Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Amendments to the Pricing Schedule, 76677-76682 [2013-30048]
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Federal Register / Vol. 78, No. 243 / Wednesday, December 18, 2013 / Notices
be submitted by any of the following
methods:
SECURITIES AND EXCHANGE
COMMISSION
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–
CHX–2013–21 on the subject line.
[Release No. 34–71064; File No. SR–Phlx–
2013–117]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to
Amendments to the Pricing Schedule
December 12, 2013.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
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All submissions should refer to File
Number SR–CHX–2013–21. 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–CHX–
2013–21 and should be submitted on or
before January 8, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–30041 Filed 12–17–13; 8:45 am]
BILLING CODE 8011–01–P
25 17
CFR 200.30–3(a)(12).
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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
November 29, 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 with
respect to: (i) The Customer 3 Rebate
Program in Section B; (ii) Simple Order
pricing in Section I entitled Rebates and
Fees for Adding and Removing
Liquidity in SPY; 4 (iii) certain pricing
in Section II related to Multiply Listed
Options Fees; 5 (iv) pricing in Section III
entitled Singly Listed Options; (v) and
pricing in Section IV, entitled ‘‘Other
Transaction Fees,’’ to amend PIXL 6
Pricing.
While the changes proposed herein
are effective upon filing, the Exchange
has designated that the amendments be
operative on December 2, 2013.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 The term ‘‘Customer’’ applies to any transaction
that is identified by a member or member
organization for clearing in the Customer range at
The Options Clearing Corporation (‘‘OCC’’) which
is not for the account of broker or dealer or for the
account of a ‘‘Professional’’ (as that term is defined
in Rule 1000(b)(14)).
4 Options overlying Standard and Poor’s
Depositary Receipts/SPDRs (‘‘SPY’’) are based on
the SPDR exchange-traded fund (‘‘ETF’’), which is
designed to track the performance of the S&P 500
Index.
5 The pricing in Section II includes options
overlying equities, ETFs, ETNs and indexes which
are Multiply Listed.
6 PIXL is the Exchange’s price improvement
mechanism known as Price Improvement XL or
(PIXLSM). See Rule 1080(n).
2 17
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76677
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 is proposing to amend
various sections of its Pricing Schedule.
Specifically, the Exchange proposes to
amend its Customer Rebate Program at
Section B of the Pricing Schedule. The
Exchange is amending the types of
transactions in Category A and Category
B which are subject to the rebate. The
Exchange proposes to amend the Simple
Order Fees for Removing Liquidity in
Section I which are applicable to
transactions overlying SPY. The
Exchange proposes to amend various
Options Transaction Charges in Section
II in both Penny and non-Penny
PilotOptions and also amend the
Electronic Firm Fee Discount.7 The
Exchange proposes to increase the
Customer Options Transaction Charge
in Section III applicable to Singly Listed
Options. Finally, the Exchange proposes
to increase certain PIXL fees in Section
IV of the Pricing Schedule related to
order executions in Section II Multiply
Listed Options. Each proposal is
detailed below.
Customer Rebate Program
Currently, the Exchange has a
Customer Rebate Program consisting of
four tiers which pays Customer rebates
on two Categories, A and B, of
transactions.8 Category A rebates are
paid to members executing
electronically-delivered Customer
Simple Orders in Penny Pilot Options
7 The Exchange assesses Firms a reduced Options
Transaction Charge in Penny and non-Penny
Options provided a Firm has volume greater than
a certain amount of contracts in a month.
8 See Section B of the Pricing Schedule.
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and Customer Simple Orders in NonPenny Pilot Options in Section II of the
Pricing Schedule. Rebates are paid on
Customer PIXL Orders in Section II
symbols that execute against nonInitiating 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.
Category B rebates are paid to members
executing electronically-delivered
1
2
3
4
................................................
................................................
................................................
................................................
0.00%–0.75% ............................................................................................
Above 0.75%–1.60% .................................................................................
Above 1.60%–2.50% .................................................................................
Above 2.50% .............................................................................................
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2.
The Exchange is proposing to amend
the types of orders that qualify in
Categories A and B for a rebate. The
Exchange proposes to continue to pay a
Category A rebate to members executing
electronically-delivered Customer
Simple Orders in Penny Pilot Options
and Customer Simple Orders in NonPenny Pilot Options in Section II
symbols. Rebates will be paid on
Customer PIXL Orders in Section II
symbols that execute against nonInitiating Order interest. The Exchange
is eliminating the exception for
Customer PIXL Orders that are greater
than 999 contracts. Today, such orders
are entitled to a rebate regardless of the
contra-party to the transaction. Also, the
Exchange is adding language to provide
that in the instance where member
organizations qualify for a Tier 3 rebate
or a higher rebate in the Customer
Rebate Program, Customer PIXL Orders
that execute against a PIXL Initiating
Order will be paid a rebate of $0.14 per
contract.
The Exchange also proposes to
continue to pay a Category B rebate to
members executing electronicallydelivered Customer Complex Orders in
Penny Pilot Options and Non-Penny
Pilot Options in Section II symbols.
Rebates will be paid on Customer PIXL
Complex Orders in Section II symbols
that execute against non-Initiating Order
interest. The Exchange is eliminating
the exception for Customer PIXL Orders
that are greater than 999 contracts.
Today, such orders are entitled to a
rebate regardless of the contra-party to
the transaction. Also, the Exchange is
adding language to provide that in the
instance where member organizations
qualify for a Tier 3 rebate or a higher
rebate in the Customer Rebate Program,
Customer Complex PIXL Orders that
execute against a Complex PIXL
Initiating Order will be paid a rebate of
$0.17 per contract.
The Exchange anticipates that
amending these Categories will further
incentivize market participants to direct
additional Customer order flow to the
Exchange.
9 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) (SRPhlx-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 the Regulation
NMS).
10 Members and member organizations under
common ownership may aggregate their Customer
volume for purposes of calculating the Customer
Rebate Tiers and receiving rebates. Common
ownership means members or member
organizations under 75% common ownership or
control.
11 SPY is included in the calculation of Customer
volume in Multiply Listed Options that are
electronically-delivered and executed for purposes
of the Customer Rebate Program, however, the
rebates do not apply to electronic executions in
SPY.
12 A ‘‘Specialist’’ is an Exchange member who is
registered as an options specialist pursuant to Rule
1020(a).
13 A ‘‘Market Maker’’ includes Registered Options
Traders (Rule 1014(b)(i) and (ii)), which includes
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A Phlx member qualifies for a certain
rebate tier based on the percentage of
total national customer volume in
multiply-listed options which it
transacts monthly on Phlx. The
Exchange calculates Customer volume
in Multiply Listed Options by totaling
electronically-delivered and executed
volume, except volume associated with
electronic Qualified Contingent Cross
(‘‘QCC’’) Orders,9 as defined in
Exchange Rule 1080(o).10 The Exchange
pays the following rebates: 11
Percentage thresholds of national customer volume in multiply-listed
equity and ETF options classes, excluding spy options (monthly)
Customer rebate tiers
Tier
Tier
Tier
Tier
Customer Complex Orders in Penny
Pilot Options and Non-Penny Pilot
Options in Section II. Rebates are paid
on Customer PIXL Complex Orders in
Section II symbols 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 are paid a rebate regardless of
the contra-party to the transaction.
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Category A
$0.00
*0.12
0.16
0.17
Category B
$0.00
*0.17
0.19
0.19
Section I, Part A—SPY Simple Order
Pricing
The Exchange currently assesses
Customers, Specialists,12 Market
Makers,13 Firms,14 Broker-Dealers 15 and
Professionals 16 a $0.44 per contract Fee
for Removing Liquidity in SPY Simple
Orders. The Exchange is proposing to
increase the Fee for Removing Liquidity
in SPY Simple Orders from $0.44 to
$0.45 per contract for all market
participants. Despite the increased fees,
the Exchange believes that these fees
remain competitive with other
exchanges.
Section II—Multiply Listed Options
Fees
The Exchange currently assesses a
Specialist and Market Maker Floor
Options Transaction Charge of $0.25 per
contract in both Penny and non-Penny
Pilot Options. The Exchange proposes to
increase the Specialist and Market
Maker Floor Options Transaction
Charge of $0.25 per contract in both
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.
14 The term ‘‘Firm’’ applies to any transaction that
is identified by a member or member organization
for clearing in the Firm range at The Options
Clearing Corporation.
15 The term ‘‘Broker-Dealer’’ applies to any
transaction which is not subject to any of the other
transaction fees applicable within a particular
category.
16 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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Penny and non-Penny Pilot Options
from $0.25 to $0.30 per contract.
The Exchange currently assesses a
Professional electronic Options
Transaction Charge in non-Penny Pilot
Options of $0.30 per contract. The
Exchange proposes to assess
Professionals a $0.60 per contract
electronic Options Transaction Charge
in non-Penny Pilot Options. The
Exchange currently assesses a Firm
electronic Options Transaction Charge
in non-Penny Pilot Options of $0.50 per
contract. The Exchange proposes to
assess Firms a $0.60 per contract
electronic Options Transaction Charge
in non-Penny Pilot Options.
The Exchange proposes to assess
electronic Professional, Broker-Dealer
and Firm Complex Orders, in either
Penny or non-Penny Pilot Options, a
reduced $0.30 per contract Options
Transaction Charge.
The Exchange also proposes to amend
the Electronic Firm Fee Discount rate
volume requirement. Today, Firm
electronic Options Transaction Charges
in Penny Pilot and non-Penny Pilot
Options are reduced to $0.17 per
contract for a given month provided that
a Firm has volume greater than 500,000
electronically-delivered contracts in a
month (‘‘Electronic Firm Fee
Discount’’).17 The Exchange proposes to
reduce Firm electronic Options
Transaction Charges in Penny Pilot and
non-Penny Pilot Options to $0.20 per
contract for a given month provided a
Firm has volume greater than 350,000
electronically-delivered contracts in a
month.
The Exchange believes that these fees
remain competitive with fees currently
assessed today on Phlx and the reduced
fees for electronic Complex Orders will
serve as an incentive for Professionals,
Broker-Dealers and Firms submitting
electronic Complex Orders to submit
additional orders. Despite the fact that
the Electronic Firm Fee Discount will
now be reduced to a $0.20 per contract
fee instead of a $0.17 per contract fee,
Firms should still be incentivized to
send additional order flow in both
Penny and non-Penny Pilot Options due
to the reduced volume requirement.
Section III—Singly Listed Options
The Exchange proposes to amend the
Customer Options Transaction Charge
for Singly Listed Options. Today, a
Customer is assessed a $0.35 per
contract Options Transaction Charge for
transacting a Singly Listed Option. The
Exchange proposes to increase the fee
17 The Electronic Firm Fee Discount applies per
member organization when such members are
trading in their own proprietary account.
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from $0.35 to $0.40 per contract. Despite
the increased fee the Exchange believes
that this fee remains competitive.
76679
Customer Rebate Program
The Exchange’s proposal to continue
to pay a Category A or Category B rebate
to members executing electronicallydelivered Customer Simple Orders in
Penny Pilot Options and Customer
Simple Orders in Non-Penny Pilot
Options in Section II symbols for
Category A or Customer Complex
Orders in Penny or Non-Penny Pilot
Options in Section II symbols, eliminate
the exception for Customer PIXL Orders
(Category A) or Customer PIXL Complex
Orders (Category B) that are greater than
999 contracts and pay a Category A
rebate of $0.14 per contract or Category
B rebate of $0.17 per contract if a
member organization qualifies for a Tier
3 rebate or a higher Customer rebate by
executing against a PIXL Initiating
Order is reasonable because these
amendments should incentivize market
participants to direct additional
Customer order flow to the Exchange to
earn an additional Customer Rebate or
a rebate on certain Customer PIXL
orders or Customer PIXL Complex
Orders. Instead of paying the rebate on
Customer PIXL orders (Category A) or
Customer PIXL Complex Orders
(Category B) that are greater than 999
contracts regardless of the contra-party,
the Exchange is offering member
organizations that qualify for a Tier 3
rebate or a higher rebate the opportunity
to earn a rebate on certain Customer
PIXL orders (Category A) or Customer
PIXL Complex Orders (Category B) to
reward them for the Customer volume
they transacted on the Exchange. The
Exchange believes that this incentive
should encourage market participants to
direct a greater amount of Customer
volume to the Exchange. In addition, the
Chicago Board Options Exchange,
Incorporated (‘‘CBOE’’) also pays rebates
for orders related to their price
improvement mechanism in an identical
fashion.22
The Exchange’s proposal to continue
to pay a Category A or Category B rebate
to members executing electronicallydelivered Customer Simple Orders in
Penny Pilot Options and Customer
Simple Orders in Non-Penny Pilot
Options in Section II symbols for
Category A or Customer Complex
Orders in Penny or Non-Penny Pilot
Options in Section II symbols, eliminate
the exception for Customer PIXL Orders
(Category A) or Customer PIXL Complex
Orders (Category B) that are greater than
999 contracts and pay a Category A
rebate of $0.14 per contract or Category
B rebate of $0.17 per contract if a
member organization qualifies for a Tier
3 rebate or a higher Customer rebate by
executing against a PIXL Initiating
Order is equitable and not unfairly
discriminatory because it will be
18 This excludes ETFs, ETNs and indexes which
are Multiply Listed.
19 See Section I, Part C of the Pricing Schedule.
20 15 U.S.C. 78f.
21 15 U.S.C. 78f(b)(4) and (5).
22 See CBOE’s Fees Schedule. CBOE’s Volume
Incentive Program (‘‘VIP’’) pays certain tiered
rebates to Trading Permit Holders for electronically
executed multiply-listed option orders which
include AIM orders.
Section IV, Part A PIXL Pricing
The Exchange proposes to amend the
PIXL Pricing in Part A of Section IV.
Currently, with respect to executions in
Section II Multiply Listed Options 18
when a PIXL Order is contra to a PIXL
Auction Responder, a Customer PIXL
Order will be assessed $0.00 per
contract while other market participants
are assessed $0.30 per contract. A
Responder is also assessed $0.30 per
contract unless the Responder is a
Customer, in which case the fee is $0.00
per contract.
With respect to executions in Section
II Multiply Listed Options, the
Exchange proposes to continue to assess
$0.00 per contract to a Customer PIXL
Order when a PIXL Order is contra to
a PIXL Auction Responder. Other
market participants would continue to
be assessed $0.30 per contract in Penny
Pilot Options, but would be assessed an
increased fee of $0.38 per contract in
non-Penny Pilot Options. A Responder
would continue to be assessed $0.30 per
contract in Penny Pilot Options and
would be assessed an increased fee of
$0.38 per contract in non-Penny Pilot
Options, unless, as is the case today, the
Responder is a Customer, in which case
the fee is $0.00 per contract.
The Exchange believes that increasing
certain PIXL fees related to non-Penny
Pilot Options will align these fees with
those currently assessed for PIXL
executions in options overlying SPY.19
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the Act,20
in general, and with Section 6(b)(4) and
6(b)(5) of the Act,21 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 the Exchange operates or
controls, and is not designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.
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applied to all market participants in a
uniform matter. All members are
eligible to receive the rebate provided
they submit a qualifying number of
electronic Customer volume.
Section I—Simple Order Pricing
The Exchange’s proposal to increase
the Fee for Removing Liquidity in
Simple Orders from $0.44 to $0.45 per
contract for all market participants is
reasonable because the increase is
consistent with or less than rates
assessed by other options exchanges,
such as Topaz Exchange, LLC
(‘‘Gemini’’), NYSE ARCA, Inc. (‘‘NYSE
Arca’’), BATS Exchange, Inc. (‘‘BATS’’)
and NASDAQ Options Market LLC
(‘‘NOM’’).23
The Exchange’s proposal to increase
the Fee for Removing Liquidity in
Simple Orders from $0.44 to $0.45 per
contract for all market participants is
equitable and not unfairly
discriminatory because all market
participants will be assessed the same
Fee for Removing Liquidity in Simple
Orders of $0.45 per contract.
Section II—Multiply Listed Options
Fees
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The Exchange’s proposal to amend its
Floor Options Transaction Charges for
Penny and Non-Penny Pilot Options for
Specialist and Market Makers is
reasonable because the proposed fees
are within the range of other fees in
Section II of the Pricing Schedule. Also,
Specialists and Market Makers pay
Payment for Order Flow fees 24 on
23 See Gemini’s Fee Schedule. Gemini assesses
taker fees for Priority Customer of $0.45 per
contract and $0.48 per contract for all market
participants. See NYSE Arca fees Schedule. NYSE
Arca assesses a Lead Market Maker and NYSE Arca
Market Maker a $0.47 [sic] per contract take
liquidity fee and a $0.48 per contract take liquidity
fee to a Firm and Broker-Dealer. See BATS BZX
Exchange Fee Schedule. BATS assesses a $0.47
charge per contract for a Professional, Firm or
Market Maker order that removes liquidity and
$0.45 per contract for a Customer order that
removes liquidity. See NOM Rules at Chapter XV,
Section 2. NOM assesses $0.45 per contract for a
Customer to remove liquidity and $0.48 per
contract for all other market participants.
24 The Payment for Order Flow (‘‘PFOF’’) Program
assesses fees to Specialists and Market Makers
resulting from Customer orders (‘‘PFOF Fees’’). The
PFOF fees are available to be disbursed by the
Exchange according to the instructions of the
Specialist or Market Maker to order flow providers
who are members or member organizations who
submit, as agent, Customer orders to the Exchange
through a member or member organization who is
acting as agent for those customer orders. Any
excess PFOF funds billed but not utilized by the
Specialist or Market Maker are carried forward
unless the Specialist or Market Maker elects to have
those funds rebated on a pro rata basis, reflected as
a credit on the monthly invoices. At the end of each
calendar quarter, the Exchange calculates the
amount of excess funds from the previous quarter
and subsequently rebates excess funds on a pro-rata
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electronic orders but do not pay such
PFOF fees when transacting nonelectronic orders.
The Exchange’s proposal to amend its
Floor Options Transaction Charges for
Penny Options and Non-Penny Pilot
Options for Specialist and Market
Makers is equitable and not unfairly
discriminatory because Specialists and
Market Makers have a time and place
advantage on the trading floor with
respect to orders, unlike other market
participants. A Professional, BrokerDealer or a Firm would necessarily
require a floor broker to represent their
trading interest on the trading floor as
compared to a Specialist or Market
Maker that could directly transact such
orders on the trading floor. Further, the
Exchange believes that in order to
attract orders from a Professional,
Broker-Dealer or a Firm, via a floor
broker, the rates must be competitive
with rates other trading floors.
Therefore, the Exchange would continue
to assess a Professional, Broker-Dealer
and a Firm a Floor Options Transaction
Charge for Penny Pilot Options and
Non-Penny Pilot Options of $0.25 per
contract.
With respect to electronic orders, the
Exchange proposes to assess
Professionals, Broker-Dealers and Firms
an Options Transaction Charge of $0.30
per contract for Penny Options and
Non-Penny Pilot Options with respect to
electronic Complex Orders. The
Exchange currently assesses
Professionals a $0.30 per contract fee for
electronic orders, so this would not
result in a change for a Professional. A
Broker-Dealer and Firm are assessed a
$0.45 per contract fee for electronic
orders, which would be reduced to
$0.30 per contract with respect to
electronic Complex Orders. Specialists
and Market Makers are assessed a $0.22
per contract electronic Options
Transaction Charge and $0.23 in nonPenny Pilot Options because Specialists
and Market Makers have obligations to
the market and regulatory
requirements,25 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
Specialists and Market Makers and
basis to the applicable Specialist or Market Maker
who paid into that pool of funds.
25 See Rule 1014 titled ‘‘Obligations and
Restrictions Applicable to Specialists and
Registered Options Traders.’’
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other market participants recognizes the
differing contributions made to the
liquidity and trading environment on
the Exchange by these market
participants.
The Exchange’s proposal to amend
the Professional and Firm Options
Transaction Charges for Non-Penny
Pilot Options is reasonable because the
Exchange is increasing the Professional
and Firm electronic fees to $0.60 per
contract in order to offer lower fees for
electronic Complex Order transactions
and also align Professional and Firm
rates with the Options Transaction
Charge which is currently assessed to a
Broker-Dealer.
The Exchange’s proposal to amend
the Professional and Firm Options
Transaction Charges for Non-Penny
Pilot Options is equitable and not
unfairly discriminatory because the
Exchange would uniformly assess a
Professional,26 Firm 27 and BrokerDealer a $0.60 per contract electronic
Non-Penny Pilot Options Transaction
Charge. The Exchange will continue not
to assess a Customer an Options
Transaction Charge because Customer
order flow brings unique benefits to the
market. Other market participants
benefit from the liquidity that Customer
order flow brings to the Exchange.
Specialists and Market Makers are
assessed an electronic Non-Penny Pilot
Options Transaction Charge of $0.23 per
contract with respect to floor
transactions in Non-Penny Pilot
Options. Specialists and Market Makers
have obligations to the market and
regulatory requirements,28 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 Exchange believes that it is
reasonable to amend the Electronic Firm
Fee Discount rate for electronic Options
Transaction Charges in Penny Pilot and
Non-Penny Pilot Options from $0.17 to
$0.20 per contract and decrease the
Firm volume requirement from 500,000
to 350,000 electronically-delivered
contracts because despite the lesser
discount, the lower volume requirement
26 A Professional is currently assessed an
electronic Non-Penny Pilot Options Transaction
Charge of $0.30 per contract.
27 A Firm is currently assessed an electronic NonPenny Pilot Options Transaction Charge of $0.50
per contract.
28 See Rule 1014 titled ‘‘Obligations and
Restrictions Applicable to Specialists and
Registered Options Traders.’’
E:\FR\FM\18DEN1.SGM
18DEN1
Federal Register / Vol. 78, No. 243 / Wednesday, December 18, 2013 / Notices
should attract additional market
participants transacting Firm orders.
The Exchange believes that it is
equitable and not unfairly
discriminatory to amend the Electronic
Firm Fee Discount rate for electronic
Options Transaction Charges in Penny
Pilot and Non-Penny Pilot Options from
$0.17 to $0.20 per contract and decrease
the Firm volume requirement from
500,000 to 350,000 electronicallydelivered contracts because all Firms
will continue to have an opportunity to
qualify for this incentive as they do
today, provided they achieve the
requisite volume. The Exchange also
believes that the discount will continue
to assist Firms to offset Options
Transaction Charges.
ehiers on DSK2VPTVN1PROD with NOTICES
Section III Singly Listed Options
The Exchange’s proposal to amend
the Customer Options Transaction
Charge for Singly Listed Options from
$0.35 to $0.40 per contact is reasonable
because despite the increase the
Exchange believes that this fee is
competitive with other Singly Listed
Options fees.29
The Exchange’s proposal to amend
the Customer Options Transaction
Charge for Singly Listed Options from
$0.35 to $0.40 per contact is equitable
and not unfairly discriminatory because
the Exchange would continue to assess
Customers, Specialists and Market
Makers the lowest fees while assessing
Professionals, Firms and Broker-Dealers
a $0.60 per contract Options
Transaction Charge. Customer order
flow brings unique benefits to the
market through increased liquidity.
Specialists and Market Makers have
obligations to the market and regulatory
requirements,30 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.
Section IV, Part A PIXL Pricing
The Exchange’s proposal to amend
the PIXL Pricing in Part A of Section IV
so that other market participants, other
than a Customer PIXL Order and a nonCustomer Responder, would be assessed
an increased $0.38 per contract in NonPenny Pilot Options is reasonable
because the increase aligns these fees
with those currently assessed for PIXL
29 See the International Securities Exchange LLC’s
Fee Schedule.
30 See Rule 1014 titled ‘‘Obligations and
Restrictions Applicable to Specialists and
Registered Options Traders.’’
VerDate Mar<15>2010
15:27 Dec 17, 2013
Jkt 232001
executions in options overlying SPY.
Section I, Part C of the Pricing Schedule
assesses non-Customer market
participants a $0.38 per contract fee
when contra to an Initiating Order.
The Exchange’s proposal to amend
the PIXL Pricing in Part A of Section IV
so that other market participants, other
than a Customer PIXL Order and a nonCustomer Responder, would be assessed
an increased $0.38 per contract in NonPenny Pilot Options is equitable and not
unfairly discriminatory because all nonCustomer market participants would be
assessed the same fee. The Exchange has
traditionally not assessed Customers
PIXL Order fees because Customer
liquidity benefits all market
participants. Customer PIXL Orders
would continue to not be assessed such
a fee.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
an undue burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange believes that the Customer
Rebate Program will continue to
encourage Customer order flow to be
directed to the Exchange. By
incentivizing members to route
Customer orders, the Exchange desires
to attract liquidity to the Exchange,
which in turn benefits all market
participants. All market participants are
eligible to qualify for a Customer Rebate.
The Exchange believes the proposed
amendment would allow a greater
number of market participants to qualify
for Tier 3 or higher Customer rebates.
The Exchange believes this pricing
change does not impose a burden on
competition but rather that the proposed
rule change will continue to promote
competition on the Exchange.
The Exchange operates in a highly
competitive market, comprised of
twelve options 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.
PO 00000
Frm 00089
Fmt 4703
Sfmt 4703
76681
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.31 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:
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 SRPhlx-2013–117 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–2013–117. 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
31 15
E:\FR\FM\18DEN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
18DEN1
76682
Federal Register / Vol. 78, No. 243 / Wednesday, December 18, 2013 / Notices
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-Phlx2013–117 and should be submitted on
or before January 8, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.32
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–30048 Filed 12–17–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71058; File No. SR–EDGX–
2013–46]
Self-Regulatory Organizations; EDGX
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating to Amendments
to the EDGX Exchange, Inc. Fee
Schedule
ehiers on DSK2VPTVN1PROD with NOTICES
December 12, 2013.
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 December
6, 2013, EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) 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.
32 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b-4.
1 15
VerDate Mar<15>2010
15:27 Dec 17, 2013
Jkt 232001
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 EDGX Rule
15.1(a) and (c) (‘‘Fee Schedule’’) to
exclude odd lot transactions from its
definition of Total Consolidated Volume
(‘‘TCV’’), which is used to determine
whether a Member is eligible for certain
pricing tiers. The text of the proposed
rule change is available on the
Exchange’s Web site at
www.directedge.com, at the Exchange’s
principal office, on the Commission’s
Web site at www.sec.gov, and at the
Public Reference Room of the
Commission.
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
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
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange currently defines TCV
as ‘‘the volume reported by all
exchanges and trade reporting facilities
to the consolidated transaction reporting
plans for Tapes A, B and C securities for
the month in which the fees are
calculated.’’ 4 An odd lot transaction,
which is generally an execution of less
than 100 shares,5 is currently not
reported to the consolidated tape, and
therefore, not included in the
Exchange’s calculation of TCV.
Beginning December 9, 2013, odd lot
transactions will be reported to the
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).
4 See Exchange Fee Schedule available at
https://www.directedge.com/Trading/
EDGXFeeSchedule.aspx (December 2, 2013)
5 See Exchange Rule 11.6.
PO 00000
Frm 00090
Fmt 4703
Sfmt 4703
consolidated tape.6 The Exchange,
therefore, proposes to amend its Fee
Schedule to exclude odd lot
transactions from its definition of TCV,
which is used to determine whether a
Member is eligible for certain pricing
tiers, through January 31, 2014. The
proposal would allow Members
additional time to adjust to the potential
impact of including odd lot transactions
within consolidated volumes. Odd lots
will continue to be included in each
Member’s average daily trading volume
(‘‘ADV’’) as they are today.
The Exchange provides Members with
the opportunity to qualify for a pricing
tier based on its [sic] level of activity
during a particular month. Each tier
provides a Member with increased
rebates or lower fees for adding or
removing liquidity in the Exchange.
Certain tiers use a specific percentage of
TCV during the billing cycle as a
threshold that a Member must meet or
exceed to qualify for a particular tier.
For example, to qualify for the Mega
Tier 2 and receive a rebate of $0.0032
per share and fee of $0.0029 per share,
a Member must: add or route at least
4,000,000 shares of ADV prior to 9:30
a.m. or after 4:00 p.m. (includes all flags
except 6); and add a minimum of 0.20%
of the TCV on a daily basis measured
monthly, including during both market
hours and pre and post-trading hours.
To qualify for Market Depth Tier 1 and
receive a rebate of $0.00325 per share,
a Member must: add greater than or
equal to 0.85% of the TCV in ADV on
EDGX in total; and add at least 4 million
shares as Non-Displayed Orders that
yield Flag HA.
The proposal to exclude odd lot
transactions from the TCV calculation is
intended to allow Members additional
time to adjust to the potential impact of
including odd lot transactions within
6 See Securities Exchange Act Release No. 70794
(October 31, 2013), 78 FR 66789 (November 6, 2013)
(SR–CTA–2013–05) (Order Approving the
Eighteenth Substantive Amendment to the Second
Restatement of the CTA Plan). See also Securities
Exchange Act Release No. 70793 (October 31, 2013),
78 FR 66788 (November 6, 2013) (File No. S7–24–
89) (Order Approving Amendment No. 30 to the
Joint Self-Regulatory Organization Plan Governing
the Collection, Consolidation and Dissemination of
Quotation and Transaction Information for NasdaqListed Securities Traded on Exchanges on an
Unlisted Trading Privileges Basis). See also
Securities Exchange Act Release No. 70898
(November 19, 2013) (SR–NYSE–2013–75). See also
announcements regarding December 9, 2013
implementation date, available at https://
cta.nyxdata.com/cta/popup/news/2385 and https://
www.nasdaqtrader.com/
TraderNews.aspx?id=uva2013-11. If the inclusion
of odd lot transactions in the consolidated tape is
delayed to a date after December 9, 2013, the
manner of inclusion or exclusion of odd lot
transactions described in this proposal for purposes
of billing on the Exchange would similarly take
effect on such later date.
E:\FR\FM\18DEN1.SGM
18DEN1
]]>Agencies
[Federal Register Volume 78, Number 243 (Wednesday, December 18, 2013)]
[Notices]
[Pages 76677-76682]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-30048]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71064; File No. SR-Phlx-2013-117]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
Amendments to the Pricing Schedule
December 12, 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 November 29, 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.
---------------------------------------------------------------------------
\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 with
respect to: (i) The Customer \3\ Rebate Program in Section B; (ii)
Simple Order pricing in Section I entitled Rebates and Fees for Adding
and Removing Liquidity in SPY; \4\ (iii) certain pricing in Section II
related to Multiply Listed Options Fees; \5\ (iv) pricing in Section
III entitled Singly Listed Options; (v) and pricing in Section IV,
entitled ``Other Transaction Fees,'' to amend PIXL \6\ Pricing.
---------------------------------------------------------------------------
\3\ The term ``Customer'' applies to any transaction that is
identified by a member or member organization for clearing in the
Customer range at The Options Clearing Corporation (``OCC'') which
is not for the account of broker or dealer or for the account of a
``Professional'' (as that term is defined in Rule 1000(b)(14)).
\4\ Options overlying Standard and Poor's Depositary Receipts/
SPDRs (``SPY'') are based on the SPDR exchange-traded fund
(``ETF''), which is designed to track the performance of the S&P 500
Index.
\5\ The pricing in Section II includes options overlying
equities, ETFs, ETNs and indexes which are Multiply Listed.
\6\ PIXL is the Exchange's price improvement mechanism known as
Price Improvement XL or (PIXL\SM\). See Rule 1080(n).
---------------------------------------------------------------------------
While the changes proposed herein are effective upon filing, the
Exchange has designated that the amendments be operative on December 2,
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 Exchange is proposing to amend various sections of its Pricing
Schedule. Specifically, the Exchange proposes to amend its Customer
Rebate Program at Section B of the Pricing Schedule. The Exchange is
amending the types of transactions in Category A and Category B which
are subject to the rebate. The Exchange proposes to amend the Simple
Order Fees for Removing Liquidity in Section I which are applicable to
transactions overlying SPY. The Exchange proposes to amend various
Options Transaction Charges in Section II in both Penny and non-Penny
PilotOptions and also amend the Electronic Firm Fee Discount.\7\ The
Exchange proposes to increase the Customer Options Transaction Charge
in Section III applicable to Singly Listed Options. Finally, the
Exchange proposes to increase certain PIXL fees in Section IV of the
Pricing Schedule related to order executions in Section II Multiply
Listed Options. Each proposal is detailed below.
---------------------------------------------------------------------------
\7\ The Exchange assesses Firms a reduced Options Transaction
Charge in Penny and non-Penny Options provided a Firm has volume
greater than a certain amount of contracts in a month.
---------------------------------------------------------------------------
Customer Rebate Program
Currently, the Exchange has a Customer Rebate Program consisting of
four tiers which pays Customer rebates on two Categories, A and B, of
transactions.\8\ Category A rebates are paid to members executing
electronically-delivered Customer Simple Orders in Penny Pilot Options
[[Page 76678]]
and Customer Simple Orders in Non-Penny Pilot Options in Section II of
the Pricing Schedule. 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.
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. Rebates are paid on Customer PIXL Complex
Orders in Section II symbols 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 are paid a rebate regardless of the contra-
party to the transaction.
---------------------------------------------------------------------------
\8\ See Section B of the Pricing Schedule.
---------------------------------------------------------------------------
A Phlx member qualifies for a certain rebate tier based on the
percentage of total national customer volume in multiply-listed options
which it transacts monthly on Phlx. The Exchange calculates Customer
volume in Multiply Listed Options by totaling electronically-delivered
and executed volume, except volume associated with electronic Qualified
Contingent Cross (``QCC'') Orders,\9\ as defined in Exchange Rule
1080(o).\10\ The Exchange pays the following rebates: \11\
---------------------------------------------------------------------------
\9\ 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 the Regulation NMS).
\10\ Members and member organizations under common ownership may
aggregate their Customer volume for purposes of calculating the
Customer Rebate Tiers and receiving rebates. Common ownership means
members or member organizations under 75% common ownership or
control.
\11\ SPY is included in the calculation of Customer volume in
Multiply Listed Options that are electronically-delivered and
executed for purposes of the Customer Rebate Program, however, the
rebates do not apply to electronic executions in SPY.
----------------------------------------------------------------------------------------------------------------
Percentage thresholds of national
customer volume in multiply-listed
Customer rebate tiers equity and ETF options classes, Category A Category B
excluding spy options (monthly)
----------------------------------------------------------------------------------------------------------------
Tier 1..................................... 0.00%-0.75%........................ $0.00 $0.00
Tier 2..................................... Above 0.75%-1.60%.................. *0.12 *0.17
Tier 3..................................... Above 1.60%-2.50%.................. 0.16 0.19
Tier 4..................................... Above 2.50%........................ 0.17 0.19
----------------------------------------------------------------------------------------------------------------
2.
The Exchange is proposing to amend the types of orders that qualify
in Categories A and B for a rebate. The Exchange proposes to continue
to pay a Category A rebate 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. Rebates
will be paid on Customer PIXL Orders in Section II symbols that execute
against non-Initiating Order interest. The Exchange is eliminating the
exception for Customer PIXL Orders that are greater than 999 contracts.
Today, such orders are entitled to a rebate regardless of the contra-
party to the transaction. Also, the Exchange is adding language to
provide that in the instance where member organizations qualify for a
Tier 3 rebate or a higher rebate in the Customer Rebate Program,
Customer PIXL Orders that execute against a PIXL Initiating Order will
be paid a rebate of $0.14 per contract.
The Exchange also proposes to continue to pay a Category B rebate
to members executing electronically-delivered Customer Complex Orders
in Penny Pilot Options and Non-Penny Pilot Options in Section II
symbols. Rebates will be paid on Customer PIXL Complex Orders in
Section II symbols that execute against non-Initiating Order interest.
The Exchange is eliminating the exception for Customer PIXL Orders that
are greater than 999 contracts. Today, such orders are entitled to a
rebate regardless of the contra-party to the transaction. Also, the
Exchange is adding language to provide that in the instance where
member organizations qualify for a Tier 3 rebate or a higher rebate in
the Customer Rebate Program, Customer Complex PIXL Orders that execute
against a Complex PIXL Initiating Order will be paid a rebate of $0.17
per contract.
The Exchange anticipates that amending these Categories will
further incentivize market participants to direct additional Customer
order flow to the Exchange.
Section I, Part A--SPY Simple Order Pricing
The Exchange currently assesses Customers, Specialists,\12\ Market
Makers,\13\ Firms,\14\ Broker-Dealers \15\ and Professionals \16\ a
$0.44 per contract Fee for Removing Liquidity in SPY Simple Orders. The
Exchange is proposing to increase the Fee for Removing Liquidity in SPY
Simple Orders from $0.44 to $0.45 per contract for all market
participants. Despite the increased fees, the Exchange believes that
these fees remain competitive with other exchanges.
---------------------------------------------------------------------------
\12\ A ``Specialist'' is an Exchange member who is registered as
an options specialist pursuant to Rule 1020(a).
\13\ 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.
\14\ The term ``Firm'' applies to any transaction that is
identified by a member or member organization for clearing in the
Firm range at The Options Clearing Corporation.
\15\ The term ``Broker-Dealer'' applies to any transaction which
is not subject to any of the other transaction fees applicable
within a particular category.
\16\ 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--Multiply Listed Options Fees
The Exchange currently assesses a Specialist and Market Maker Floor
Options Transaction Charge of $0.25 per contract in both Penny and non-
Penny Pilot Options. The Exchange proposes to increase the Specialist
and Market Maker Floor Options Transaction Charge of $0.25 per contract
in both
[[Page 76679]]
Penny and non-Penny Pilot Options from $0.25 to $0.30 per contract.
The Exchange currently assesses a Professional electronic Options
Transaction Charge in non-Penny Pilot Options of $0.30 per contract.
The Exchange proposes to assess Professionals a $0.60 per contract
electronic Options Transaction Charge in non-Penny Pilot Options. The
Exchange currently assesses a Firm electronic Options Transaction
Charge in non-Penny Pilot Options of $0.50 per contract. The Exchange
proposes to assess Firms a $0.60 per contract electronic Options
Transaction Charge in non-Penny Pilot Options.
The Exchange proposes to assess electronic Professional, Broker-
Dealer and Firm Complex Orders, in either Penny or non-Penny Pilot
Options, a reduced $0.30 per contract Options Transaction Charge.
The Exchange also proposes to amend the Electronic Firm Fee
Discount rate volume requirement. Today, Firm electronic Options
Transaction Charges in Penny Pilot and non-Penny Pilot Options are
reduced to $0.17 per contract for a given month provided that a Firm
has volume greater than 500,000 electronically-delivered contracts in a
month (``Electronic Firm Fee Discount'').\17\ The Exchange proposes to
reduce Firm electronic Options Transaction Charges in Penny Pilot and
non-Penny Pilot Options to $0.20 per contract for a given month
provided a Firm has volume greater than 350,000 electronically-
delivered contracts in a month.
---------------------------------------------------------------------------
\17\ The Electronic Firm Fee Discount applies per member
organization when such members are trading in their own proprietary
account.
---------------------------------------------------------------------------
The Exchange believes that these fees remain competitive with fees
currently assessed today on Phlx and the reduced fees for electronic
Complex Orders will serve as an incentive for Professionals, Broker-
Dealers and Firms submitting electronic Complex Orders to submit
additional orders. Despite the fact that the Electronic Firm Fee
Discount will now be reduced to a $0.20 per contract fee instead of a
$0.17 per contract fee, Firms should still be incentivized to send
additional order flow in both Penny and non-Penny Pilot Options due to
the reduced volume requirement.
Section III--Singly Listed Options
The Exchange proposes to amend the Customer Options Transaction
Charge for Singly Listed Options. Today, a Customer is assessed a $0.35
per contract Options Transaction Charge for transacting a Singly Listed
Option. The Exchange proposes to increase the fee from $0.35 to $0.40
per contract. Despite the increased fee the Exchange believes that this
fee remains competitive.
Section IV, Part A PIXL Pricing
The Exchange proposes to amend the PIXL Pricing in Part A of
Section IV. Currently, with respect to executions in Section II
Multiply Listed Options \18\ when a PIXL Order is contra to a PIXL
Auction Responder, a Customer PIXL Order will be assessed $0.00 per
contract while other market participants are assessed $0.30 per
contract. A Responder is also assessed $0.30 per contract unless the
Responder is a Customer, in which case the fee is $0.00 per contract.
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\18\ This excludes ETFs, ETNs and indexes which are Multiply
Listed.
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With respect to executions in Section II Multiply Listed Options,
the Exchange proposes to continue to assess $0.00 per contract to a
Customer PIXL Order when a PIXL Order is contra to a PIXL Auction
Responder. Other market participants would continue to be assessed
$0.30 per contract in Penny Pilot Options, but would be assessed an
increased fee of $0.38 per contract in non-Penny Pilot Options. A
Responder would continue to be assessed $0.30 per contract in Penny
Pilot Options and would be assessed an increased fee of $0.38 per
contract in non-Penny Pilot Options, unless, as is the case today, the
Responder is a Customer, in which case the fee is $0.00 per contract.
The Exchange believes that increasing certain PIXL fees related to
non-Penny Pilot Options will align these fees with those currently
assessed for PIXL executions in options overlying SPY.\19\
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\19\ See Section I, Part C of the Pricing Schedule.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\20\ in general, and with
Section 6(b)(4) and 6(b)(5) of the Act,\21\ 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 the Exchange operates or controls, and is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\20\ 15 U.S.C. 78f.
\21\ 15 U.S.C. 78f(b)(4) and (5).
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Customer Rebate Program
The Exchange's proposal to continue to pay a Category A or Category
B rebate 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 for Category A or Customer Complex
Orders in Penny or Non-Penny Pilot Options in Section II symbols,
eliminate the exception for Customer PIXL Orders (Category A) or
Customer PIXL Complex Orders (Category B) that are greater than 999
contracts and pay a Category A rebate of $0.14 per contract or Category
B rebate of $0.17 per contract if a member organization qualifies for a
Tier 3 rebate or a higher Customer rebate by executing against a PIXL
Initiating Order is reasonable because these amendments should
incentivize market participants to direct additional Customer order
flow to the Exchange to earn an additional Customer Rebate or a rebate
on certain Customer PIXL orders or Customer PIXL Complex Orders.
Instead of paying the rebate on Customer PIXL orders (Category A) or
Customer PIXL Complex Orders (Category B) that are greater than 999
contracts regardless of the contra-party, the Exchange is offering
member organizations that qualify for a Tier 3 rebate or a higher
rebate the opportunity to earn a rebate on certain Customer PIXL orders
(Category A) or Customer PIXL Complex Orders (Category B) to reward
them for the Customer volume they transacted on the Exchange. The
Exchange believes that this incentive should encourage market
participants to direct a greater amount of Customer volume to the
Exchange. In addition, the Chicago Board Options Exchange, Incorporated
(``CBOE'') also pays rebates for orders related to their price
improvement mechanism in an identical fashion.\22\
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\22\ See CBOE's Fees Schedule. CBOE's Volume Incentive Program
(``VIP'') pays certain tiered rebates to Trading Permit Holders for
electronically executed multiply-listed option orders which include
AIM orders.
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The Exchange's proposal to continue to pay a Category A or Category
B rebate 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 for Category A or Customer Complex
Orders in Penny or Non-Penny Pilot Options in Section II symbols,
eliminate the exception for Customer PIXL Orders (Category A) or
Customer PIXL Complex Orders (Category B) that are greater than 999
contracts and pay a Category A rebate of $0.14 per contract or Category
B rebate of $0.17 per contract if a member organization qualifies for a
Tier 3 rebate or a higher Customer rebate by executing against a PIXL
Initiating Order is equitable and not unfairly discriminatory because
it will be
[[Page 76680]]
applied to all market participants in a uniform matter. All members are
eligible to receive the rebate provided they submit a qualifying number
of electronic Customer volume.
Section I--Simple Order Pricing
The Exchange's proposal to increase the Fee for Removing Liquidity
in Simple Orders from $0.44 to $0.45 per contract for all market
participants is reasonable because the increase is consistent with or
less than rates assessed by other options exchanges, such as Topaz
Exchange, LLC (``Gemini''), NYSE ARCA, Inc. (``NYSE Arca''), BATS
Exchange, Inc. (``BATS'') and NASDAQ Options Market LLC (``NOM'').\23\
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\23\ See Gemini's Fee Schedule. Gemini assesses taker fees for
Priority Customer of $0.45 per contract and $0.48 per contract for
all market participants. See NYSE Arca fees Schedule. NYSE Arca
assesses a Lead Market Maker and NYSE Arca Market Maker a $0.47
[sic] per contract take liquidity fee and a $0.48 per contract take
liquidity fee to a Firm and Broker-Dealer. See BATS BZX Exchange Fee
Schedule. BATS assesses a $0.47 charge per contract for a
Professional, Firm or Market Maker order that removes liquidity and
$0.45 per contract for a Customer order that removes liquidity. See
NOM Rules at Chapter XV, Section 2. NOM assesses $0.45 per contract
for a Customer to remove liquidity and $0.48 per contract for all
other market participants.
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The Exchange's proposal to increase the Fee for Removing Liquidity
in Simple Orders from $0.44 to $0.45 per contract for all market
participants is equitable and not unfairly discriminatory because all
market participants will be assessed the same Fee for Removing
Liquidity in Simple Orders of $0.45 per contract.
Section II--Multiply Listed Options Fees
The Exchange's proposal to amend its Floor Options Transaction
Charges for Penny and Non-Penny Pilot Options for Specialist and Market
Makers is reasonable because the proposed fees are within the range of
other fees in Section II of the Pricing Schedule. Also, Specialists and
Market Makers pay Payment for Order Flow fees \24\ on electronic orders
but do not pay such PFOF fees when transacting non-electronic orders.
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\24\ The Payment for Order Flow (``PFOF'') Program assesses fees
to Specialists and Market Makers resulting from Customer orders
(``PFOF Fees''). The PFOF fees are available to be disbursed by the
Exchange according to the instructions of the Specialist or Market
Maker to order flow providers who are members or member
organizations who submit, as agent, Customer orders to the Exchange
through a member or member organization who is acting as agent for
those customer orders. Any excess PFOF funds billed but not utilized
by the Specialist or Market Maker are carried forward unless the
Specialist or Market Maker elects to have those funds rebated on a
pro rata basis, reflected as a credit on the monthly invoices. At
the end of each calendar quarter, the Exchange calculates the amount
of excess funds from the previous quarter and subsequently rebates
excess funds on a pro-rata basis to the applicable Specialist or
Market Maker who paid into that pool of funds.
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The Exchange's proposal to amend its Floor Options Transaction
Charges for Penny Options and Non-Penny Pilot Options for Specialist
and Market Makers is equitable and not unfairly discriminatory because
Specialists and Market Makers have a time and place advantage on the
trading floor with respect to orders, unlike other market participants.
A Professional, Broker-Dealer or a Firm would necessarily require a
floor broker to represent their trading interest on the trading floor
as compared to a Specialist or Market Maker that could directly
transact such orders on the trading floor. Further, the Exchange
believes that in order to attract orders from a Professional, Broker-
Dealer or a Firm, via a floor broker, the rates must be competitive
with rates other trading floors. Therefore, the Exchange would continue
to assess a Professional, Broker-Dealer and a Firm a Floor Options
Transaction Charge for Penny Pilot Options and Non-Penny Pilot Options
of $0.25 per contract.
With respect to electronic orders, the Exchange proposes to assess
Professionals, Broker-Dealers and Firms an Options Transaction Charge
of $0.30 per contract for Penny Options and Non-Penny Pilot Options
with respect to electronic Complex Orders. The Exchange currently
assesses Professionals a $0.30 per contract fee for electronic orders,
so this would not result in a change for a Professional. A Broker-
Dealer and Firm are assessed a $0.45 per contract fee for electronic
orders, which would be reduced to $0.30 per contract with respect to
electronic Complex Orders. Specialists and Market Makers are assessed a
$0.22 per contract electronic Options Transaction Charge and $0.23 in
non-Penny Pilot Options because Specialists and Market Makers have
obligations to the market and regulatory requirements,\25\ 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 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.
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\25\ See Rule 1014 titled ``Obligations and Restrictions
Applicable to Specialists and Registered Options Traders.''
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The Exchange's proposal to amend the Professional and Firm Options
Transaction Charges for Non-Penny Pilot Options is reasonable because
the Exchange is increasing the Professional and Firm electronic fees to
$0.60 per contract in order to offer lower fees for electronic Complex
Order transactions and also align Professional and Firm rates with the
Options Transaction Charge which is currently assessed to a Broker-
Dealer.
The Exchange's proposal to amend the Professional and Firm Options
Transaction Charges for Non-Penny Pilot Options is equitable and not
unfairly discriminatory because the Exchange would uniformly assess a
Professional,\26\ Firm \27\ and Broker-Dealer a $0.60 per contract
electronic Non-Penny Pilot Options Transaction Charge. The Exchange
will continue not to assess a Customer an Options Transaction Charge
because Customer order flow brings unique benefits to the market. Other
market participants benefit from the liquidity that Customer order flow
brings to the Exchange. Specialists and Market Makers are assessed an
electronic Non-Penny Pilot Options Transaction Charge of $0.23 per
contract with respect to floor transactions in Non-Penny Pilot Options.
Specialists and Market Makers have obligations to the market and
regulatory requirements,\28\ 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.
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\26\ A Professional is currently assessed an electronic Non-
Penny Pilot Options Transaction Charge of $0.30 per contract.
\27\ A Firm is currently assessed an electronic Non-Penny Pilot
Options Transaction Charge of $0.50 per contract.
\28\ See Rule 1014 titled ``Obligations and Restrictions
Applicable to Specialists and Registered Options Traders.''
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The Exchange believes that it is reasonable to amend the Electronic
Firm Fee Discount rate for electronic Options Transaction Charges in
Penny Pilot and Non-Penny Pilot Options from $0.17 to $0.20 per
contract and decrease the Firm volume requirement from 500,000 to
350,000 electronically-delivered contracts because despite the lesser
discount, the lower volume requirement
[[Page 76681]]
should attract additional market participants transacting Firm orders.
The Exchange believes that it is equitable and not unfairly
discriminatory to amend the Electronic Firm Fee Discount rate for
electronic Options Transaction Charges in Penny Pilot and Non-Penny
Pilot Options from $0.17 to $0.20 per contract and decrease the Firm
volume requirement from 500,000 to 350,000 electronically-delivered
contracts because all Firms will continue to have an opportunity to
qualify for this incentive as they do today, provided they achieve the
requisite volume. The Exchange also believes that the discount will
continue to assist Firms to offset Options Transaction Charges.
Section III Singly Listed Options
The Exchange's proposal to amend the Customer Options Transaction
Charge for Singly Listed Options from $0.35 to $0.40 per contact is
reasonable because despite the increase the Exchange believes that this
fee is competitive with other Singly Listed Options fees.\29\
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\29\ See the International Securities Exchange LLC's Fee
Schedule.
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The Exchange's proposal to amend the Customer Options Transaction
Charge for Singly Listed Options from $0.35 to $0.40 per contact is
equitable and not unfairly discriminatory because the Exchange would
continue to assess Customers, Specialists and Market Makers the lowest
fees while assessing Professionals, Firms and Broker-Dealers a $0.60
per contract Options Transaction Charge. Customer order flow brings
unique benefits to the market through increased liquidity. Specialists
and Market Makers have obligations to the market and regulatory
requirements,\30\ 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.
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\30\ See Rule 1014 titled ``Obligations and Restrictions
Applicable to Specialists and Registered Options Traders.''
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Section IV, Part A PIXL Pricing
The Exchange's proposal to amend the PIXL Pricing in Part A of
Section IV so that other market participants, other than a Customer
PIXL Order and a non-Customer Responder, would be assessed an increased
$0.38 per contract in Non-Penny Pilot Options is reasonable because the
increase aligns these fees with those currently assessed for PIXL
executions in options overlying SPY. Section I, Part C of the Pricing
Schedule assesses non-Customer market participants a $0.38 per contract
fee when contra to an Initiating Order.
The Exchange's proposal to amend the PIXL Pricing in Part A of
Section IV so that other market participants, other than a Customer
PIXL Order and a non-Customer Responder, would be assessed an increased
$0.38 per contract in Non-Penny Pilot Options is equitable and not
unfairly discriminatory because all non-Customer market participants
would be assessed the same fee. The Exchange has traditionally not
assessed Customers PIXL Order fees because Customer liquidity benefits
all market participants. Customer PIXL Orders would continue to not be
assessed such a fee.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose an undue burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange believes that the
Customer Rebate Program will continue to encourage Customer order flow
to be directed to the Exchange. By incentivizing members to route
Customer orders, the Exchange desires to attract liquidity to the
Exchange, which in turn benefits all market participants. All market
participants are eligible to qualify for a Customer Rebate.
The Exchange believes the proposed amendment would allow a greater
number of market participants to qualify for Tier 3 or higher Customer
rebates. The Exchange believes this pricing change does not impose a
burden on competition but rather that the proposed rule change will
continue to promote competition on the Exchange.
The Exchange operates in a highly competitive market, comprised of
twelve options 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.\31\ 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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\31\ 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-2013-117 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-2013-117. 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
[[Page 76682]]
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-2013-117 and should be submitted on or before
January 8, 2014.
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\32\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-30048 Filed 12-17-13; 8:45 am]
BILLING CODE 8011-01-P
