Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Routing Fees, 76358-76360 [2013-29895]

Download as PDF 76358 Federal Register / Vol. 78, No. 242 / Tuesday, December 17, 2013 / Notices prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–71032; File No. SR–ICC– 2013–08] Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Withdrawal of Proposed Rule Change To Add Rules Related to the Clearing of MCDX Index CDS Contracts and Make Conforming Changes to Existing Rules December 11, 2013. On October 25, 2013, ICE Clear Credit LLC (‘‘ICC’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 1 and Rule 19b–4 thereunder,2 a proposed rule change relating to the clearing of MCDX Index CDS Contracts and making conforming changes to existing rules. Notice of the proposed rule change was published in the Federal Register on November 14, 2013.3 The Commission did not receive comments on the proposed rule change. On December 2, 2013, ICC withdrew the proposed rule change (SR–ICC– 2013–08). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.4 Kevin M. O’Neill, Deputy Secretary. BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–71040; File No. SR–Phlx– 2013–118] Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Routing Fees wreier-aviles on DSK5TPTVN1PROD with NOTICES December 11, 2013. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on December 2, 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 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 Securities Exchange Act Release No. 70826 (Nov. 7, 2013), 78 FR 68480 (Nov. 14, 2013). 4 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. VerDate Mar<15>2010 14:45 Dec 16, 2013 Jkt 232001 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 [FR Doc. 2013–29888 Filed 12–16–13; 8:45 am] 1 15 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Section V of the Pricing Schedule entitled ‘‘Routing Fees.’’ 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. 1. Purpose The purpose of this filing is to amend the Routing Fees in Section V of the Pricing Schedule in order to recoup costs the Exchange incurs for routing and executing certain orders in equity options to away markets. Today, the Exchange assesses a Non-Customer a $0.95 per contract Routing Fee to any options exchange. The Customer Routing Fee for option orders routed to The NASDAQ Options Exchange LLC (‘‘NOM’’) is a $0.05 per contract Fixed Fee in addition to the actual transaction fee assessed. The Customer Routing Fee for option orders routed to NASDAQ OMX BX, Inc. (‘‘BX Options’’) is $0.00. The Customer Routing Fee for option orders routed to all other options exchanges 3 (excluding NOM and BX 3 Including BATS Exchange, Inc. (‘‘BATS’’), BOX Options Exchange LLC (‘‘BOX’’), the Chicago Board Options Exchange, Incorporated (‘‘CBOE’’), C2 Options Exchange, Incorporated (‘‘C2’’), International Securities Exchange, LLC (‘‘ISE’’), the Miami International Securities Exchange, LLC (‘‘MIAX’’), NYSE Arca, Inc. (‘‘NYSE Arca’’), NYSE MKT LLC (‘‘NYSE Amex’’) and Topaz Exchange, LLC (‘‘Gemini’’). PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 Options) is a fixed fee of $0.15 per contract (‘‘Fixed Fee’’) in addition to the actual transaction fee assessed. If the away market pays a rebate, the Routing Fee is $0.00 per contract.4 The Exchange proposes to increase the Customer Routing Fixed Fee of $0.15 per contract when an option order is routed to all other exchanges to $0.20 per contract. With respect to the fixed costs, the Exchange incurs a fee when it utilizes Nasdaq Options Services LLC (‘‘NOS’’), a member of the Exchange and the Exchange’s exclusive order router.5 Each time NOS routes an order to an away market, NOS is charged a clearing fee 6 and, in the case of certain exchanges, a transaction fee is also charged in certain symbols, which fees are passed through to the Exchange. The Exchange currently recoups clearing and transaction charges incurred by the Exchange as well as certain other costs incurred by the Exchange when routing to away markets, such as administrative and technical costs associated with operating NOS, membership fees at away markets, Options Regulatory Fees (‘‘ORFs’’) and technical costs associated with routing options. The Exchange assesses the actual away market fee at the time that the order was entered into the Exchange’s trading system. This transaction fee would be calculated on an order-by-order basis since different away markets charge different amounts. A new market entrant recently adopted an ORF.7 The Exchange proposes to increase its Fixed Fee from $0.15 to $0.20 per contract to recoup costs associated with increased costs. The Exchange also proposes to correct a reference in the Routing Fees to the Customer Rebate Program which was relocated from Section A to Section B. 4 For all Routing Fees, the transaction fee will continue to be based on the away market’s actual transaction fee or rebate for particular market participants and in the case that there is no transaction fee or rebate assessed by the away market, the Fixed Fee. A member organization qualifying for a Tier 2, 3 or 4 rebate in the Customer Rebate Program in Section B of the Pricing Schedule is entitled to receive a credit equal to the applicable Fixed Fee plus $0.05 per contract, unless the away market transaction fee is $0.00 or the away market pays a rebate, in which case the member organization is entitled to receive a credit equal to the applicable Fixed Fee. 5 In May 2009, the Exchange adopted Rule 1080(m)(iii)(A) to establish Nasdaq Options Services LLC (‘‘NOS’’), a member of the Exchange, as the Exchange’s exclusive order router. See Securities Exchange Act Release No. 59995 (May 28, 2009), 74 FR 26750 (June 3, 2009) (SR–Phlx– 2009–32). NOS is utilized by the Exchange’s fully automated options trading system, PHLX XL®. 6 The Options Clearing Corporation (‘‘OCC’’) assesses $0.01 per contract side. 7 Gemini adopted an ORF of $0.0010 per contract. See Securities Exchange Act Release No. 70200 (August 14, 2013), 78 FR 51242 (August 20, 2013) (SR–Topaz–2013–01). E:\FR\FM\17DEN1.SGM 17DEN1 Federal Register / Vol. 78, No. 242 / Tuesday, December 17, 2013 / Notices transaction fees on all orders routed to non-NASDAQ OMX markets. The Exchange believes that it is equitable and not unfairly discriminatory to assess a fixed cost of $0.05 per contract to route orders to 2. Statutory Basis NOM and no cost to route orders to BX The Exchange believes that its Options because the cost, in terms of proposal to amend its Pricing Schedule actual cash outlays, to the Exchange to is consistent with Section 6(b) of the route to those markets is lower. For Act 8 in general, and furthers the example, costs related to routing to objectives of Section 6(b)(4) and (b)(5) of NOM and BX Options are lower as the Act 9 in particular, in that it provides compared to other away markets for the equitable allocation of reasonable because NOS is utilized by all three dues, fees and other charges among exchanges to route orders.11 NOS and members and issuers and other persons the three NASDAQ OMX options using any facility or system which Phlx (PHLX, BX Options and NOM) markets operates or controls, and is not designed have a common data center and staff to permit unfair discrimination between that are responsible for the day-to-day customers, issuers, brokers, or dealers. operations of NOS. Because the three exchanges are in a common data center, The Exchange believes that the Routing Fees are reduced because costly proposed Routing Fees are reasonable expenses related to, for example, because they seek to recoup costs that telecommunication lines to obtain are incurred by the Exchange when connectivity are avoided when routing routing orders to away markets on orders in this instance. The costs related behalf of members. Each destination to connectivity to route orders to other market’s transaction charge varies and there is a cost incurred by the Exchange NASDAQ OMX exchanges are de minimis. When routing orders to nonwhen routing orders to away markets. NASDAQ OMX exchanges, the The costs to the Exchange include Exchange incurs costly connectivity clearing costs, administrative and charges related to telecommunication technical costs associated with lines and other related costs. The operating NOS, membership fees at away markets, ORFs and technical costs Exchange believes it is reasonable, equitable and not unfairly associated with routing options. The discriminatory to pass along savings Exchange believes that the proposed realized by leveraging NASDAQ OMX’s Routing Fees would enable the infrastructure. Market participants may Exchange to recover the costs it incurs submit orders to the Exchange as to route orders to away markets in ineligible for routing or ‘‘DNR’’ to avoid addition to transaction fees assessed to Routing Fees.12 It is important to note market participants for the execution of orders by the away market. Specifically, that when orders are routed to an away market they are routed based on price new entrants have added costs associated with routing.10 The Exchange first.13 believes that it is reasonable to recoup The Exchange believes its proposal to these costs borne by the Exchange on correct the reference to the Customer each transaction. The proposed $0.20 Rebate Program at Section B is per contract Customer Routing Fixed reasonable, equitable and not unfairly Fee, which would be assessed when an option order is routed to all other 11 See Chapter VI, Section 11 of the NASDAQ and exchanges, represents the overall cost to BX Options Rules and PHLX Rule 1080(m)(iii)(A). 12 See Rule 1066(h) (Certain Types of Orders the Exchange for technical, Defined) and 1080(b)(i)(A) (PHLX XL and PHLX XL administrative, clearing, regulatory, II). compliance and other costs, in addition 13 PHLX XL will route orders to away markets to the transaction fee assessed by the where the Exchange’s disseminated bid or offer is away market. inferior to the national best bid (best offer) (‘‘NBBO’’) price. See Rule 1080(m). The PHLX XL In addition, the Exchange believes II system will contemporaneously route an order that it is equitable and not unfairly marked as an Intermarket Sweep Order (‘‘ISO’’) to discriminatory to assess a $0.20 per each away market disseminating prices better than the Exchange’s price, for the lesser of: (a) The contract Customer Routing Fixed Fee disseminated size of such away markets, or (b) the when an option order is routed to all order size and, if order size remains after such other exchanges because this fee would routing, trade at the Exchange’s disseminated bid or be assessed uniformly on all market offer up to its disseminated size. If contracts still remain unexecuted after routing, they are posted on participants in addition to the actual wreier-aviles on DSK5TPTVN1PROD with NOTICES The Exchange believes that amending the Routing Fees to reflect the correct location of the Customer Rebate Program will add clarity to the Routing Fees. the book. Once on the book, should the order subsequently be locked or crossed by another market center, the PHLX XL II system will not route the order to the locking or crossing market center, with some exceptions noted in Rule 1080(m). 8 15 U.S.C. 78f(b). U.S.C. 78f(b)(4), (5). 10 See note 7. 9 15 VerDate Mar<15>2010 14:45 Dec 16, 2013 Jkt 232001 PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 76359 discriminatory because it will add clarity to the Pricing Schedule. 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 the rule change would allow the Exchange to recoup its costs when routing orders designated as available for routing by the market participant. Market participants may submit orders to the Exchange as ineligible for routing or ‘‘DNR’’ to avoid Routing Fees.14 It is important to note that when orders are routed to an away market they are routed based on price first.15 Today, other options exchanges also assess similar fees to recoup costs incurred when routing orders to away markets.16 With respect to continuing to route orders to NOM and PHLX at a lower cost as compared to other away markets, the Exchange does not believe that the proposed amendments to increase those fees, while maintaining the same fee differential imposes a burden because all market participants would be assessed the same fees depending on the away market. Also, the Exchange is proposing to recoup costs incurred only when members request the Exchange route their orders to an away market. The Exchange is passing along savings realized by leveraging NASDAQ OMX’s infrastructure and scale to market participants when those orders are routed to NOM and PHLX and is providing those savings to all market participants. 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.17 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 14 See note 12. note 13. 16 See Chicago Board of Options Exchange, Incorporated’s Fee Schedule. See NYSE Amex’s Fee Schedule. 17 15 U.S.C. 78s(b)(3)(A)(ii). 15 See E:\FR\FM\17DEN1.SGM 17DEN1 76360 Federal Register / Vol. 78, No. 242 / Tuesday, December 17, 2013 / Notices 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. 2013–118 and should be submitted on or before January 7, 2014. principal office, and at the Public Reference Room of the Commission. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 Kevin M. O’Neill, Deputy Secretary. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change [FR Doc. 2013–29895 Filed 12–16–13; 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 rule-comments@ sec.gov. Please include File Number SR– Phlx–2013–118 on the subject line. wreier-aviles on DSK5TPTVN1PROD with NOTICES 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: Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Amendments to the EDGA Exchange, Inc. Fee Schedule 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–2013–118. 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– VerDate Mar<15>2010 14:45 Dec 16, 2013 Jkt 232001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–71047; File No. SR–EDGA– 2013–35] In its filing with the Commission, the self-regulatory organization 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 self-regulatory organization 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 the Statutory Basis for, the Proposed Rule Change December 11, 2013. 1. Purpose Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on November 29, 2013, EDGA Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGA’’) 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 self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. The Exchange proposes to amend its Fee Schedule to: (i) Remove Flag RS, which routes to PSX and adds liquidity; (ii) make a non-substantive, corrective change to both Step-Up Tier 1 and StepUp Tier 2 under Footnote 4; and (iii) amend the criteria of both Step-Up Tier 1 and Step-Up Tier 2 under Footnote 4. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its fees and rebates applicable to Members 3 of the Exchange pursuant to EDGA Rule 15.1(a) and (c) (‘‘Fee Schedule’’) to: (i) Remove Flag RS, which routes to NASDAQ OMX PSX (‘‘PSX’’) and adds liquidity; (ii) make a non-substantive, corrective change to both Step-Up Tier 1 and Step-Up Tier 2 under Footnote 4; and (3) amend the criteria of both StepUp Tier 1 and Step-Up Tier 2 under Footnote 4. The text of the proposed rule change is available on the Exchange’s Internet Web site at www.directedge.com, at the Exchange’s 18 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 The term ‘‘Member’’ is defined as ‘‘any registered broker or dealer, or any person associated with a registered broker or dealer, that has been admitted to membership in the Exchange. A Member will have the status of a ‘‘member’’ of the Exchange as that term is defined in Section 3(a)(3) of the Act.’’ See Exchange Rule 1.5(n). 1 15 PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 Flag RS The Exchange proposes to delete Flag RS from its Fee Schedule. Orders that yield Flag RS are routed to the PSX and add liquidity. The Exchange currently rebates orders that yield Flag RS $0.0020 per share for securities priced at or above $1.00 and charges no fee for securities priced below $1.00. These fees represent a pass through of the rate that Direct Edge ECN LLC (d/b/a DE Route) (‘‘DE Route’’), the Exchange’s affiliated routing broker-dealer, is rebated for routing orders to PSX when it does not qualify for a volume tiered rate. The Exchange recently began to incur increased excessive messaging fees from PSX.4 To mitigate the increased messaging fees, the Exchange intends to delete Flag RS from its Fee Schedule and no longer permit Members to route orders via DE Route to post on the PSX. Members would continue to be able to route orders to PSX and remove liquidity via DE Route. Step-Up Tiers 1 and 2 Footnote 4 of the Fee Schedule contains the Step-Up Tier 1 and Step4 See the Excessive Messaging Policy under the Nasdaq Stock Market LLC fee schedule available at https://www.nasdaqtrader.com/ Trader.aspx?id=PriceListTrading2 (last visited November 20, 2013). E:\FR\FM\17DEN1.SGM 17DEN1

Agencies

[Federal Register Volume 78, Number 242 (Tuesday, December 17, 2013)]
[Notices]
[Pages 76358-76360]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-29895]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71040; File No. SR-Phlx-2013-118]


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

December 11, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 2, 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 Section V of the Pricing Schedule 
entitled ``Routing Fees.''
    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 this filing is to amend the Routing Fees in Section 
V of the Pricing Schedule in order to recoup costs the Exchange incurs 
for routing and executing certain orders in equity options to away 
markets. Today, the Exchange assesses a Non-Customer a $0.95 per 
contract Routing Fee to any options exchange. The Customer Routing Fee 
for option orders routed to The NASDAQ Options Exchange LLC (``NOM'') 
is a $0.05 per contract Fixed Fee in addition to the actual transaction 
fee assessed. The Customer Routing Fee for option orders routed to 
NASDAQ OMX BX, Inc. (``BX Options'') is $0.00. The Customer Routing Fee 
for option orders routed to all other options exchanges \3\ (excluding 
NOM and BX Options) is a fixed fee of $0.15 per contract (``Fixed 
Fee'') in addition to the actual transaction fee assessed. If the away 
market pays a rebate, the Routing Fee is $0.00 per contract.\4\
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    \3\ Including BATS Exchange, Inc. (``BATS''), BOX Options 
Exchange LLC (``BOX''), the Chicago Board Options Exchange, 
Incorporated (``CBOE''), C2 Options Exchange, Incorporated (``C2''), 
International Securities Exchange, LLC (``ISE''), the Miami 
International Securities Exchange, LLC (``MIAX''), NYSE Arca, Inc. 
(``NYSE Arca''), NYSE MKT LLC (``NYSE Amex'') and Topaz Exchange, 
LLC (``Gemini'').
    \4\ For all Routing Fees, the transaction fee will continue to 
be based on the away market's actual transaction fee or rebate for 
particular market participants and in the case that there is no 
transaction fee or rebate assessed by the away market, the Fixed 
Fee. A member organization qualifying for a Tier 2, 3 or 4 rebate in 
the Customer Rebate Program in Section B of the Pricing Schedule is 
entitled to receive a credit equal to the applicable Fixed Fee plus 
$0.05 per contract, unless the away market transaction fee is $0.00 
or the away market pays a rebate, in which case the member 
organization is entitled to receive a credit equal to the applicable 
Fixed Fee.
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    The Exchange proposes to increase the Customer Routing Fixed Fee of 
$0.15 per contract when an option order is routed to all other 
exchanges to $0.20 per contract. With respect to the fixed costs, the 
Exchange incurs a fee when it utilizes Nasdaq Options Services LLC 
(``NOS''), a member of the Exchange and the Exchange's exclusive order 
router.\5\ Each time NOS routes an order to an away market, NOS is 
charged a clearing fee \6\ and, in the case of certain exchanges, a 
transaction fee is also charged in certain symbols, which fees are 
passed through to the Exchange. The Exchange currently recoups clearing 
and transaction charges incurred by the Exchange as well as certain 
other costs incurred by the Exchange when routing to away markets, such 
as administrative and technical costs associated with operating NOS, 
membership fees at away markets, Options Regulatory Fees (``ORFs'') and 
technical costs associated with routing options. The Exchange assesses 
the actual away market fee at the time that the order was entered into 
the Exchange's trading system. This transaction fee would be calculated 
on an order-by-order basis since different away markets charge 
different amounts.
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    \5\ In May 2009, the Exchange adopted Rule 1080(m)(iii)(A) to 
establish Nasdaq Options Services LLC (``NOS''), a member of the 
Exchange, as the Exchange's exclusive order router. See Securities 
Exchange Act Release No. 59995 (May 28, 2009), 74 FR 26750 (June 3, 
2009) (SR-Phlx-2009-32). NOS is utilized by the Exchange's fully 
automated options trading system, PHLX XL[supreg].
    \6\ The Options Clearing Corporation (``OCC'') assesses $0.01 
per contract side.
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    A new market entrant recently adopted an ORF.\7\ The Exchange 
proposes to increase its Fixed Fee from $0.15 to $0.20 per contract to 
recoup costs associated with increased costs.
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    \7\ Gemini adopted an ORF of $0.0010 per contract. See 
Securities Exchange Act Release No. 70200 (August 14, 2013), 78 FR 
51242 (August 20, 2013) (SR-Topaz-2013-01).
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    The Exchange also proposes to correct a reference in the Routing 
Fees to the Customer Rebate Program which was relocated from Section A 
to Section B.

[[Page 76359]]

The Exchange believes that amending the Routing Fees to reflect the 
correct location of the Customer Rebate Program will add clarity to the 
Routing Fees.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Pricing 
Schedule is consistent with Section 6(b) of the Act \8\ in general, and 
furthers the objectives of Section 6(b)(4) and (b)(5) of the Act \9\ in 
particular, in that it provides for the equitable allocation of 
reasonable dues, fees and other charges among members and issuers and 
other persons using any facility or system which Phlx operates or 
controls, and is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4), (5).
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    The Exchange believes that the proposed Routing Fees are reasonable 
because they seek to recoup costs that are incurred by the Exchange 
when routing orders to away markets on behalf of members. Each 
destination market's transaction charge varies and there is a cost 
incurred by the Exchange when routing orders to away markets. The costs 
to the Exchange include clearing costs, administrative and technical 
costs associated with operating NOS, membership fees at away markets, 
ORFs and technical costs associated with routing options. The Exchange 
believes that the proposed Routing Fees would enable the Exchange to 
recover the costs it incurs to route orders to away markets in addition 
to transaction fees assessed to market participants for the execution 
of orders by the away market. Specifically, new entrants have added 
costs associated with routing.\10\ The Exchange believes that it is 
reasonable to recoup these costs borne by the Exchange on each 
transaction. The proposed $0.20 per contract Customer Routing Fixed 
Fee, which would be assessed when an option order is routed to all 
other exchanges, represents the overall cost to the Exchange for 
technical, administrative, clearing, regulatory, compliance and other 
costs, in addition to the transaction fee assessed by the away market.
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    \10\ See note 7.
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    In addition, the Exchange believes that it is equitable and not 
unfairly discriminatory to assess a $0.20 per contract Customer Routing 
Fixed Fee when an option order is routed to all other exchanges because 
this fee would be assessed uniformly on all market participants in 
addition to the actual transaction fees on all orders routed to non-
NASDAQ OMX markets.
    The Exchange believes that it is equitable and not unfairly 
discriminatory to assess a fixed cost of $0.05 per contract to route 
orders to NOM and no cost to route orders to BX Options because the 
cost, in terms of actual cash outlays, to the Exchange to route to 
those markets is lower. For example, costs related to routing to NOM 
and BX Options are lower as compared to other away markets because NOS 
is utilized by all three exchanges to route orders.\11\ NOS and the 
three NASDAQ OMX options (PHLX, BX Options and NOM) markets have a 
common data center and staff that are responsible for the day-to-day 
operations of NOS. Because the three exchanges are in a common data 
center, Routing Fees are reduced because costly expenses related to, 
for example, telecommunication lines to obtain connectivity are avoided 
when routing orders in this instance. The costs related to connectivity 
to route orders to other NASDAQ OMX exchanges are de minimis. When 
routing orders to non-NASDAQ OMX exchanges, the Exchange incurs costly 
connectivity charges related to telecommunication lines and other 
related costs. The Exchange believes it is reasonable, equitable and 
not unfairly discriminatory to pass along savings realized by 
leveraging NASDAQ OMX's infrastructure. Market participants may submit 
orders to the Exchange as ineligible for routing or ``DNR'' to avoid 
Routing Fees.\12\ It is important to note that when orders are routed 
to an away market they are routed based on price first.\13\
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    \11\ See Chapter VI, Section 11 of the NASDAQ and BX Options 
Rules and PHLX Rule 1080(m)(iii)(A).
    \12\ See Rule 1066(h) (Certain Types of Orders Defined) and 
1080(b)(i)(A) (PHLX XL and PHLX XL II).
    \13\ PHLX XL will route orders to away markets where the 
Exchange's disseminated bid or offer is inferior to the national 
best bid (best offer) (``NBBO'') price. See Rule 1080(m). The PHLX 
XL II system will contemporaneously route an order marked as an 
Intermarket Sweep Order (``ISO'') to each away market disseminating 
prices better than the Exchange's price, for the lesser of: (a) The 
disseminated size of such away markets, or (b) the order size and, 
if order size remains after such routing, trade at the Exchange's 
disseminated bid or offer up to its disseminated size. If contracts 
still remain unexecuted after routing, they are posted on the book. 
Once on the book, should the order subsequently be locked or crossed 
by another market center, the PHLX XL II system will not route the 
order to the locking or crossing market center, with some exceptions 
noted in Rule 1080(m).
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    The Exchange believes its proposal to correct the reference to the 
Customer Rebate Program at Section B is reasonable, equitable and not 
unfairly discriminatory because it will add clarity to the Pricing 
Schedule.

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 the 
rule change would allow the Exchange to recoup its costs when routing 
orders designated as available for routing by the market participant. 
Market participants may submit orders to the Exchange as ineligible for 
routing or ``DNR'' to avoid Routing Fees.\14\ It is important to note 
that when orders are routed to an away market they are routed based on 
price first.\15\ Today, other options exchanges also assess similar 
fees to recoup costs incurred when routing orders to away markets.\16\
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    \14\ See note 12.
    \15\ See note 13.
    \16\ See Chicago Board of Options Exchange, Incorporated's Fee 
Schedule. See NYSE Amex's Fee Schedule.
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    With respect to continuing to route orders to NOM and PHLX at a 
lower cost as compared to other away markets, the Exchange does not 
believe that the proposed amendments to increase those fees, while 
maintaining the same fee differential imposes a burden because all 
market participants would be assessed the same fees depending on the 
away market. Also, the Exchange is proposing to recoup costs incurred 
only when members request the Exchange route their orders to an away 
market. The Exchange is passing along savings realized by leveraging 
NASDAQ OMX's infrastructure and scale to market participants when those 
orders are routed to NOM and PHLX and is providing those savings to all 
market participants.

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.\17\ 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

[[Page 76360]]

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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    \17\ 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-2013-118 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-2013-118. 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-2013-118 and should be 
submitted on or before January 7, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-29895 Filed 12-16-13; 8:45 am]
BILLING CODE 8011-01-P
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