of the challenge, and the 
performance of the incumbent LMM and the challenger will be evaluated 
over the course of the following two calendar months with respect to 
both percentage of time and size at the NBBO. More than one member 
organization may challenge an LMM at one time.
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    \11\ However, no challenge may be initiated for the first six 
months after a Qualified Security has been assigned to a particular 
LMM.
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    If, during the two-month period of the challenge, a challenger (i) 
satisfies the requirements for LMM pricing (i.e., it has an average 
daily volume of 5 million or more shares of liquidity in all securities 
during the month and satisfies the performance standards for the 
Qualified Security, as described above) and (ii) exceeds the incumbent 
LMM's time at the NBBO by a daily average of at least 5%, or equals or 
exceeds the LMM's time at the NBBO by a daily average of less than 5% 
but exceeds the LMM's size at the NBBO by a daily average of at least 
100 shares, the Qualified Security will be reassigned to the challenger 
on the first day of the following month. If there is more than one 
challenger and both satisfy the foregoing requirements, the Qualified 
Security will be assigned to the challenger with the highest time at 
the NBBO (or the highest size at the NBBO in the event of a tie). 
Moreover, during the challenge months, the challenger will be eligible 
to receive credits with respect to providing liquidity through 
displayed orders in the Qualified Security that is the subject of the 
challenge at the rates paid to an LMM, provided that it satisfied all 
volume requirements and performance standards.
    If a challenger does not, over the course of the two challenge 
months, satisfy the requirements described above for receiving 
assignment of the Qualified Security, the Qualified Security will be 
retained by the incumbent LMM. If the challenger did, however, exceed 
the average time at the NBBO and average size at the NBBO of the 
incumbent LMM during the month immediately prior to the challenge 
months, and the challenger satisfied all volume requirements and 
performance standards associated with being an LMM for the Qualified 
Security, the challenger will receive, for the months of the challenge, 
the following credits with respect to providing liquidity through 
displayed orders in the Qualified Security that is the subject of the 
challenge: $0.0031 per share executed with respect to an LMM Category 1 
Security; $0.0034 per share executed with respect to an LMM Category 2 
Security; $0.0036 per share executed with respect to an LMM Category 3 
Security; and $0.0039 per share executed with respect to an LMM 
Category 4 Security.
    If a challenger does not, over the course of the two challenge 
months, satisfy the requirements described above for receiving 
assignment of the Qualified Security, and did not exceed the average 
time at the NBBO and average size at the NBBO of the incumbent LMM 
during the month immediately prior to the challenge months, the 
Qualified Security will be retained by the incumbent LMM, the 
challenger will receive the credits otherwise applicable to its 
provision of liquidity, and the challenger may not attempt to challenge 
with respect to that Qualified Security again for a period of six 
months.\12\
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    \12\ In addition to the foregoing changes, Phlx is also 
proposing to move the location of the following sentence--``For 
purposes of determining average daily volume hereunder, any day that 
the market is not open for the entire trading day will be excluded 
from such calculation''--from the end of paragraph (a) of the 
section governing fees for order execution and routing to the 
beginning. Phlx is also changing the reference to ``Order'' in the 
heading of such section to ``Quote/Order''.
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2. Statutory Basis
    Phlx believes that the proposed rule change is consistent with the 
provisions of Section 6 of the Act,\13\ in general, and with Sections 
6(b)(4) and 6(b)(5) of the Act,\14\ in particular, in that the proposal 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, 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; 
and also in that the proposal 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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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4) and (5).
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    The primary purpose of the process for designating LMMs and the 
associated pricing incentives proposed in this rule change is to use 
higher liquidity provider rebates to encourage market participants to 
make markets in Qualified Securities and support their trading by 
adhering to performance standards that are designed to markedly 
increase the extent to which PSX is quoting at or near the NBBO, as 
well as the size of its quote. The Exchange believes that a program 
designed to increase the depth of liquidity available at or near the 
inside market will remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and protect 
investors and the public interest, because increasing such displayed 
liquidity increases opportunities for investors to have their orders 
executed at the best available prices, rather than having portions of 
their orders executed at inferior prices, and also enhances the price 
discovery process. Accordingly, the Exchange believes that the program 
has the potential to improve the prices at which investors' orders are 
executed and to dampen price volatility. Thus, the Exchange believes 
that the proposed rule change is responsive to the recommendation of 
the Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues 
that the Commission ``consider encouraging, through incentives or 
regulation, persons who regularly implement market maker strategies to 
maintain best buy and sell quotations which are `reasonably related to 
the market,''' noting that such

[[Page 31992]]

``measures could certainly include differential pricing.''\15\
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    \15\ ``Recommendations Regarding Regulatory Responses to the 
Market Events of May 6, 2010'' (February 18, 2011) (available at 
http://www.cftc.gov/ucm/groups/public/@aboutcftc/documents/file/jacreport_021811.pdf).
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    The Exchange further believes that the proposed process of 
selecting LMMs will promote just and equitable principles of trade, 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and protect investors and the 
public interest because it relies on the objective criteria of a market 
maker's commitment to time and size at the inside market, rather than a 
subjective or random process. Accordingly, the process will eliminate 
the potential for bias in the selection process and provide a mechanism 
by which bidders with the highest commitment to promotion of the 
Exchange's market quality may be selected. The Exchange further 
believes that the proposed framework for an auction, under which 
bidders are provided at least five business days to submit a bid 
following the announcement of an auction, will ensure that adequate 
time is provided to interested market makers to determine the extent of 
commitment they are prepared to make. Similarly, the process by which a 
market maker may challenge an incumbent LMM if it believes that it can 
exceed the incumbent with respect to time and/or size at the inside 
ensures that the designation of LMMs is not static, but rather may 
shift to the market maker that is best able to support the trading of a 
particular Qualified Security. The Exchange believes that this process 
also has the potential to incentivize incumbent LMMs to increase their 
commitment to price and size at the inside in order to prevent 
successful challenges. Finally, the Exchange believes that its ability 
to reassign Qualified Securities if an LMM is not achieving the 
performance standards to which it has committed will contribute to the 
ability of the program to fulfill its market quality goals by ensuring 
that a Qualified Security does not remain indefinitely assigned to an 
LMM that is not achieving the goals of the program.
    The Exchange believes that use of pricing as a means of encouraging 
commitments from LMMs is reasonable, not unfairly discriminatory, and 
reflective of an equitable allocation of fees because the higher 
rebates payable to LMMs are available only to the extent that such 
market participants satisfy the market quality requirements of 
participation in the program. Specifically:
     Phlx believes that the proposed rebates of $0.0032, 
$0.0038, $0.0042, and $0.0048 per share executed to be paid with 
respect to displayed orders of LMMs that provide liquidity are 
reasonable because they are specifically designed to incentivize member 
organizations to engage in quoting activity that will benefit all 
market participants by increasing the extent of liquidity provided at 
the inside market in Qualified Securities. Moreover, the size of the 
proposed rebates is inversely correlated with the trading volume of the 
Qualified Security. This approach is reasonable because higher rebates 
will be paid with respect to historically less liquid Qualified 
Securities so as to increase the liquidity available to support trading 
in these securities. This approach is also reasonable because the 
aggregate amount of rebates paid with respect to a lower volume 
Qualified Security will be low as long as the trading volume of the 
security remains low. As the volume increases, the rebate rate will 
decrease, thereby insuring that the aggregate rebate paid to an LMM in 
a given month for a single Qualified Security will not be excessively 
high.
     Phlx further believes that the proposed rebates payable to 
LMMs are equitable and not unreasonably discriminatory. Although only 
one market maker at a time may serve as an LMM for a given Qualified 
Security, the selection process for LMMs is open to all member 
organizations and is designed to encourage member organizations that 
wish to become LMMs to compete to provide more liquidity at or near the 
NBBO, thereby increasing the benefits of the program to all other 
market participants. Similarly, the opportunity for member 
organizations to challenge an incumbent LMM by competing to exceed its 
performance, and the ability of the Exchange to reassign Qualified 
Securities if an LMM is not consistently achieving performance 
standards, provide further assurance that the program is not 
unreasonably discriminatory and is consistent with an equitable 
allocation of fees. Finally, Phlx believes that the rebates are 
equitable and not unreasonably discriminatory because they are 
available only if, and to the extent that, the selected LMM actually 
achieves the performance standards required by the program.
     The proposed rebates payable to a challenger with respect 
to the liquidity it provides during the two months of a challenge 
period are reasonable because they correspond to the rebates payable to 
the incumbent LMM with respect to similar quoting activity. Thus, if a 
challenger is successful in its challenge, it is eligible to receive 
rebates at the same level as the incumbent for the period of the 
challenge, reflecting the fact that it exceeded the incumbent with 
respect to performance standards and therefore will receive LMM rebates 
going forward. If the challenger is unsuccessful but nevertheless 
contributed significantly to market quality during the challenge 
period, it is reasonable for it to receive rebates that are higher than 
rebates payable to other market participants but nevertheless lower 
than the LMM rebates. Moreover, the Exchange believes that this aspect 
of the proposal is consistent with an equitable allocation of fees and 
not unreasonably discriminatory because it encourages challengers to 
attempt to exceed the market quality performance of incumbents, thereby 
benefitting all market participants that trade the Qualified Security 
in question, and because the higher rebates paid to the challenger are 
consistent with its performance at a level above or near the level of 
the incumbent.
    The proposal to pay LMM rebates only with respect to securities 
listed on exchanges other than NYSE is reasonable because at this time, 
Phlx does not propose to designate NYSE-listed securities as Qualified 
Securities under the program. This is the case because the program is 
initially designed to enhance PSX's competitiveness as a venue for 
trading ETPs, and NYSE does not list significant quantities of ETPs at 
this time. Phlx further believes that this aspect of the proposal is 
consistent with an equitable allocation of fees and not unfairly 
discriminatory because it is not unusual for exchange transaction fees 
to encourage market participants to trade securities listed on 
particular markets, or particular identified securities.\16\
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    \16\ See e.g., http://usequities.nyx.com/markets/nyse-arca-equities/trading-fees (paying higher liquidity provider rebates for 
securities listed on exchanges other than NYSE); Securities Exchange 
Act Release No. 68021 (October 9, 2012), 77 FR 63406 (October 16, 
2012) (SR-NYSE-2012-50) (special pricing for identified ticker 
symbols); Securities Exchange Act Release No. 67986 (October 4, 
2012), 77 FR 61803 (October 11, 2012) (SR-NYSEArca-2012-104) (same).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Phlx does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.\17\ Phlx notes that 
it operates

[[Page 31993]]

in a highly competitive market in which market participants can readily 
favor competing venues if they deem fee levels at a particular venue to 
be excessive, or rebate opportunities available at other venues to be 
more favorable. In such an environment, Phlx must continually adjust 
its fees to remain competitive with other exchanges and with 
alternative trading systems that have been exempted from compliance 
with the statutory standards applicable to exchanges. Because 
competitors are free to modify their own fees in response, and because 
market participants may readily adjust their order routing practices, 
Phlx believes that the degree to which fee changes in this market may 
impose any burden on competition is extremely limited. In this 
instance, Phlx is introducing a new pricing programs [sic] to accompany 
changes to PSX's market structure. These changes were necessitated by 
the failure of PSX's former price/size execution algorithm to garner 
significant market share, and therefore reflect an effort to increase 
PSX's competitiveness. If the changes are unattractive to market 
participants, it is likely that PSX will fail to increase its share of 
executions. Conversely, because the proposed changes introduce new 
pricing incentive programs and reflect overall reductions in fees, if 
they are successful in attracting additional order flow, they will 
reduce costs to market participants and possibly encourage competitive 
responses from other trading venues. Accordingly, Phlx believes that 
the proposed changes will promote greater competition, but will not 
impair the ability of members or competing order execution venues to 
maintain their competitive standing in the financial markets.
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    \17\ 15 U.S.C. 78f(b)(8).
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    Phlx further believes that the process for selection of LMMs does 
not burden competition. Although only one market maker may serve as the 
LMM for a particular Qualified Security at a given time, LMMs will be 
assigned on the basis of a competitive bidding process that relies on 
objective criteria. The process for challenging incumbent LMMs and 
reassigning Qualified Securities for which an LMM is not achieving the 
program's requirements will provide further opportunities for 
competition among market makers to receive designations under the 
program. Moreover, depending on the outcome of the bidding process, 
assignments of Qualified Securities may spread across a range of market 
makers, so as to allow the financial benefits of the program to be 
dispersed among those market makers that are willing and able to 
achieve the goals of the program. Thus, the Exchange believes that the 
program will enhance competition among market makers.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission shall: (a) by order approve 
or disapprove such proposed rule change, or (b) institute proceedings 
to determine whether the proposed rule change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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-2013-52 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2013-52. 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-2013-52 and should be 
submitted on or before June 18, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-12548 Filed 5-24-13; 8:45 am]
BILLING CODE 8011-01-P