Document ID: SEC-2013-1619-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, LLC
Posted Date: 2013-09-17T04:00Z

[Federal Register Volume 78, Number 180 (Tuesday, September 17, 2013)]
[Notices]
[Pages 57203-57205]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-22511]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70371; File No. SR-Phlx-2013-90]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the 
Exchange's Pricing Schedule

September 11, 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 August 29, 2013, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') a 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 the Exchange's Pricing Schedule with 
respect to certain pricing in Section II entitled ``Multiply Listed 
Options Fees''.\3\ While changes to the Pricing Schedule pursuant to 
this proposal are effective upon filing, the Exchange has designated 
that they become operative on September 3, 2013.
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    \3\ The pricing in Section II includes options overlying 
equities, ETFs, ETNs and indexes which are Multiply Listed.
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    The text of the proposed rule change is also 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 the proposed rule change is to amend the Exchange's 
Pricing Schedule with respect to certain pricing in Section II entitled 
``Multiply Listed Options Fees'' by eliminating a certain fee and 
rebate for certain floor transactions.
    Specifically, the Exchange proposes to eliminate certain pricing, 
established on May 1, 2013,\4\ for Specialists \5\ and Market Makers 
\6\ that are contra to a Customer order in Penny Pilot Options on 
Exchange Traded-Fund (``ETFs'') \7\ on the Exchange's floor by 
eliminating the $0.25 per contract fee that is in addition to the Floor 
Options Transaction Charges in Section II of the Pricing

[[Page 57204]]

Schedule.\8\ Additionally, the contra Customer order to the Specialist 
and Market Maker transaction, established on May 1, 2013,\9\ no longer 
will be entitled to a rebate of $0.25 per contract. The Exchange 
believes that the existing pricing structure did not provide any 
material benefit to Specialists, Market Makers, Customers or to the 
Exchange and that this new pricing will not impact trading in Penny 
Pilot Options on ETFs on the Exchange's trading floor.
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    \4\ See Securities Exchange Act Release No. 69548 (May 9, 2013) 
78 FR 28681 (May 15, 2013) (SR-PHLX-2013-49).
    \5\ A Specialist is an Exchange member who is registered as an 
options specialist pursuant to Rule 1020(a).
    \6\ 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)). Directed Participants are also market makers.
    \7\ 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.
    \8\ Specialists and Market Makers are assessed a Floor Options 
Transaction Charge of $0.25 per contract. See Section II of the 
Pricing Schedule.
    \9\ See supra note 4.
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2. Statutory Basis
    The Exchange believes that its proposal to amend its Pricing 
Schedule is consistent with Section 6(b) of the Act \10\ in general, 
and furthers the objectives of Section 6(b)(4) of the Act \11\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among Exchange members and other persons using its 
facilities.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes it is reasonable to eliminate certain pricing 
for Specialists and Market Makers that are contra to a Customer Penny 
Pilot Options on ETFs transacted on the Exchange's floor by eliminating 
the $0.25 per contract fee that is in addition to the Options 
Transaction Charges \12\ in Section II of the Pricing Schedule is 
reasonable because the Exchange has determined that the fee did not 
encourage more orders in Penny Pilot Options on ETFs to be delivered 
and executed on the Exchange's trading floor and did not provide any 
material additional opportunity for floor participants to interact with 
that order. The Exchange also proposes to eliminate this since the 
Exchange also seeks to eliminate the rebate to the Customer on the 
contra-side of a Specialist and Market Maker floor transaction in a 
Penny Pilot Option on an ETF. The Exchange determined that paying a 
rebate of $0.25 per contract to Customers on the contra-side of a 
Specialist and Market Maker Penny Pilot Options on an ETF order did not 
encourage market participants to send Customer Penny Pilot Options on 
ETFs to the Exchange's floor for execution to qualify for the rebate 
when they are contra to a Specialist or Market Maker order.
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    \12\ Specialists and Market Makers are assessed an Options 
Transaction Charge of $0.25 per contract for transacting floor 
trading ETFs in Penny Pilot Options. See Section II of the Pricing 
Schedule. The Exchange does not assess Payment for Order Flow fees 
for floor transactions. See Section II of the Pricing Schedule.
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    The Exchange's proposal to eliminate certain pricing for 
Specialists and Market Makers that are contra to a Customer Penny Pilot 
Options on ETFs transacted on the Exchange's trading floor by 
eliminating the $0.25 per contract in addition to the Options 
Transaction Charges\13\ in Section II of the Pricing Schedule is 
equitable and not unfairly discriminatory because it applies to all 
Specialists and Market Makers equally and uniformly.
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    \13\ Specialists and Market Makers are assessed an Options 
Transaction Charge of $0.25 per contract for transacting Floor ETFs 
in Penny Pilot Options. See Section II of the Pricing Schedule. The 
Exchange does not assess Payment for Order Flow fees for floor 
transactions. See Section II of the Pricing Schedule.
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    The Exchange's proposal to eliminate the $0.25 per contract rebate 
to a Customer that is contra to a Specialist or Market Maker order in a 
Penny Pilot Options on an ETF transacted on the Exchange's trading 
floor is reasonable because although Customer order flow is unique and 
such order flow may attract liquidity to the market to the benefit of 
all market participants, the rebate at hand did not attract additional 
liquidity and thus no additional benefit to market participants. The 
Exchange will uniformly eliminate for all Customers the $0.25 per 
contract rebate for orders that are contra to a Specialist or Market 
Maker order in Penny Pilot Options on ETFs transacted on the Exchange's 
trading floor so it is equitable and not unfairly discriminatory 
because it applies to all Customers.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The 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 these pricing amendments 
do not impose a burden on competition but rather that the proposed rule 
change will continue to promote competition on the Exchange and 
position the Exchange as an attractive alternative when compared to 
other options exchanges.
    The Exchange operates in a highly competitive market, comprised of 
eleven [sic] 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 
Exchange described in the above 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.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\14\ 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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    \14\ 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-2013-90 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-2013-90. 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

[[Page 57205]]

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-2013-90 and should be 
submitted on or before October 8, 2013.
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    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-22511 Filed 9-16-13; 8:45 am]
BILLING CODE 8011-01-P