Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Section B of Exchange's Pricing Schedule, 39426-39429 [2013-15615]
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Federal Register / Vol. 78, No. 126 / Monday, July 1, 2013 / Notices
to file the proposed rule change at least
five business days prior to the date of
filing of the proposed rule change or
such shorter time as designated by the
Commission, the proposed rule change
has become effective pursuant to
Section 19(b)(3)(A) of the Act 11 and
Rule 19b–4(f)(6) thereunder.12 At any
time within 60 days of the filing of such
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.
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:
mstockstill on DSK4VPTVN1PROD with NOTICES
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
Number SR–CBOE–2013–063 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–CBOE–2013–063. 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 CBOE. 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–CBOE–
2013–063 and should be submitted on
or before July 22, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–15700 Filed 6–28–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69842; File No. SR–Phlx–
2013–68]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend
Section B of Exchange’s Pricing
Schedule
June 25, 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 June 21,
2013, NASDAQ OMX PHLX LLC
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
and III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
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
13 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
11 15
U.S.C. 78s(b)(3)(A).
12 17 CFR 240.19b–4(f)(6).
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B, entitled ‘‘Customer Rebate Program’’
to amend the various defined categories
associated with Customer rebates.
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 Exchange proposes to amend
Section B of the Pricing Schedule,
entitled ‘‘Customer Rebate Program,’’ to
provide members and member
organizations the ability to achieve
greater Customer rebates by transacting
PIXL 3 Orders.
Currently, the Exchange has in place
a four tier structure Customer Rebate
Program at Section B of the Pricing
Schedule which pays Customer rebates
on four Categories, A, B, C and D, of
transactions. The four tier structure pays
rebates based on percentage thresholds
of national customer multiply-listed
options volume by month based on four
Categories (A, B, C and D) of
transactions. Specifically, the Exchange
bases a market participant’s
qualification for a certain Rebate Tier on
the percentage of total national
customer volume in multiply-listed
options which are transacted monthly
on Phlx as follows:
3 PIXL is the Exchange’s price improvement
mechanism known as Price Improvement XL or
(PIXLSM). See Rule 1080(n).
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Federal Register / Vol. 78, No. 126 / Monday, July 1, 2013 / Notices
Customer rebate tiers
Tier
Tier
Tier
Tier
1
2
3
4
Percentage thresholds of national
customer volume in multiply-listed
equity and ETF options classes, excluding SPY options (monthly)
Category A
Category B
Category C
Category D
...............................................
...............................................
...............................................
...............................................
0.00%–0.75% ....................................
Above 0.75%–1.60% .........................
Above 1.60%–2.60% .........................
Above 2.60% .....................................
$0.00
0.12
0.14
0.15
$0.00
0.17
0.17
0.17
$0.00
0.17
0.17
0.17
$0.00
0.08
0.08
0.09
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The Exchange totals Customer volume
in Multiply Listed Options (including
Select Symbols and options overlying
Standard and Poor’s Depositary
Receipts/SPDRs (‘‘SPY’’)); 4 that are
electronically-delivered and executed,
except volume associated with
electronic Qualified Contingent Cross
(‘‘QCC’’) Orders,5 as defined in
Exchange Rule 1080(o).6 Members and
member organizations under Common
Ownership 7 may aggregate their
Customer volume for purposes of
calculating the Customer Rebate Tiers
and receiving rebates.
Category A rebates are paid to
members executing electronicallydelivered Customer Simple Orders in
Penny Pilot Options and Customer
Simple Orders in Non-Penny Pilot
Options in Section II symbols.8 Rebates
4 SPY options are based on the SPDR exchangetraded fund (‘‘ETF’’), which is designed to track the
performance of the S&P 500 Index.
5 A QCC Order is comprised of an order to buy
or sell at least 1000 contracts that is identified as
being part of a qualified contingent trade, as that
term is defined in Rule 1080(o)(3), coupled with a
contra-side order to buy or sell an equal number of
contracts. The QCC Order must be executed at a
price at or between the National Best Bid and Offer
and be rejected if a Customer order is resting on the
Exchange book at the same price. A QCC Order
shall only be submitted electronically from off the
floor to the PHLX XL II System. See Rule 1080(o).
See also Securities Exchange Act Release No. 64249
(April 7, 2011), 76 FR 20773 (April 13, 2011) (SR–
Phlx–2011–47) (a rule change to establish a QCC
Order to facilitate the execution of stock/option
Qualified Contingent Trades (‘‘QCTs’’) that satisfy
the requirements of the trade through exemption in
connection with Rule 611(d) of Regulation NMS).
A Floor QCC Order must: (i) Be for at least 1,000
contracts, (ii) meet the six requirements of Rule
1080(o)(3) which are modeled on the QCT
Exemption, (iii) be executed at a price at or between
the National Best Bid and Offer; and (iv) be rejected
if a Customer order is resting on the Exchange book
at the same price. In order to satisfy the 1,000contract requirement, a Floor QCC Order must be
for 1,000 contracts and could not be, for example,
two 500-contract orders or two 500-contract legs.
See Rule 1064(e). See also Securities Exchange Act
Release No. 64688 (June 16, 2011), 76 FR 36606
(June 22, 2011) (SR–Phlx–2011–56).
6 The Exchange calculates volume and pays
rebates based on a member’s or member
organization’s Phlx house account number.
7 Common ownership means 75% common
ownership or control.
8 Section II of the Pricing Schedule includes
Multiply Listed Options Fees, including options
overlying equities, ETFs, ETNs and indexes which
are Multiply Listed.
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are paid on Customer PIXL Orders in
Section II symbols that execute against
non-Initiating Order 9 interest, except in
the case of Customer PIXL Orders that
are greater than 999 contracts. All
Customer PIXL Orders that are greater
than 999 contracts are paid a rebate
regardless of the contra-party to the
transaction.
Category B rebates are paid to
members executing electronicallydelivered Customer Complex Orders in
Penny Pilot Options and Non-Penny
Pilot Options in Section II symbols.
Category C rebates are paid to
members executing electronicallydelivered Customer Complex Orders 10
in Select Symbols 11 in Section I.
Category D rebates are paid to
members executing electronicallydelivered Customer Simple Orders in
Select Symbols in Section I. Rebates are
paid on PIXL Orders in Section I
symbols that execute against nonInitiating Order interest.
The Exchange is proposing to amend
Categories B and C to offer rebates on
qualifying 12 Customer PIXL Complex
Orders in Section II symbols for
Category B and Section I symbols for
9 A member may electronically submit for
execution an order it represents as agent on behalf
of a public customer, broker-dealer, or any other
entity (‘‘PIXL Order’’) against principal interest or
against any other order (except as provided in Rule
1080(n)(i)(E)) it represents as agent (‘‘Initiating
Order’’) provided it submits the PIXL order for
electronic execution into the PIXL Auction
(‘‘Auction’’) pursuant to Rule 1080. See Exchange
Rule 1080(n). Non-Initiating Order interest could be
a PIXL Auction Responder or a resting order or
quote that was on the Phlx book prior to the
auction.
10 A Complex Order is any order involving the
simultaneous purchase and/or sale of two or more
different options series in the same underlying
security, priced at a net debit or credit based on the
relative prices of the individual components, for the
same account, for the purpose of executing a
particular investment strategy. Furthermore, a
Complex Order can also be a stock-option order,
which is an order to buy or sell a stated number
of units of an underlying stock or exchange-traded
fund (‘‘ETF’’) coupled with the purchase or sale of
options contract(s). See Exchange Rule 1080,
Commentary .08(a)(i).
11 The Select Symbols are listed in Section I of
the Pricing Schedule.
12 The Exchange pays rebates on certain Customer
volumes as specified in Section B of the Pricing
Schedule.
PO 00000
Frm 00177
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Category C that execute against nonInitiating Order interest, except in the
case of Customer PIXL Complex Orders
that are greater than 999 contracts. All
Customer PIXL Complex Orders that are
greater than 999 contracts would be
paid a rebate regardless of the contraparty to the transaction.
The Exchange filed a proposed rule
change to amend its Rules to permit
Complex Orders in PIXL.13 Specifically,
the Exchange filed a proposal to amend
Rule 1080 to allow Complex Orders in
the Exchange’s price-improving
electronic auction, PIXL.14 The
Exchange proposes to permit members
to receive a Customer rebate, pursuant
to Section B of the Exchange’s Pricing
Schedule, by transacting qualifying
Customer PIXL Complex Orders in
Multiply Listed Section I and II symbols
provided the transactions are against
non-Initiating Order interest and not
greater than 999 contracts. If the
Customer PIXL Complex Order is
greater than 999 contracts, that
transaction will be paid a rebate
regardless of the contra-party to the
transaction. The Exchange proposes for
this rule change to become immediately
effective, however a member would not
be able to transact PIXL Complex
Orders, and thereby receive Customer
rebates, until SR–Phlx–2013–46 is
approved by the Commission.15
The Exchange proposes to amend
Category D to offer members a similar
13 Securities Exchange Act Release No. 69550
(May 9, 2013), 78 FR 28654 (May 15, 2013) (SR–
Phlx–2013–46) (notice of filing of proposed rule
change to accommodate Complex Orders in PIXL).
14 The PIXL mechanism is a process whereby
members and member organizations electronically
submit orders they represent as agent against
principal interest or other interest that they
represent as agent. The submitted orders are
stopped at a price and are subsequently entered into
an auction seeking price improvement. Currently,
the PIXL mechanism accepts only simple orders.
Securities Exchange Act Release No. 69550 (May 9,
2013), 78 FR 28654 (May 15, 2013) (SR–Phlx–2013–
46).
15 The functionality to transact PIXL Complex
Orders will not be available unless and until such
time as the Commission approves SR–Phlx–2013–
46. The purpose of this filing is to offer members
the opportunity to achieve certain rebates related to
PIXL Complex Orders when the functionality to
transact such orders is approved by the
Commission.
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Federal Register / Vol. 78, No. 126 / Monday, July 1, 2013 / Notices
rebate opportunity. The Exchange
proposes to pay rebates on qualifying
Customer PIXL Orders in Select
Symbols in Section I that execute
against non-Initiating Order interest,
except in the case of Customer PIXL
Order that are greater than 999
contracts. All Customer PIXL Orders
that are greater than 999 contracts
would be paid a rebate regardless of the
contra-party to the transaction.
The Exchange believes that offering
members the opportunity to obtain
rebates from PIXL transactions, whether
in Simple or Complex Orders, will
incentivize members to transact a
greater number of PIXL Orders.
The Exchange also proposes to make
technical amendments to the text of
Category A to clarify rule text and
conform the text to the new language
which the Exchange proposes to add
pursuant to this rule change.
2. Statutory Basis
The Exchange believes that its
proposal to amend its Pricing Schedule
is consistent with Section 6(b) of the
Act 16 in general, and furthers the
objectives of Section 6(b)(4) of the Act 17
in particular, in that it provides for an
equitable allocation of reasonable fees
and other charges among Exchange
members and member organizations and
other persons using its facilities.
The Exchange’s proposal to amend
Categories B and C of the Customer
Rebate Program to pay rebates on
qualifying Customer PIXL Complex
Orders in Section I (Category C) and II
(Category B) symbols, provided those
transactions are contra to non-Initiating
Order interest,18 and also pay Customer
PIXL Complex Order rebates on all
orders greater than 999 contracts
regardless of the contra-party is
reasonable because the Exchange desires
to incentivize members to transact
Complex Orders in PIXL. Today, the
Exchange incentivizes members to
transact Simple Orders in PIXL by
offering similar rebates under Category
A 19 of the Customer Rebate Program.
The Exchange’s proposal to amend
Category D of the Customer Rebate
16 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
18 For example, a PIXL Responder or a resting
order or quote that was on the Phlx book prior to
the auction.
19 Category A rebates are paid to members and
member organizations executing electronicallydelivered Customer Simple Orders in Penny Pilot
Options and Customer Simple Orders in Non-Penny
Pilot Options in Section II. Rebates are paid on
Customer PIXL Orders in Section II symbols that
execute against non-Initiating Order interest, except
in the case of Customer PIXL Orders that are greater
than 999 contracts. All Customer PIXL Orders that
are greater than 999 contracts are paid a rebate
regardless of the contra-party to the transaction.
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17 15
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Program to pay rebates on qualifying
Customer PIXL Orders in Section I
Select Symbols provided those
transactions are contra to non-Initiating
Order interest and also pay Customer
PIXL Order rebates on all orders greater
than 999 contracts regardless of the
contra-party is reasonable because the
Exchange desires to incentivize
members to transact a greater number of
Simple Orders in PIXL. Today, the
Exchange offers a rebate for Simple
Orders in PIXL under Category A of the
Customer Rebate Program.
The Exchange believes that the
proposals to amend Categories B, C and
D of the Customer Rebate Program to
pay rebates on Customer Simple and
Complex Orders in PIXL, respectively,
in Section I and II symbols, provided
those transactions are contra to nonInitiating Order interest,20 and also pay
Customer PIXL Complex Order rebates
on all orders greater than 999 contracts
regardless of the contra-party are
equitable and not unfairly
discriminatory because the Exchange
will pay Customer rebates to any market
participant that transacts a qualifying
Customer PIXL Order in a Simple or
Complex Order that executes against
non-Initiating Order interest and will
also pay Customer rebates to any market
participant that transacts a qualifying
Customer Simple or Complex Order in
PIXL which is greater than 999 contracts
regardless of the contra-party in Section
I and II symbols. The Exchange will
apply the Category B, C and D rebates
uniformly with respect to market
participants transacting qualifying PIXL
Orders.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
The Exchange believes that its
proposal to amend Category B, C and D
of the Customer Rebate Program does
not impose an undue burden on
competition because the Exchange is
offering to pay Customer rebates on
qualifying PIXL Simple and Complex
Orders in Section I and II symbols,
respectively, provided those
transactions are contra to non-Initiating
Order interest, to all participants. The
Exchange is also offering to pay
Customer rebates on PIXL Simple and
Complex Orders in Section I and II
symbols, respectively, on all qualifying
20 For example, a PIXL Auction Responder or a
resting order or quote that was on the Phlx book
prior to the auction.
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orders greater than 999 contracts
regardless of the contra party for all
market participants. These rebates
should attract Customer PIXL Simple
and Complex Order flow to the
Exchange and benefit all market
participants through the increased
liquidity such order flow will bring to
the PIXL auction in terms of order
interaction. Today, the Exchange pays
rebates on PIXL Simple Orders only in
Category A of the Customer Rebate
Program. With this proposal, the
Exchange is providing an opportunity to
obtain Customer rebates by transacting
both Simple and Complex Orders in
PIXL, respectively, in all categories of
the Customer Rebate Program.
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.
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.21 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
21 15
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U.S.C. 78s(b)(3)(A)(ii).
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Federal Register / Vol. 78, No. 126 / Monday, July 1, 2013 / Notices
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–15615 Filed 6–28–13; 8:45 am]
Electronic Comments
BILLING CODE 8011–01–P
• 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
Number SR–Phlx–2013–68 on the
subject line.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69845; File No. SR–Phlx–
2013–46]
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
mstockstill on DSK4VPTVN1PROD with NOTICES
Paper Comments
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Order
Granting Approval To Proposed Rule
Change, as Modified by Amendment
No. 1, Regarding Complex Order PIXL
June 25, 2013.
All submissions should refer to File
Number SR–Phlx–2013–68. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (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 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–2013–68 and should
be submitted on or before July 22, 2013.
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I. Introduction
On April 30, 2013, NASDAQ OMX
PHLX LLC (the ‘‘Exchange’’ or ‘‘Phlx’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to amend Phlx Rule 1080 to
accommodate Complex Orders in Phlx’s
price-improving electronic auction
(‘‘PIXL,’’ ‘‘PIXL Auction,’’ or
‘‘Auction’’). On May 8, 2013, the
Exchange filed Amendment No. 1 to the
proposed rule change. The proposed
rule change, as amended, was published
for comment in the Federal Register on
May 15, 2013.3 The Commission
received no comments on the proposal.
This order approves the proposed rule
change, as amended.
II. Description of the Proposal
Phlx proposes to amend Rule 1080 to
accommodate Complex Orders in PIXL.
Specifically, current Phlx Rule 1080(n)
provides that a Phlx member (an
‘‘Initiating Member’’) may electronically
submit for execution an order it
represents as agent on behalf of a public
customer, broker-dealer, or any other
entity (a ‘‘PIXL Order’’) against
principal interest or against any other
order it represents as agent (an
‘‘Initiating Order’’).4 The submitted
orders are then stopped at a price and
entered into a PIXL Auction seeking
price improvement. Phlx Rule 1080(n)
22 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 69550
(May 9, 2013), 78 FR 28654 (May 15, 2013)
(‘‘Notice’’).
4 See Phlx Rule 1080(n); see also Securities
Exchange Act Release No. 63027 (October 1, 2010),
75 FR 62160 (October 7, 2010) (approving rules
establishing the PIXL Auction for simple orders).
1 15
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39429
currently does not permit Complex
Orders to be entered into the PIXL. This
proposed rule change would permit
Phlx members to send Complex Orders
to the PIXL.5
A. Auction Eligibility and Auction
Process
In order for a Complex Order to
initiate a PIXL Auction, the Complex
Order must be of a conforming ratio 6
and must be stopped at a price that is
better than the best net price (debit or
credit) that is (1) available on the
Complex Order book regardless of the
Complex Order book size; and (2)
achievable from the best Phlx bids and
offers for the individual options (an
‘‘improved net price’’), provided in
either case that such price is equal to or
better than the PIXL Order’s limit
price.7 The Exchange notes that
requiring a Complex Order to be
stopped at a net debit/credit price that
improves upon the stated markets
present for the individual components
of the Complex Order ensures that at
least one option leg will be executed at
a better price than the established bid or
offer for such leg.8
In order to initiate a PIXL Auction for
a Complex Order (‘‘Complex Order PIXL
Auction’’), the Initiating Member must
mark the Complex PIXL Order for
Auction processing, and specify either:
(1) a single price at which it seeks to
execute the PIXL Order (a ‘‘stop price’’);
or (2) that it is willing to either: (a) stop
the entire order at a single stop price
and auto-match responses to the
Complex Order PIXL Auction (‘‘PAN
responses’’ or ‘‘Complex Order PAN
responses’’) and trading interest at a
price or prices that improve the stop
price to a specified price (a ‘‘Not Worse
Than’’ or ‘‘NWT’’ price); or (b) stop the
entire order at a single stop price and
auto-match all PAN responses and
trading interest at or better than the stop
5 A Complex Order is defined as ‘‘an order
involving the simultaneous purchase and/or sale of
two or more different options series in the same
underlying security, priced as a net debit or credit
based on the relative prices of the individual
components, for the same account, for the purpose
of executing a particular investment strategy.’’ See
Phlx Rule 1080 Commentary .08(a)(i).
6 Conforming ratios for Complex Orders are
defined in Commentary .08(a)(i) and (a)(ix) to Phlx
Rule 1080. Complex Orders consisting of a ratio
other than a conforming ratio will not be accepted.
See Notice, 78 FR at 28657.
7 See proposed Phlx Rule 1080(n)(i)(C); see also
Notice, 78 FR at 28657 for an example of an eligible
Complex Order on PIXL. This provision, as applied
to Complex Orders whose smallest leg is less than
50 contracts, is effective for a pilot period
scheduled to expire on July 18, 2013.
8 See Notice, 78 FR at 28657.
E:\FR\FM\01JYN1.SGM
01JYN1
]]>Agencies
[Federal Register Volume 78, Number 126 (Monday, July 1, 2013)]
[Notices]
[Pages 39426-39429]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-15615]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69842; File No. SR-Phlx-2013-68]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Section B of Exchange's Pricing Schedule
June 25, 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 June 21, 2013, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I, II, and III, below,
which Items have been prepared by the Exchange. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Exchange's Pricing Schedule at
Section B, entitled ``Customer Rebate Program'' to amend the various
defined categories associated with Customer rebates.
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 Exchange proposes to amend Section B of the Pricing Schedule,
entitled ``Customer Rebate Program,'' to provide members and member
organizations the ability to achieve greater Customer rebates by
transacting PIXL \3\ Orders.
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\3\ PIXL is the Exchange's price improvement mechanism known as
Price Improvement XL or (PIXL\SM\). See Rule 1080(n).
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Currently, the Exchange has in place a four tier structure Customer
Rebate Program at Section B of the Pricing Schedule which pays Customer
rebates on four Categories, A, B, C and D, of transactions. The four
tier structure pays rebates based on percentage thresholds of national
customer multiply-listed options volume by month based on four
Categories (A, B, C and D) of transactions. Specifically, the Exchange
bases a market participant's qualification for a certain Rebate Tier on
the percentage of total national customer volume in multiply-listed
options which are transacted monthly on Phlx as follows:
[[Page 39427]]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percentage thresholds of national
customer volume in multiply-listed
Customer rebate tiers equity and ETF options classes, Category A Category B Category C Category D
excluding SPY options (monthly)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Tier 1.......................................... 0.00%-0.75%....................... $0.00 $0.00 $0.00 $0.00
Tier 2.......................................... Above 0.75%-1.60%................. 0.12 0.17 0.17 0.08
Tier 3.......................................... Above 1.60%-2.60%................. 0.14 0.17 0.17 0.08
Tier 4.......................................... Above 2.60%....................... 0.15 0.17 0.17 0.09
--------------------------------------------------------------------------------------------------------------------------------------------------------
The Exchange totals Customer volume in Multiply Listed Options
(including Select Symbols and options overlying Standard and Poor's
Depositary Receipts/SPDRs (``SPY'')); \4\ that are electronically-
delivered and executed, except volume associated with electronic
Qualified Contingent Cross (``QCC'') Orders,\5\ as defined in Exchange
Rule 1080(o).\6\ Members and member organizations under Common
Ownership \7\ may aggregate their Customer volume for purposes of
calculating the Customer Rebate Tiers and receiving rebates.
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\4\ SPY options are based on the SPDR exchange-traded fund
(``ETF''), which is designed to track the performance of the S&P 500
Index.
\5\ A QCC Order is comprised of an order to buy or sell at least
1000 contracts that is identified as being part of a qualified
contingent trade, as that term is defined in Rule 1080(o)(3),
coupled with a contra-side order to buy or sell an equal number of
contracts. The QCC Order must be executed at a price at or between
the National Best Bid and Offer and be rejected if a Customer order
is resting on the Exchange book at the same price. A QCC Order shall
only be submitted electronically from off the floor to the PHLX XL
II System. See Rule 1080(o). See also Securities Exchange Act
Release No. 64249 (April 7, 2011), 76 FR 20773 (April 13, 2011) (SR-
Phlx-2011-47) (a rule change to establish a QCC Order to facilitate
the execution of stock/option Qualified Contingent Trades (``QCTs'')
that satisfy the requirements of the trade through exemption in
connection with Rule 611(d) of Regulation NMS). A Floor QCC Order
must: (i) Be for at least 1,000 contracts, (ii) meet the six
requirements of Rule 1080(o)(3) which are modeled on the QCT
Exemption, (iii) be executed at a price at or between the National
Best Bid and Offer; and (iv) be rejected if a Customer order is
resting on the Exchange book at the same price. In order to satisfy
the 1,000-contract requirement, a Floor QCC Order must be for 1,000
contracts and could not be, for example, two 500-contract orders or
two 500-contract legs. See Rule 1064(e). See also Securities
Exchange Act Release No. 64688 (June 16, 2011), 76 FR 36606 (June
22, 2011) (SR-Phlx-2011-56).
\6\ The Exchange calculates volume and pays rebates based on a
member's or member organization's Phlx house account number.
\7\ Common ownership means 75% common ownership or control.
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Category A rebates are paid to members executing electronically-
delivered Customer Simple Orders in Penny Pilot Options and Customer
Simple Orders in Non-Penny Pilot Options in Section II symbols.\8\
Rebates are paid on Customer PIXL Orders in Section II symbols that
execute against non-Initiating Order \9\ interest, except in the case
of Customer PIXL Orders that are greater than 999 contracts. All
Customer PIXL Orders that are greater than 999 contracts are paid a
rebate regardless of the contra-party to the transaction.
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\8\ Section II of the Pricing Schedule includes Multiply Listed
Options Fees, including options overlying equities, ETFs, ETNs and
indexes which are Multiply Listed.
\9\ A member may electronically submit for execution an order it
represents as agent on behalf of a public customer, broker-dealer,
or any other entity (``PIXL Order'') against principal interest or
against any other order (except as provided in Rule 1080(n)(i)(E))
it represents as agent (``Initiating Order'') provided it submits
the PIXL order for electronic execution into the PIXL Auction
(``Auction'') pursuant to Rule 1080. See Exchange Rule 1080(n). Non-
Initiating Order interest could be a PIXL Auction Responder or a
resting order or quote that was on the Phlx book prior to the
auction.
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Category B rebates are paid to members executing electronically-
delivered Customer Complex Orders in Penny Pilot Options and Non-Penny
Pilot Options in Section II symbols.
Category C rebates are paid to members executing electronically-
delivered Customer Complex Orders \10\ in Select Symbols \11\ in
Section I.
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\10\ A Complex Order is any order involving the simultaneous
purchase and/or sale of two or more different options series in the
same underlying security, priced at a net debit or credit based on
the relative prices of the individual components, for the same
account, for the purpose of executing a particular investment
strategy. Furthermore, a Complex Order can also be a stock-option
order, which is an order to buy or sell a stated number of units of
an underlying stock or exchange-traded fund (``ETF'') coupled with
the purchase or sale of options contract(s). See Exchange Rule 1080,
Commentary .08(a)(i).
\11\ The Select Symbols are listed in Section I of the Pricing
Schedule.
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Category D rebates are paid to members executing electronically-
delivered Customer Simple Orders in Select Symbols in Section I.
Rebates are paid on PIXL Orders in Section I symbols that execute
against non-Initiating Order interest.
The Exchange is proposing to amend Categories B and C to offer
rebates on qualifying \12\ Customer PIXL Complex Orders in Section II
symbols for Category B and Section I symbols for Category C that
execute against non-Initiating Order interest, except in the case of
Customer PIXL Complex Orders that are greater than 999 contracts. All
Customer PIXL Complex Orders that are greater than 999 contracts would
be paid a rebate regardless of the contra-party to the transaction.
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\12\ The Exchange pays rebates on certain Customer volumes as
specified in Section B of the Pricing Schedule.
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The Exchange filed a proposed rule change to amend its Rules to
permit Complex Orders in PIXL.\13\ Specifically, the Exchange filed a
proposal to amend Rule 1080 to allow Complex Orders in the Exchange's
price-improving electronic auction, PIXL.\14\ The Exchange proposes to
permit members to receive a Customer rebate, pursuant to Section B of
the Exchange's Pricing Schedule, by transacting qualifying Customer
PIXL Complex Orders in Multiply Listed Section I and II symbols
provided the transactions are against non-Initiating Order interest and
not greater than 999 contracts. If the Customer PIXL Complex Order is
greater than 999 contracts, that transaction will be paid a rebate
regardless of the contra-party to the transaction. The Exchange
proposes for this rule change to become immediately effective, however
a member would not be able to transact PIXL Complex Orders, and thereby
receive Customer rebates, until SR-Phlx-2013-46 is approved by the
Commission.\15\
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\13\ Securities Exchange Act Release No. 69550 (May 9, 2013), 78
FR 28654 (May 15, 2013) (SR-Phlx-2013-46) (notice of filing of
proposed rule change to accommodate Complex Orders in PIXL).
\14\ The PIXL mechanism is a process whereby members and member
organizations electronically submit orders they represent as agent
against principal interest or other interest that they represent as
agent. The submitted orders are stopped at a price and are
subsequently entered into an auction seeking price improvement.
Currently, the PIXL mechanism accepts only simple orders. Securities
Exchange Act Release No. 69550 (May 9, 2013), 78 FR 28654 (May 15,
2013) (SR-Phlx-2013-46).
\15\ The functionality to transact PIXL Complex Orders will not
be available unless and until such time as the Commission approves
SR-Phlx-2013-46. The purpose of this filing is to offer members the
opportunity to achieve certain rebates related to PIXL Complex
Orders when the functionality to transact such orders is approved by
the Commission.
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The Exchange proposes to amend Category D to offer members a
similar
[[Page 39428]]
rebate opportunity. The Exchange proposes to pay rebates on qualifying
Customer PIXL Orders in Select Symbols in Section I that execute
against non-Initiating Order interest, except in the case of Customer
PIXL Order that are greater than 999 contracts. All Customer PIXL
Orders that are greater than 999 contracts would be paid a rebate
regardless of the contra-party to the transaction.
The Exchange believes that offering members the opportunity to
obtain rebates from PIXL transactions, whether in Simple or Complex
Orders, will incentivize members to transact a greater number of PIXL
Orders.
The Exchange also proposes to make technical amendments to the text
of Category A to clarify rule text and conform the text to the new
language which the Exchange proposes to add pursuant to this rule
change.
2. Statutory Basis
The Exchange believes that its proposal to amend its Pricing
Schedule is consistent with Section 6(b) of the Act \16\ in general,
and furthers the objectives of Section 6(b)(4) of the Act \17\ in
particular, in that it provides for an equitable allocation of
reasonable fees and other charges among Exchange members and member
organizations and other persons using its facilities.
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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(4).
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The Exchange's proposal to amend Categories B and C of the Customer
Rebate Program to pay rebates on qualifying Customer PIXL Complex
Orders in Section I (Category C) and II (Category B) symbols, provided
those transactions are contra to non-Initiating Order interest,\18\ and
also pay Customer PIXL Complex Order rebates on all orders greater than
999 contracts regardless of the contra-party is reasonable because the
Exchange desires to incentivize members to transact Complex Orders in
PIXL. Today, the Exchange incentivizes members to transact Simple
Orders in PIXL by offering similar rebates under Category A \19\ of the
Customer Rebate Program.
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\18\ For example, a PIXL Responder or a resting order or quote
that was on the Phlx book prior to the auction.
\19\ Category A rebates are paid to members and member
organizations executing electronically-delivered Customer Simple
Orders in Penny Pilot Options and Customer Simple Orders in Non-
Penny Pilot Options in Section II. Rebates are paid on Customer PIXL
Orders in Section II symbols that execute against non-Initiating
Order interest, except in the case of Customer PIXL Orders that are
greater than 999 contracts. All Customer PIXL Orders that are
greater than 999 contracts are paid a rebate regardless of the
contra-party to the transaction.
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The Exchange's proposal to amend Category D of the Customer Rebate
Program to pay rebates on qualifying Customer PIXL Orders in Section I
Select Symbols provided those transactions are contra to non-Initiating
Order interest and also pay Customer PIXL Order rebates on all orders
greater than 999 contracts regardless of the contra-party is reasonable
because the Exchange desires to incentivize members to transact a
greater number of Simple Orders in PIXL. Today, the Exchange offers a
rebate for Simple Orders in PIXL under Category A of the Customer
Rebate Program.
The Exchange believes that the proposals to amend Categories B, C
and D of the Customer Rebate Program to pay rebates on Customer Simple
and Complex Orders in PIXL, respectively, in Section I and II symbols,
provided those transactions are contra to non-Initiating Order
interest,\20\ and also pay Customer PIXL Complex Order rebates on all
orders greater than 999 contracts regardless of the contra-party are
equitable and not unfairly discriminatory because the Exchange will pay
Customer rebates to any market participant that transacts a qualifying
Customer PIXL Order in a Simple or Complex Order that executes against
non-Initiating Order interest and will also pay Customer rebates to any
market participant that transacts a qualifying Customer Simple or
Complex Order in PIXL which is greater than 999 contracts regardless of
the contra-party in Section I and II symbols. The Exchange will apply
the Category B, C and D rebates uniformly with respect to market
participants transacting qualifying PIXL Orders.
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\20\ For example, a PIXL Auction Responder or a resting order or
quote that was on the Phlx book prior to the auction.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
The Exchange believes that its proposal to amend Category B, C and
D of the Customer Rebate Program does not impose an undue burden on
competition because the Exchange is offering to pay Customer rebates on
qualifying PIXL Simple and Complex Orders in Section I and II symbols,
respectively, provided those transactions are contra to non-Initiating
Order interest, to all participants. The Exchange is also offering to
pay Customer rebates on PIXL Simple and Complex Orders in Section I and
II symbols, respectively, on all qualifying orders greater than 999
contracts regardless of the contra party for all market participants.
These rebates should attract Customer PIXL Simple and Complex Order
flow to the Exchange and benefit all market participants through the
increased liquidity such order flow will bring to the PIXL auction in
terms of order interaction. Today, the Exchange pays rebates on PIXL
Simple Orders only in Category A of the Customer Rebate Program. With
this proposal, the Exchange is providing an opportunity to obtain
Customer rebates by transacting both Simple and Complex Orders in PIXL,
respectively, in all categories of the Customer Rebate Program.
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.
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.\21\ 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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\21\ 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
[[Page 39429]]
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-2013-68 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-2013-68. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (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 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-2013-68 and
should be submitted on or before July 22, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-15615 Filed 6-28-13; 8:45 am]
BILLING CODE 8011-01-P
