Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Sections I and II of the Pricing Schedule, 18652-18654 [2013-07011]
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18652
Federal Register / Vol. 78, No. 59 / Wednesday, March 27, 2013 / Notices
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NYSEArca–2013–28, and should be
submitted on or before April 17, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–07005 Filed 3–26–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69204; File No. SR–Phlx–
2013–31]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend
Sections I and II of the Pricing
Schedule
March 21, 2013.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 2 thereunder,
notice is hereby given that on March 15,
2013, NASDAQ OMX PHLX LLC
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘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.
mstockstill on DSK4VPTVN1PROD with NOTICES
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 at Section
I entitled ‘‘Rebates and Fees for Adding
and Removing Liquidity in Select
Symbols,’’ 3 and Section II entitled
‘‘Multiply Listed Options Fees.’’ 4
While the changes proposed herein
are effective upon filing, the Exchange
has designated that the amendments be
operative on April 1, 2013.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://
17 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 The rebates and fees in Section I apply to certain
Select Symbols which are listed in Section I of the
Pricing Schedule. The Select Symbols are listed in
Section I of the Pricing Schedule.
4 The pricing in Section II includes options
overlying equities, ETFs, ETNs and indexes which
are Multiply Listed.
1 15
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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 increase certain Simple
Order Fees for Removing Liquidity and
Firm Options Transaction Charges in
Penny and Non-Penny Pilot Options.
Despite the increase to these fees, the
Exchange believes that the fees remain
competitive with fees assessed by other
options exchanges. The Exchange is also
proposing to waive the Firm Options
Transaction Charge for the buy side of
a transaction if the same member is both
the buyer and seller of a Firm
transaction when such members are
trading in their own proprietary account
in order to incentivize Firms to add and
remove liquidity in the market.
Section I Amendments
The Exchange proposes to amend the
Simple Order fees in Section I, Part A
of the Pricing Schedule which apply to
Select Symbols. Currently, the Exchange
pays the following Simple Order Fees
for Removing Liquidity: Customer $0.00
per contract and a Specialist,5 Market
Maker,6 Firm, Broker-Dealer and
Professional 7 $0.44 per contract. The
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 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).
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Exchange proposes to amend the Simple
Order Fees for Adding Liquidity by
increasing Specialist, Market Maker,
Firm, Broker-Dealer and Professional
fees from $0.44 to $0.45 per contract.
The Exchange proposes to continue to
assess Customers no Fee for Removing
Liquidity in Simple Orders.
Section II Amendments
The Exchange proposes to increase
the Firm electronic Options Transaction
Charge in Penny Pilot Options from
$0.44 to $0.45 per contract. The
Exchange also proposes to amend the
Firm electronic Options Transaction
Charge in Non-Penny Pilot Options from
$0.45 to $0.50 per contract.
The Exchange proposes to waive the
Firm Floor Options Transaction Charge
for the buy side of a transaction if the
Firm represents both sides of a Firm
transaction when such members or its
affiliates under Common Ownership 8
are trading in their own proprietary
account.9 The Firm Floor Options
Transaction Charges in Penny Pilot and
Non-Penny Options are $0.25 per
contract. The Exchange also proposes to
relocate another Firm Options
Transaction Charges waiver for
members executing facilitation orders
pursuant to Exchange Rule 1064 when
such members are trading in their own
proprietary account (including FLEX
and Cabinet Options Transaction
Charges) to a new bullet on the Pricing
Schedule and amend that text to clarify
that the waiver applies to Floor Options
Transaction Charges, which the
Exchange proposes to capitalize for
consistency. The Exchange also
proposes to capitalize the terms ‘‘Floor’’
and ‘‘Options Transaction Charge’’ in
Section II.
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.
The Exchange believes that increasing
the Simple Order Fees For Removing
Liquidity in Select Symbols from $0.44
to $0.45 per contract is reasonable
because the fees will continue to remain
8 Common Ownership is defined as members or
member organizations under 75% common
ownership or control. See Preface to the Exchange’s
Pricing Schedule.
9 This waiver does not apply to electronic
transactions.
10 15 U.S.C. 78f(b).
11 15 U.S.C. 78f(b)(4).
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mstockstill on DSK4VPTVN1PROD with NOTICES
competitive with fees assessed by other
options exchanges.12 The Exchange
believes that increasing the Simple
Order Fees For Removing Liquidity in
Select Symbols from $0.44 to $0.45 per
contract is equitable and not unfairly
discriminatory because the Exchange
would assess all market participants,
except Customers, a $0.45 per contract
Simple Order Fee for Removing
Liquidity in Select Symbols. The
Exchange proposes to assess no Simple
Order Fee for Removing Liquidity to
Customers because Customer order flow
enhances liquidity on the Exchange for
the benefit of all market participants.
The Exchange believes that increasing
the Firm Options Transaction Charge in
Penny Pilot Options from $0.44 to $0.45
per contract reasonable because this fee
is within the range of other fees in
Section II of the Pricing Schedule. The
Exchange currently assesses an
electronic Broker-Dealer Firm Options
Transaction Charge in Penny Pilot
Options of $0.45 per contract. The
Exchange believes that increasing the
Firm Options Transaction Charge in
Non-Penny Pilot Options from $0.45 to
$0.50 per contract is reasonable because
this fee is within the range of other fees
in Section II of the Pricing Schedule.
The Exchange currently assesses an
electronic Broker-Dealer Firm Options
Transaction Charge in Penny Pilot
Options of $0.60 per contract. The
Exchange generally assesses lower fees
for Penny Pilot Options as compared to
non-Penny Pilot Option because those
securities are among the most actively
traded and liquid options. This is the
case today for Specialist, Market Maker
and Broker-Dealer Fees.13
The Exchange believes that increasing
the Firm Options Transaction Charge in
Penny Pilot Options from $0.44 to $0.45
per contract and increasing the Firm
Options Transaction Charge in NonPenny Pilot Options from $0.45 to $0.50
per contract is equitable and not
unfairly discriminatory for the reasons
which follow. Firms will continue to be
assessed a higher fee than a Customer
who pays no fee to transact electronic
Penny Pilot or Non-Penny Pilot Options.
12 NYSE Arca, Inc. assesses Customers, Firms,
Broker-Dealers, Lead Market Maker and NYSE Arca
Market Makers a $0.45 take fee for electronic
executions in Penny Pilot Issues. See NYSE Arca,
Inc.’s Fee Schedule.
13 The Exchange assesses Specialists and Market
Makers an electronic Options Transaction Charge in
Penny Pilot Options of $0.22 per contract and an
electronic Options Transaction Charge in nonPenny Pilot Options of $0.23 per contract. The
Exchange assesses Broker-Dealers an electronic
Options Transaction Charge in Penny Pilot Options
of $0.45 per contract and an electronic Options
Transaction Charge in non-Penny Pilot Options of
$0.60 per contract.
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Customer order flow brings unique
benefits to the market which benefits all
market participants through increased
liquidity. Firms will continue to be
assessed higher fees than Specialists
and Market Makers in electronic Penny
Pilot Options 14 and Non-Penny Pilot
Options 15 because Specialists and
Market Makers have obligations to the
market and regulatory requirements,
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.
The proposed differentiation as between
Customers, Specialists and Market
Makers and other market participants
recognizes the differing contributions
made to the liquidity and trading
environment on the Exchange by these
market participants, as well as the
differing mix of orders entered. BrokerDealers and Firms today pay higher fees
as compared to a Professional for
electronic Penny Pilot Options 16 and
Non-Penny Pilot 17 transactions and this
would not change. Professionals have
access to more information and
technological advantages as compared
to Customers and Professionals do not
bear the obligations of Specialists or
Market Makers. Also, Professionals
engage in trading activity similar to that
conducted by Specialists or Market
Makers. For example, Professionals
continue to join bids and offers on the
Exchange and thus compete for
incoming order flow. For these reasons,
the Exchange believes that Professionals
may be priced higher than a Customer
and may be priced equal to or higher
than a Specialist or Market Maker.
Finally, the Firm will be assessed fees
which are equal to or lower than a
Broker-Dealer. The Exchange believes
that increasing the Firm electronic
Penny Pilot and Non-Penny Options
Transaction Charges does not misalign
the current rate differentials between a
Broker-Dealer and a Firm because the
Exchange is eliminating the differential
in electronic Penny Pilot Options and
14 Specialists and Market Makers are assessed
Floor Penny Pilot Options Transaction Charges of
$0.22 per contract and Floor Non-Penny Pilot
Options Transaction Charges of $0.23 per contract.
15 Specialists and Market Makers are assessed
electronic Non-Penny Pilot Options Transaction
Charges of $0.23 per contract.
16 Professionals are assessed electronic Penny
Pilot Options Transaction Charges of $0.30 per
contract.
17 Professionals are assessed electronic NonPenny Pilot Options Transaction Charges of $0.30
per contract.
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18653
narrowing the differential from $0.15 to
$0.10 per contract in electronic NonPenny Pilot Options.
The Exchange believes that assessing
higher electronic Firm Options
Transaction Charges in both Penny Pilot
($0.45 per contract) and non-Penny Pilot
Options ($0.50 per contract) as
compared to a Firm Floor Options
Transaction Charge in both Penny Pilot
and non-Penny Pilot Options of $0.25
per contract is reasonable, equitable and
not unfairly discriminatory because
these fees recognize the distinction
between the floor order entry model and
the electronic model and the proposed
fees respond to competition along the
same lines.18 Floor participants incur
costs associated with accessing the
floor, i.e. need for a floor broker, and
other costs which are not born by
electronic members. Today, the
Exchange assesses different fees for
electronic as compared to floor
transactions for Professionals,
Specialists and Market Makers, BrokerDealers and Firms in Section II of the
Pricing Schedule.
The Exchange believes that its
proposal to waive the Firm Floor
Options Transaction Charge for the buy
side of a transaction if the same member
or its affiliates under Common
Ownership is both the buyer and seller
of a Firm transaction when such
members are trading in their own
proprietary account is reasonable
because the Exchange is proposing to
not assess fees to both sides of that
transaction in the instance where a Firm
is moving positions within the Firm and
is both the buyer and the seller. For
example, a Firm on the Exchange’s
trading floor may determine to move
positions within the Firm and today the
transaction results in an Options
Transaction Charge to both sides of the
trade. The Exchange believes as long as
the Firm is the buyer and seller for a
trade in the Firm’s proprietary account,
it is reasonable to apply only one
Options Transaction Charge.
The Exchange believes its proposal to
waive the Firm Floor Options
Transaction Charge for the buy side of
a transaction if the same member or its
affiliate under Common Ownership is
both the buyer and seller of a Firm
transaction when such members are
trading in their own proprietary account
18 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 will be either
electronically or non-electronically delivered.
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Federal Register / Vol. 78, No. 59 / Wednesday, March 27, 2013 / Notices
is equitable and not unfairly
discriminatory because the Exchange
intends to apply the waiver uniformly to
all Firms that trade in this manner in
their proprietary account, even if certain
members and chose to operate under
separate entities.
The Exchange believes that the
amendment to relocate the sentence
referencing the waiver of the Firm
Options Transaction Charges for
members executing facilitation orders
pursuant to Exchange Rule 1064 when
such members are trading in their own
proprietary account (including FLEX
and Cabinet Options Transaction
Charges) to a new bullet on the Pricing
Schedule, amending the rule text to
clarify that the waiver applies to Floor
Options Transaction Charges, and
capitalizing the words ‘‘Options
Transaction Charges’’ are reasonable,
equitable and not unfairly
discriminatory. The Exchange is not
proposing to amend the application of
the waiver, but believes that grouping
the Firm waivers separately in a new
bullet on the Pricing Schedule,
capitalizing terms for consistency in
Section II and clarifying that the waiver
is a floor waiver will prevent confusion
among market participants.
mstockstill on DSK4VPTVN1PROD with NOTICES
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 operates in a highly
competitive market, comprised of
eleven 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.
The Exchange believes that increasing
the Simple Order Fees for Removing
Liquidity in Select Symbols and Firm
Options Transaction Charges in Penny
and Non-Penny Pilot Options does not
impose a burden on competition. The
fees proposed herein are consistent with
fees on other options exchanges and
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18:10 Mar 26, 2013
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other fees assessed by Phlx.19 In
addition, the Exchange believes that the
increase to the Simple Order Fees for
Removing Liquidity will impose the
same fees on all members, except
Customers. Customer order flow brings
liquidity to the market and benefits all
market participants.
With respect to the increase to the
Firm Fees, the Exchange believes that
those fee increases do not misalign the
current rate differentials as between
market participants, but serves to
narrow or eliminate in the case of Firm
Penny Pilot Options the fee differential.
In addition, the Exchange is offering
Firms an opportunity to eliminate
Options Transaction Charges by
encouraging Firms to take liquidity. The
Exchange believes that the proposed
rule change will continue to promote
competition on the Exchange.
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.20 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.
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:
Number SR–Phlx–2013–31 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–2013–31. 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 (https://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–
2013–31 and should be submitted on or
before April 17, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–07011 Filed 3–26–13; 8:45 am]
BILLING CODE 8011–01–P
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml ); or
• Send an email to rulecomments@sec.gov. Please include File
19 See NYSE Arca, Inc.’s Fee Schedule and
Section II of the Phlx Pricing Schedule.
20 15 U.S.C. 78s(b)(3)(A)(ii).
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21 17
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CFR 200.30–3(a)(12).
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Agencies
[Federal Register Volume 78, Number 59 (Wednesday, March 27, 2013)]
[Notices]
[Pages 18652-18654]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-07011]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69204; File No. SR-Phlx-2013-31]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Sections I and II of the Pricing Schedule
March 21, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given
that on March 15, 2013, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'')
filed with the Securities and Exchange Commission (``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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
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 at
Section I entitled ``Rebates and Fees for Adding and Removing Liquidity
in Select Symbols,'' \3\ and Section II entitled ``Multiply Listed
Options Fees.'' \4\
---------------------------------------------------------------------------
\3\ The rebates and fees in Section I apply to certain Select
Symbols which are listed in Section I of the Pricing Schedule. The
Select Symbols are listed in Section I of the Pricing Schedule.
\4\ The pricing in Section II includes options overlying
equities, ETFs, ETNs and indexes which are Multiply Listed.
---------------------------------------------------------------------------
While the changes proposed herein are effective upon filing, the
Exchange has designated that the amendments be operative on April 1,
2013.
The text of the proposed rule change is available on the Exchange's
Web site at https://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 increase certain
Simple Order Fees for Removing Liquidity and Firm Options Transaction
Charges in Penny and Non-Penny Pilot Options. Despite the increase to
these fees, the Exchange believes that the fees remain competitive with
fees assessed by other options exchanges. The Exchange is also
proposing to waive the Firm Options Transaction Charge for the buy side
of a transaction if the same member is both the buyer and seller of a
Firm transaction when such members are trading in their own proprietary
account in order to incentivize Firms to add and remove liquidity in
the market.
Section I Amendments
The Exchange proposes to amend the Simple Order fees in Section I,
Part A of the Pricing Schedule which apply to Select Symbols.
Currently, the Exchange pays the following Simple Order Fees for
Removing Liquidity: Customer $0.00 per contract and a Specialist,\5\
Market Maker,\6\ Firm, Broker-Dealer and Professional \7\ $0.44 per
contract. The Exchange proposes to amend the Simple Order Fees for
Adding Liquidity by increasing Specialist, Market Maker, Firm, Broker-
Dealer and Professional fees from $0.44 to $0.45 per contract. The
Exchange proposes to continue to assess Customers no Fee for Removing
Liquidity in Simple Orders.
---------------------------------------------------------------------------
\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\ 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).
---------------------------------------------------------------------------
Section II Amendments
The Exchange proposes to increase the Firm electronic Options
Transaction Charge in Penny Pilot Options from $0.44 to $0.45 per
contract. The Exchange also proposes to amend the Firm electronic
Options Transaction Charge in Non-Penny Pilot Options from $0.45 to
$0.50 per contract.
The Exchange proposes to waive the Firm Floor Options Transaction
Charge for the buy side of a transaction if the Firm represents both
sides of a Firm transaction when such members or its affiliates under
Common Ownership \8\ are trading in their own proprietary account.\9\
The Firm Floor Options Transaction Charges in Penny Pilot and Non-Penny
Options are $0.25 per contract. The Exchange also proposes to relocate
another Firm Options Transaction Charges waiver for members executing
facilitation orders pursuant to Exchange Rule 1064 when such members
are trading in their own proprietary account (including FLEX and
Cabinet Options Transaction Charges) to a new bullet on the Pricing
Schedule and amend that text to clarify that the waiver applies to
Floor Options Transaction Charges, which the Exchange proposes to
capitalize for consistency. The Exchange also proposes to capitalize
the terms ``Floor'' and ``Options Transaction Charge'' in Section II.
---------------------------------------------------------------------------
\8\ Common Ownership is defined as members or member
organizations under 75% common ownership or control. See Preface to
the Exchange's Pricing Schedule.
\9\ This waiver does not apply to electronic transactions.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The Exchange believes that increasing the Simple Order Fees For
Removing Liquidity in Select Symbols from $0.44 to $0.45 per contract
is reasonable because the fees will continue to remain
[[Page 18653]]
competitive with fees assessed by other options exchanges.\12\ The
Exchange believes that increasing the Simple Order Fees For Removing
Liquidity in Select Symbols from $0.44 to $0.45 per contract is
equitable and not unfairly discriminatory because the Exchange would
assess all market participants, except Customers, a $0.45 per contract
Simple Order Fee for Removing Liquidity in Select Symbols. The Exchange
proposes to assess no Simple Order Fee for Removing Liquidity to
Customers because Customer order flow enhances liquidity on the
Exchange for the benefit of all market participants.
---------------------------------------------------------------------------
\12\ NYSE Arca, Inc. assesses Customers, Firms, Broker-Dealers,
Lead Market Maker and NYSE Arca Market Makers a $0.45 take fee for
electronic executions in Penny Pilot Issues. See NYSE Arca, Inc.'s
Fee Schedule.
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The Exchange believes that increasing the Firm Options Transaction
Charge in Penny Pilot Options from $0.44 to $0.45 per contract
reasonable because this fee is within the range of other fees in
Section II of the Pricing Schedule. The Exchange currently assesses an
electronic Broker-Dealer Firm Options Transaction Charge in Penny Pilot
Options of $0.45 per contract. The Exchange believes that increasing
the Firm Options Transaction Charge in Non-Penny Pilot Options from
$0.45 to $0.50 per contract is reasonable because this fee is within
the range of other fees in Section II of the Pricing Schedule. The
Exchange currently assesses an electronic Broker-Dealer Firm Options
Transaction Charge in Penny Pilot Options of $0.60 per contract. The
Exchange generally assesses lower fees for Penny Pilot Options as
compared to non-Penny Pilot Option because those securities are among
the most actively traded and liquid options. This is the case today for
Specialist, Market Maker and Broker-Dealer Fees.\13\
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\13\ The Exchange assesses Specialists and Market Makers an
electronic Options Transaction Charge in Penny Pilot Options of
$0.22 per contract and an electronic Options Transaction Charge in
non-Penny Pilot Options of $0.23 per contract. The Exchange assesses
Broker-Dealers an electronic Options Transaction Charge in Penny
Pilot Options of $0.45 per contract and an electronic Options
Transaction Charge in non-Penny Pilot Options of $0.60 per contract.
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The Exchange believes that increasing the Firm Options Transaction
Charge in Penny Pilot Options from $0.44 to $0.45 per contract and
increasing the Firm Options Transaction Charge in Non-Penny Pilot
Options from $0.45 to $0.50 per contract is equitable and not unfairly
discriminatory for the reasons which follow. Firms will continue to be
assessed a higher fee than a Customer who pays no fee to transact
electronic Penny Pilot or Non-Penny Pilot Options. Customer order flow
brings unique benefits to the market which benefits all market
participants through increased liquidity. Firms will continue to be
assessed higher fees than Specialists and Market Makers in electronic
Penny Pilot Options \14\ and Non-Penny Pilot Options \15\ because
Specialists and Market Makers have obligations to the market and
regulatory requirements, 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. The proposed differentiation as between Customers,
Specialists and Market Makers and other market participants recognizes
the differing contributions made to the liquidity and trading
environment on the Exchange by these market participants, as well as
the differing mix of orders entered. Broker-Dealers and Firms today pay
higher fees as compared to a Professional for electronic Penny Pilot
Options \16\ and Non-Penny Pilot \17\ transactions and this would not
change. Professionals have access to more information and technological
advantages as compared to Customers and Professionals do not bear the
obligations of Specialists or Market Makers. Also, Professionals engage
in trading activity similar to that conducted by Specialists or Market
Makers. For example, Professionals continue to join bids and offers on
the Exchange and thus compete for incoming order flow. For these
reasons, the Exchange believes that Professionals may be priced higher
than a Customer and may be priced equal to or higher than a Specialist
or Market Maker. Finally, the Firm will be assessed fees which are
equal to or lower than a Broker-Dealer. The Exchange believes that
increasing the Firm electronic Penny Pilot and Non-Penny Options
Transaction Charges does not misalign the current rate differentials
between a Broker-Dealer and a Firm because the Exchange is eliminating
the differential in electronic Penny Pilot Options and narrowing the
differential from $0.15 to $0.10 per contract in electronic Non-Penny
Pilot Options.
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\14\ Specialists and Market Makers are assessed Floor Penny
Pilot Options Transaction Charges of $0.22 per contract and Floor
Non-Penny Pilot Options Transaction Charges of $0.23 per contract.
\15\ Specialists and Market Makers are assessed electronic Non-
Penny Pilot Options Transaction Charges of $0.23 per contract.
\16\ Professionals are assessed electronic Penny Pilot Options
Transaction Charges of $0.30 per contract.
\17\ Professionals are assessed electronic Non-Penny Pilot
Options Transaction Charges of $0.30 per contract.
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The Exchange believes that assessing higher electronic Firm Options
Transaction Charges in both Penny Pilot ($0.45 per contract) and non-
Penny Pilot Options ($0.50 per contract) as compared to a Firm Floor
Options Transaction Charge in both Penny Pilot and non-Penny Pilot
Options of $0.25 per contract is reasonable, equitable and not unfairly
discriminatory because these fees recognize the distinction between the
floor order entry model and the electronic model and the proposed fees
respond to competition along the same lines.\18\ Floor participants
incur costs associated with accessing the floor, i.e. need for a floor
broker, and other costs which are not born by electronic members.
Today, the Exchange assesses different fees for electronic as compared
to floor transactions for Professionals, Specialists and Market Makers,
Broker-Dealers and Firms in Section II of the Pricing Schedule.
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\18\ 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
will be either electronically or non-electronically delivered.
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The Exchange believes that its proposal to waive the Firm Floor
Options Transaction Charge for the buy side of a transaction if the
same member or its affiliates under Common Ownership is both the buyer
and seller of a Firm transaction when such members are trading in their
own proprietary account is reasonable because the Exchange is proposing
to not assess fees to both sides of that transaction in the instance
where a Firm is moving positions within the Firm and is both the buyer
and the seller. For example, a Firm on the Exchange's trading floor may
determine to move positions within the Firm and today the transaction
results in an Options Transaction Charge to both sides of the trade.
The Exchange believes as long as the Firm is the buyer and seller for a
trade in the Firm's proprietary account, it is reasonable to apply only
one Options Transaction Charge.
The Exchange believes its proposal to waive the Firm Floor Options
Transaction Charge for the buy side of a transaction if the same member
or its affiliate under Common Ownership is both the buyer and seller of
a Firm transaction when such members are trading in their own
proprietary account
[[Page 18654]]
is equitable and not unfairly discriminatory because the Exchange
intends to apply the waiver uniformly to all Firms that trade in this
manner in their proprietary account, even if certain members and chose
to operate under separate entities.
The Exchange believes that the amendment to relocate the sentence
referencing the waiver of the Firm Options Transaction Charges for
members executing facilitation orders pursuant to Exchange Rule 1064
when such members are trading in their own proprietary account
(including FLEX and Cabinet Options Transaction Charges) to a new
bullet on the Pricing Schedule, amending the rule text to clarify that
the waiver applies to Floor Options Transaction Charges, and
capitalizing the words ``Options Transaction Charges'' are reasonable,
equitable and not unfairly discriminatory. The Exchange is not
proposing to amend the application of the waiver, but believes that
grouping the Firm waivers separately in a new bullet on the Pricing
Schedule, capitalizing terms for consistency in Section II and
clarifying that the waiver is a floor waiver will prevent confusion
among 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 Exchange operates in a
highly competitive market, comprised of eleven 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.
The Exchange believes that increasing the Simple Order Fees for
Removing Liquidity in Select Symbols and Firm Options Transaction
Charges in Penny and Non-Penny Pilot Options does not impose a burden
on competition. The fees proposed herein are consistent with fees on
other options exchanges and other fees assessed by Phlx.\19\ In
addition, the Exchange believes that the increase to the Simple Order
Fees for Removing Liquidity will impose the same fees on all members,
except Customers. Customer order flow brings liquidity to the market
and benefits all market participants.
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\19\ See NYSE Arca, Inc.'s Fee Schedule and Section II of the
Phlx Pricing Schedule.
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With respect to the increase to the Firm Fees, the Exchange
believes that those fee increases do not misalign the current rate
differentials as between market participants, but serves to narrow or
eliminate in the case of Firm Penny Pilot Options the fee differential.
In addition, the Exchange is offering Firms an opportunity to eliminate
Options Transaction Charges by encouraging Firms to take liquidity. The
Exchange believes that the proposed rule change will continue to
promote competition on the Exchange.
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.\20\ 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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\20\ 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 (https://www.sec.gov/rules/sro.shtml ); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-Phlx-2013-31 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-2013-31. 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 (https://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-2013-31 and should be
submitted on or before April 17, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-07011 Filed 3-26-13; 8:45 am]
BILLING CODE 8011-01-P