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]

Download as PDF 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 (http://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. ehiers on DSK2VPTVN1PROD with NOTICES 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 (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–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). VerDate Mar<15>2010 15:27 Dec 17, 2013 Jkt 232001 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 http:// 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 PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 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. E:\FR\FM\18DEN1.SGM 18DEN1 76678 Federal Register / Vol. 78, No. 243 / Wednesday, December 18, 2013 / Notices 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% ............................................................................................. ehiers on DSK2VPTVN1PROD with NOTICES 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 VerDate Mar<15>2010 15:27 Dec 17, 2013 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. Jkt 232001 PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 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). E:\FR\FM\18DEN1.SGM 18DEN1 Federal Register / Vol. 78, No. 243 / Wednesday, December 18, 2013 / Notices ehiers on DSK2VPTVN1PROD with NOTICES 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. VerDate Mar<15>2010 15:27 Dec 17, 2013 Jkt 232001 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. PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 E:\FR\FM\18DEN1.SGM 18DEN1 76680 Federal Register / Vol. 78, No. 243 / Wednesday, December 18, 2013 / Notices 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 ehiers on DSK2VPTVN1PROD with NOTICES 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 VerDate Mar<15>2010 15:27 Dec 17, 2013 Jkt 232001 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.’’ PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 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 (http://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 (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the 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 http://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 http:// 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]


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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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's Pricing Schedule with 
respect to: (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.
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    \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).
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    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 http://nasdaqomxphlx.cchwallstreet.com/, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The 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.
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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.
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    \8\ See Section B of the Pricing Schedule.
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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\
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    \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).
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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.
---------------------------------------------------------------------------

    \18\ This excludes ETFs, ETNs and indexes which are Multiply 
Listed.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78f.
    \21\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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 (http://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 (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the

[[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