Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Customer Rebate Program, 2489-2493 [2014-00465]
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Federal Register / Vol. 79, No. 9 / Tuesday, January 14, 2014 / Notices
multiple types of municipal advisory
activities, and even if registering as both
a dealer and municipal advisor.
Improvements to Registration Forms
and Process
Comments: SIFMA suggested that the
MSRB use a spreadsheet to maintain the
registrant contact information similar to
a spreadsheet purportedly used by the
Financial Industry Regulatory Authority
(FINRA) to collect contact information
for submitters to FINRA’s Trade
Reporting and Compliance Engine
(TRACE) system.
MSRB Response: MSRB staff has been
informed by FINRA that it no longer
collects contact information in the
manner described by SIFMA. Under the
proposed rule change, the trade
reporting information would be entered
directly on Form A–12, thereby
streamlining the registration process.
Comments: NAIPFA stated that it
would welcome additional efforts by the
MSRB to harmonize its registration
process with that of the SEC in terms of
developing a more standardized or
uniform initial registration form/system
designed to avoid the current
duplicative SEC and MSRB registration
process. Also, NAIPFA suggested that
the MSRB standardize its forms and
process for updating registrant
information between the MSRB and the
SEC.
MSRB Response: The MSRB has
reviewed the SEC forms and process
established for registering municipal
advisors in creating new Form A–12 and
has harmonized the business activities
on Form A–12 with SEC Form MA.
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period of
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) by order approve or disapprove
such proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be 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, as modified by Amendment No.
1 thereto, is consistent with the Act.
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Comments may 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–
MSRB–2013–09 on the subject line.
[Release No. 34–71257; File No. SR–Phlx–
2014–03]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to the
Customer Rebate Program
January 8, 2014.
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–MSRB–2013–09. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
office of the MSRB. 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–MSRB–
2013–09, and should be submitted on or
before February 4, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–00463 Filed 1–13–14; 8:45 am]
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 January 3,
2014, 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 the Substance
of the Proposed Rule Change
The Exchange proposes to amend the
Customer Rebate Program in Section B
of the Pricing Schedule.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://
nasdaqomxphlx.cchwallstreet.com/, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
certain Customer Rebate tier percentage
thresholds and add a new tier to the
BILLING CODE 8011–01–P
1 15
19 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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‘‘Customer Rebate Program,’’ in Section
B of the Pricing Schedule to provide
members a greater opportunity to
receive Customer rebates.
Currently, the Exchange has a
Customer Rebate Program consisting of
four tiers which pays Customer rebates
Customer rebate tiers
Tier
Tier
Tier
Tier
1
2
3
4
.................................
.................................
.................................
.................................
on two Categories, A 3 and B,4 of
transactions.5 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,6 as defined in
Exchange Rule 1080(o).7 The Exchange
pays the following rebates: 8
Percentage thresholds of national customer volume in multiply-listed equity and
ETF options classes, excluding SPY options (monthly)
0.00%–0.75% ...........................................................................................................
Above 0.75%–1.60% ................................................................................................
Above 1.60%–2.50% ................................................................................................
Above 2.50% ............................................................................................................
Category
A
$0.00
*0.12
0.16
0.17
Category
B
$0.00
*0.17
0.19
0.19
* The Exchange will pay a $0.02 per contract rebate in addition to the applicable Tier 2 rebate to a Specialist or Market Maker or its affiliate
under Common Ownership provided the Specialist or Market Maker has reached the Monthly Market Maker Cap, as defined in Section II.
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The Exchange proposes to amend Tier
1 of the Customer Rebate Program to
lower the percentage threshold from
0.00%–0.75% to 0.00%–0.45%. The
Exchange believes that lowering the
percentage threshold in Tier 1 will
continue to encourage market
participants to direct a greater number
of Customer orders to the Exchange to
qualify for the rebate.
The Exchange proposes to adopt a
new Tier 2 Customer rebate with a
percentage threshold of above 0.45%–
1.00% and offer a Category A rebate of
$0.11 per contract and a Category B
rebate of $0.17 per contract. The
Exchange believes that this new tier will
continue to encourage market
participants to direct a greater number
of Customer orders to the Exchange to
qualify for the rebate.
The Exchange proposes to amend the
current Tier 2 rebate by renaming it
‘‘Tier 3’’ and amending the percentage
threshold from above 0.75%–1.60% to
above 1.00%–1.60%. The Exchange is
increasing this rebate tier to account for
the new Tier 2 rebate.
The Exchange proposes to rename
current Tier 3 as Tier 4 and current Tier
4 as Tier 5 to account for the new rebate
tier that is being proposed.
The Exchange proposes to amend rule
text related to a current rebate which
was recently added in November 2013.9
In that filing the Exchange amended the
Pricing Schedule at Section B to offer a
Specialist or Market Maker, or its
affiliate under Common Ownership,10
provided the Specialist or Market Maker
has reached the Monthly Market Maker
Cap 11 as defined in Section II, an
additional $0.02 per contract rebate in
addition to the applicable Tier 2 rebate
if they qualified for the Tier 2 rebate
(‘‘$0.02 Rebate’’). The Exchange is
proposing to amend the rule text to
continue to refer to the current Tier 2
rebate which the Exchange is proposing
to rename Tier 3. The rule text will be
amended to also reflect the change to
Tier 3 with respect to the ‘‘$0.02
Rebate.’’ Further, the Exchange proposes
to clarify the rule text by noting that the
reference to ‘‘affiliate’’ with respect to
the ‘‘$0.02 Rebate is to a member or
member organization affiliate. This
relates back to the definition of
Common Ownership which means
members or member organizations
under 75% common ownership or
control.12 The Exchange is proposing to
add the words ‘‘member or member
organization’’ before ‘‘affiliate’’ to make
clear that the affiliate must be a member
or member organization of Phlx.
The Exchange also proposes to amend
Category A of Section B of the Pricing
Schedule to amend the following
sentence: [i]n the instance where
member organizations qualify for Tier 3
or higher in the Customer Rebate
Program, Customer PIXL Orders that
execute against a PIXL Initiating Order
are paid a rebate of $0.14 per contract.
3 Category A rebates are paid to members
executing electronically-delivered Customer Simple
Orders in Penny Pilot Options and Customer
Simple Orders in Non-Penny Pilot Options in
Section II symbols. Rebates are paid on Customer
PIXL Orders in Section II symbols that execute
against non-Initiating Order interest. In the instance
where member organizations qualify for Tier 3 or
higher in the Customer Rebate Program, Customer
PIXL Orders that execute against a PIXL Initiating
Order are paid a rebate of $0.14 per contract.
4 Category B rebates are paid to members
executing electronically-delivered Customer
Complex Orders in Penny Pilot Options and NonPenny Pilot Options in Section II. Rebates are paid
on Customer PIXL Complex Orders in Section II
symbols that execute against non-Initiating Order
interest. In the instance where member
organizations qualify for Tier 3 or higher 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.
5 See Section B of the Pricing Schedule.
6 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).
7 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.
8 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.
9 See Securities Exchange Act Release No. 70969
(December 3, 2013), 78 FR 73907 (December 9,
2013) (SR–Phlx–2013–114).
10 The term ‘‘Common Ownership’’ means
members or member organizations under 75%
common ownership or control.
11 Specialists and Market Makers are subject to a
‘‘Monthly Market Maker Cap’’ of $550,000 for: (i)
Electronic and floor Option Transaction Charges;
(ii) QCC Transaction Fees (as defined in Exchange
Rule 1080(o) and Floor QCC Orders, as defined in
1064(e)); and (iii) fees related to an order or quote
that is contra to a PIXL Order or specifically
responding to a PIXL auction. The trading activity
of separate Specialist and Market Maker member
organizations is aggregated in calculating the
Monthly Market Maker Cap if there is Common
Ownership between the member organizations. All
dividend, merger, short stock interest, reversal and
conversion, jelly roll and box spread strategy
executions (as defined in this Section II) are
excluded from the Monthly Market Maker Cap. In
addition, Specialists or Market Makers that (i) are
on the contra-side of an electronically-delivered
and executed Customer order; and (ii) have reached
the Monthly Market Maker Cap are assessed a $0.17
per contract fee.
12 See the Preface of the Exchange’s Pricing
Schedule which includes the definition of Common
Ownership.
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The Exchange proposes to pay the $0.14
per contract rebate in the instance
where member organizations qualify for
Tier 4 or higher in the Customer Rebate
Program. Similarly, the Exchange
proposes to amend Category B of
Section B of the Pricing Schedule to
amend the following sentence: [i]n the
instance where member organizations
qualify for Tier 3 or higher 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 proposes to pay
the $0.17 per contract rebate in the
instance where member organizations
qualify for Tier 4 or higher in the
Customer Rebate Program. The
Exchange added a new Tier 2 rebate to
the Customer Rebate Program and is
proposing to apply the higher rebates to
the newly renamed Tier 4 rebate at this
time to incentivize market participants
to add a greater amount of Customer
volume.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the Act,13
in general, and with Section 6(b)(4) and
6(b)(5) of the Act,14 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.
The Exchange’s proposal to lower the
Tier 1 percentage threshold from 0.00%
¥0.75% to 0.00%–0.45% is reasonable
because the Exchange is proposing to
adopt a Tier 2 rebate for volume
between 0.45%–1.00%. Members that
currently qualify for a non-paying Tier
1 rebate by transacting greater than
0.75% of national customer volume in
multiply listed equity and ETF options
(excluding SPY) may qualify for the
newly added Tier 2 rebate, which pays
a Category A rebate of $0.11 per contract
and a Category B rebate of $0.17 per
contract, by transacting greater than
0.45% of national customer volume in
multiply listed equity and ETF options
(excluding SPY). The Exchange believes
that the new Tier 2 will offer members
an opportunity to earn a Customer
rebate because the volume threshold is
lower with new Tier 2 than with current
Tier 1.
The Exchange’s proposal to lower the
Tier 1 percentage threshold from 0.00%
13 15
14 15
U.S.C. 78f.
U.S.C. 78f(b)(4) and (5).
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¥0.75% to 0.00%–0.45% is equitable
and not unfairly discriminatory because
it will be applied to all market
participants in a uniform matter. Any
market participant is eligible to receive
the rebate provided they transact a
qualifying amount of electronic
Customer volume.
The Exchange’s proposal to adopt a
Tier 2 rebate of above 0.45%–1.00% is
reasonable because, as stated above,
members that today do not earn a
Customer Rebate in current Tier 1 may
be able to qualify for the new Tier 2
rebate. Some members that currently
qualify for the current Tier 2 (0.75%–
1.60%) rebate would receive a lower
Category A rebate as the new Tier 2
rebate pays a Category A rebate of $0.11
per contract and the current Tier 2
Category A rebate is $0.12 per contract.
The Category B rebate is $0.17 per
contract in both the current and
proposed Tier 2. However, the volume
requirement for the new Tier 2 rebate
(0.45%–1.00%) is lower than the
current Tier 2 rebate (0.75%–1.60%).
The Exchange believes that despite the
lower Category A rebate, the new Tier
2 will continue to encourage members
to transact Customer orders on Phlx.
Certain members that currently qualify
for the current Tier 2 rebate will need
to transact above 1.00% of national
customer volume in multiply listed
equity and ETF options (excluding SPY)
to continue to receive the higher
Category A rebate of $0.12 per contract.
In addition Specialists and Market
Makers that currently qualify for the
$0.02 Rebate will need to transact the
increased volume of at least 1.00% of
national customer volume in multiply
listed equity and ETF options
(excluding SPY) to qualify for the $0.02
Rebate. The Exchange believes that
members will be encouraged to transact
a greater number of Customer contracts
to receive higher rebates, despite the
reduced Category A rebate with the new
Tier 2.
The Exchange’s proposal to adopt a
new Tier 2 rebate of above 0.45%–
1.00% is equitable and not unfairly
discriminatory because it will be
applied to all market participants in a
uniform matter. Any market participant
is eligible to receive the rebate provided
they transact a qualifying amount of
electronic Customer volume.
The Exchange’s proposal to increase
the current Tier 3 rebate from above
0.75%–1.60% to above 1.00%–1.60% is
reasonable because it should incentivize
members to direct a greater number of
Customer orders to the Exchange to
qualify for the newly named Tier 3
rebate. As explained above, certain
members that currently qualify for the
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current Tier 2 rebate will need to
transact above 1.00% of national
customer volume in multiply listed
equity and ETF options (excluding SPY)
to continue to receive the higher
Category A rebate of $0.12 per
contract.15 The Exchange believes that
members will be encouraged to transact
a greater number of Customer contracts
to receive the higher Category A rebate
in newly named Tier 3. In addition
Specialists and Market Makers that
currently qualify for the $0.02 Rebate
will need to transact the increased
volume of at least 1.00% of national
customer volume in multiply listed
equity and ETF options (excluding SPY)
to qualify for the $0.02 Rebate. This
should also incentivize Specialists and
Market Makers to transact a greater
number of Customer orders on the
Exchange. Phlx offers members certain
Customer rebates to encourage Phlx
member organizations to direct
Customer order flow to the Exchange,
and the $0.02 Rebate provides an
additional incentive for Customer order
flow. Customer liquidity benefits all
market participants by providing more
trading opportunities, which attract
Specialists and Market Makers. An
increase in the activity of these market
participants in turn facilitates tighter
spreads, which may cause an additional
corresponding increase in order flow
from other market participants.
The Exchange’s proposal to increase
the current Tier 3 rebate from above
0.75%–1.60% to above 1.00%–1.60% is
equitable and not unfairly
discriminatory because it will be
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.
The Exchange’s proposal to renumber
the Customer Rebate Tiers to
accommodate the new Tier 2 is
reasonable, equitable and not unfairly
discriminatory to clarify the Pricing
Schedule.
The Exchange’s proposal to add the
words ‘‘member or member
organization’’ before ‘‘affiliate’’ is
reasonable, equitable and not unfairly
discriminatory because the addition of
these words further clarifies the intent
of the $0.02 Rebate to apply to affiliates
that are members or member
organizations of the Exchange. The
proposed amendment is not substantive
as this is the manner in which the
Common Ownership is applied today.
The Exchange’s proposal to replace
Tier 3 with Tier 4 in order to receive the
15 The Category B rebate is $0.17 per contract
with new Tier 2 and newly named Tier 3.
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higher Category A rebate of $0.14 per
contract or the higher Category B rebate
of $0.17 per contract in the instance
where member organizations qualify for
Tier 3 or higher in the Customer Rebate
Program, Customer PIXL Orders that
execute against a PIXL Initiating Order
or member organizations qualify for Tier
3 or higher in the Customer Rebate
Program, Customer Complex PIXL
Orders that execute against a Complex
PIXL Initiating Order, respectively, is
reasonable to encourage market
participants to add a greater amount of
Customer volume on Phlx. The
Exchange believes that members will be
encouraged to transact a greater amount
of Customer volume to obtain the higher
rebates.
The Exchange believes that replacing
Tier 3 with Tier 4 in order to receive the
higher Category A rebate of $0.14 per
contract or the higher Category B rebate
of $0.17 is equitable and not unfairly
discriminatory because the Exchange
will pay rebates to all market
participants in a uniform manner
provided they meet the requirements to
obtain the higher rebate.
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. Customer liquidity benefits
all market participants by providing
more trading opportunities, which
attract Specialists and Market Makers.
An increase in the activity of these
market participants in turn facilitates
tighter spreads, which may cause an
additional corresponding increase in
order flow from other market
participants. All market participants are
eligible to qualify for a Customer Rebate.
The Exchange believes the proposed
amendments would allow market
participants to qualify for the new Tier
2 rebate and possibly higher rebates if
they direct a qualifying number of
Customer orders to the Exchange. The
Exchange believes this pricing
amendment does not impose a burden
on competition but rather that the
proposed rule change will continue to
promote competition on the Exchange.
A market participant requires less
Customer volume with this proposal to
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earn a Customer rebate. The current Tier
2 rebate requires above 0.75% of
national customer volume in multiply
listed equity and ETF options
(excluding SPY) while the new Tier 2
rebate requires above 0.45% of national
customer volume in multiply listed
equity and ETF options (excluding
SPY). While some participants will be
required to transact a greater number of
Customer orders to continue to earn the
newly named Tier 3 Category A rebate,
the Exchange believes that members
will be encouraged to transact a greater
number of Customer contracts to receive
the higher rebate, which will promote
competition.
In addition Specialists and Market
Makers that currently qualify for the
$0.02 Rebate will need to transact the
increased volume of at least 1.00% of
national customer volume in multiply
listed equity and ETF options
(excluding SPY) to qualify for the $0.02
Rebate. This proposal should
incentivize Specialists and Market
Makers to transact a greater number of
Customer orders on the Exchange to
achieve the $0.02 Rebate and therefore
would not create an undue burden on
competition, but would instead
encourage competition.
The Exchange believes that replacing
Tier 3 with Tier 4 in order to receive the
higher Category A rebate of $0.14 per
contract or the higher Category B rebate
of $0.17 does not impose an undue
burden on competition because the
Exchange will pay the higher rebate to
all market participants that qualify for
the rebate and the rebate is intended to
promote competition by encouraging
market participants to transact a greater
number of Customer orders.
The remainder of the proposed
amendments are clarifying and would
not impose an undue burden on
competition.
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.
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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.16 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 SR–
Phlx–2014–03 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–2014–03. 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
16 15
E:\FR\FM\14JAN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
14JAN1
Federal Register / Vol. 79, No. 9 / Tuesday, January 14, 2014 / 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 such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–Phlx–
2014–03, and should be submitted on or
before February 4, 2014.
Exchange Rule 4754 governing the
NASDAQ Closing Cross (‘‘Cross’’) to
accommodate changes in market
structure triggered by Phase 2 of the
Plan to Address Extraordinary Market
Volatility submitted to the Commission
pursuant to Rule 608 of Regulation NMS
(‘‘LULD Plan’’). Specifically, NASDAQ
proposes to modify the operation of the
Cross in circumstances where a pause
triggered under the LULD Plan would be
triggered after 3:50 p.m. EST and could,
absent the proposed modification,
disrupt the operation of the Cross.
The text of the proposed rule change
is available from Nasdaq’s Web site at
https://nasdaq.cchwallstreet.com/
Filings/, at Nasdaq’s principal office, on
the Commission’s Web site at https://
www.sec.gov, and at the Commission’s
Public Reference Room.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Kevin M. O’Neill,
Deputy Secretary.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2014–00465 Filed 1–13–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71254; File No. SR–
NASDAQ–2014–004]
Self-Regulatory Organizations; Notice
of Filing of a Proposed Rule Change by
the NASDAQ Stock Market LLC
Proposes To Amend Exchange Rule
4754 Governing the NASDAQ Closing
Cross (‘‘Cross’’)
In its filing with the Commission,
Nasdaq 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. Nasdaq 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
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 January 7,
2014, The NASDAQ Stock Market LLC
(‘‘NASDAQ’’ 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.
emcdonald on DSK67QTVN1PROD with NOTICES
January 8, 2014.
Background. Since May 6, 2010, the
national securities exchanges and
FINRA have implemented market-wide
measures designed to protect investors
from market volatility. The measures
adopted include pilot plans for stockby-stock trading pauses,3 changes to the
erroneous execution rules,4 stricter
equities market maker quoting
requirements,5 and changes to the
equities market-wide circuit breaker
rules.6 In addition, on May 31, 2012, the
Commission approved the LULD Plan,
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
Nasdaq is filing with the Commission
a proposed rule change to amend
17 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
16:32 Jan 13, 2014
Jkt 232001
3 See,
e.g., NASDAQ Rule 4120.
e.g., NASDAQ Rule 11890.
5 See, e.g., NASDAQ Rule 4613(a).
6 See Securities Exchange Act Release No. 67090
(May 31, 2012), 77 FR 33531 (June 6, 2012) (SR–
BATS–2011–038; SR–BYX–2011–025; SR–BX–
2011–068; SR–CBOE–2011–087; SR–C2–2011–024;
SR–CHX–2011–30; SR–EDGA–2011–31; SR–EDGX–
2011–30; SR–FINRA–2011–054; SR–ISE–2011–61;
SR–NASDAQ–2011–131; SR–NSX–2011–11; SR–
NYSE–2011–48; SR–NYSEAmex–2011–73; SR–
NYSEArca–2011–68; SR–Phlx–2011–129).
4 See,
PO 00000
Frm 00087
Fmt 4703
Sfmt 4703
2493
as amended, as a one-year pilot, which
began on April 8, 2013.7
The LULD Plan is designed to prevent
trades in individual NMS Stocks from
occurring outside of specified Price
Bands calculated and disseminated by
the Network Processors.8 When the
National Best Bid (Offer) (‘‘NBB’’ or
‘‘NBO’’) is below (above) the Lower
(Upper) Price Band, the Processors
disseminate the National Best Bid
(Offer) with an appropriate flag
identifying it as non-executable. When
the NBB (NBO) is equal to the Upper
(Lower) Price Band, the Processors
distribute the NBB (NBO) with an
appropriate flag identifying it as a Limit
State Quotation.9 Although trading
centers must maintain written policies
and procedures that are reasonably
designed to prevent the display of offers
outside of the Price Band, the Processors
will display such bids and offers with
a ‘‘non-executable’’ flag. Such bids and
offers are excluded from the NBB and
NBO.10
Trading in an NMS Stock
immediately enters a Limit State if the
NBO (NBB) equals but does not cross
the Lower (Upper) Price Band.11
Trading exits the Limit State if, within
15 seconds of entering the Limit State,
all Limit State Quotations are executed
or canceled in their entirety. If the
affected NMS Stock does not exit the
Limit State within 15 seconds, the
Primary Listing Exchange declares a
market-wide, five-minute Trading Pause
pursuant to Section VII of the LULD
Plan.12 In addition, the Plan defines a
Straddle State as when the NBB (NBO)
is below (above) the Lower (Upper)
Price Band and the NMS Stock is not in
a Limit State. If an NMS Stock is in a
Straddle State and trading in that stock
deviates from normal trading
characteristics, the Primary Listing
Exchange may declare a Trading Pause
for that NMS Stock.
Currently, the Trading Pauses
described above operate from 9:30 a.m.
EST to 3:45 p.m. EST. Because no
Trading Pause can be triggered after 3:45
7 See Securities Exchange Act Release No. 67091
(May 31, 2012), 77 FR 33498 (June 6, 2012) (File
No. 4–631) (Order Approving, on a Pilot Basis, the
National Market System Plan To Address
Extraordinary Market Volatility). Unless otherwise
specified, capitalized terms used in this rule filing
are based on the defined terms of the Plan.
8 See Section (V)(A) of the LULD Plan.
9 See Section VI(A) of the Plan.
10 See Section VI(A)(3) of the Plan.
11 See Section VI(B)(1) of the Plan.
12 The primary listing market would declare a
trading pause in an NMS Stock; upon notification
by the primary listing market, the Processor would
disseminate this information to the public. No
trades in that NMS Stock could occur during the
trading pause, but all bids and offers may be
displayed. See Section VII(A) of the Plan.
E:\FR\FM\14JAN1.SGM
14JAN1
]]>Agencies
[Federal Register Volume 79, Number 9 (Tuesday, January 14, 2014)]
[Notices]
[Pages 2489-2493]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-00465]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71257; File No. SR-Phlx-2014-03]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
the Customer Rebate Program
January 8, 2014.
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 January 3, 2014, 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 the
Substance of the Proposed Rule Change
The Exchange proposes to amend the Customer Rebate Program in
Section B of the Pricing Schedule.
The text of the proposed rule change is available on the Exchange's
Web site at https://nasdaqomxphlx.cchwallstreet.com/, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend certain Customer Rebate tier
percentage thresholds and add a new tier to the
[[Page 2490]]
``Customer Rebate Program,'' in Section B of the Pricing Schedule to
provide members a greater opportunity to receive Customer rebates.
Currently, the Exchange has a Customer Rebate Program consisting of
four tiers which pays Customer rebates on two Categories, A \3\ and
B,\4\ of transactions.\5\ 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,\6\ as defined in Exchange Rule 1080(o).\7\ The Exchange pays
the following rebates: \8\
---------------------------------------------------------------------------
\3\ Category A rebates are paid to members executing
electronically-delivered Customer Simple Orders in Penny Pilot
Options and Customer Simple Orders in Non-Penny Pilot Options in
Section II symbols. Rebates are paid on Customer PIXL Orders in
Section II symbols that execute against non-Initiating Order
interest. In the instance where member organizations qualify for
Tier 3 or higher in the Customer Rebate Program, Customer PIXL
Orders that execute against a PIXL Initiating Order are paid a
rebate of $0.14 per contract.
\4\ 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. In the instance where member
organizations qualify for Tier 3 or higher 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.
\5\ See Section B of the Pricing Schedule.
\6\ 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).
\7\ 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.
\8\ 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
Customer rebate tiers multiply-listed equity and ETF Category A Category B
options classes, 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
----------------------------------------------------------------------------------------------------------------
* The Exchange will pay a $0.02 per contract rebate in addition to the applicable Tier 2 rebate to a Specialist
or Market Maker or its affiliate under Common Ownership provided the Specialist or Market Maker has reached
the Monthly Market Maker Cap, as defined in Section II.
The Exchange proposes to amend Tier 1 of the Customer Rebate
Program to lower the percentage threshold from 0.00%-0.75% to 0.00%-
0.45%. The Exchange believes that lowering the percentage threshold in
Tier 1 will continue to encourage market participants to direct a
greater number of Customer orders to the Exchange to qualify for the
rebate.
The Exchange proposes to adopt a new Tier 2 Customer rebate with a
percentage threshold of above 0.45%-1.00% and offer a Category A rebate
of $0.11 per contract and a Category B rebate of $0.17 per contract.
The Exchange believes that this new tier will continue to encourage
market participants to direct a greater number of Customer orders to
the Exchange to qualify for the rebate.
The Exchange proposes to amend the current Tier 2 rebate by
renaming it ``Tier 3'' and amending the percentage threshold from above
0.75%-1.60% to above 1.00%-1.60%. The Exchange is increasing this
rebate tier to account for the new Tier 2 rebate.
The Exchange proposes to rename current Tier 3 as Tier 4 and
current Tier 4 as Tier 5 to account for the new rebate tier that is
being proposed.
The Exchange proposes to amend rule text related to a current
rebate which was recently added in November 2013.\9\ In that filing the
Exchange amended the Pricing Schedule at Section B to offer a
Specialist or Market Maker, or its affiliate under Common
Ownership,\10\ provided the Specialist or Market Maker has reached the
Monthly Market Maker Cap \11\ as defined in Section II, an additional
$0.02 per contract rebate in addition to the applicable Tier 2 rebate
if they qualified for the Tier 2 rebate (``$0.02 Rebate''). The
Exchange is proposing to amend the rule text to continue to refer to
the current Tier 2 rebate which the Exchange is proposing to rename
Tier 3. The rule text will be amended to also reflect the change to
Tier 3 with respect to the ``$0.02 Rebate.'' Further, the Exchange
proposes to clarify the rule text by noting that the reference to
``affiliate'' with respect to the ``$0.02 Rebate is to a member or
member organization affiliate. This relates back to the definition of
Common Ownership which means members or member organizations under 75%
common ownership or control.\12\ The Exchange is proposing to add the
words ``member or member organization'' before ``affiliate'' to make
clear that the affiliate must be a member or member organization of
Phlx.
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 70969 (December 3,
2013), 78 FR 73907 (December 9, 2013) (SR-Phlx-2013-114).
\10\ The term ``Common Ownership'' means members or member
organizations under 75% common ownership or control.
\11\ Specialists and Market Makers are subject to a ``Monthly
Market Maker Cap'' of $550,000 for: (i) Electronic and floor Option
Transaction Charges; (ii) QCC Transaction Fees (as defined in
Exchange Rule 1080(o) and Floor QCC Orders, as defined in 1064(e));
and (iii) fees related to an order or quote that is contra to a PIXL
Order or specifically responding to a PIXL auction. The trading
activity of separate Specialist and Market Maker member
organizations is aggregated in calculating the Monthly Market Maker
Cap if there is Common Ownership between the member organizations.
All dividend, merger, short stock interest, reversal and conversion,
jelly roll and box spread strategy executions (as defined in this
Section II) are excluded from the Monthly Market Maker Cap. In
addition, Specialists or Market Makers that (i) are on the contra-
side of an electronically-delivered and executed Customer order; and
(ii) have reached the Monthly Market Maker Cap are assessed a $0.17
per contract fee.
\12\ See the Preface of the Exchange's Pricing Schedule which
includes the definition of Common Ownership.
---------------------------------------------------------------------------
The Exchange also proposes to amend Category A of Section B of the
Pricing Schedule to amend the following sentence: [i]n the instance
where member organizations qualify for Tier 3 or higher in the Customer
Rebate Program, Customer PIXL Orders that execute against a PIXL
Initiating Order are paid a rebate of $0.14 per contract.
[[Page 2491]]
The Exchange proposes to pay the $0.14 per contract rebate in the
instance where member organizations qualify for Tier 4 or higher in the
Customer Rebate Program. Similarly, the Exchange proposes to amend
Category B of Section B of the Pricing Schedule to amend the following
sentence: [i]n the instance where member organizations qualify for Tier
3 or higher 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 proposes to pay the
$0.17 per contract rebate in the instance where member organizations
qualify for Tier 4 or higher in the Customer Rebate Program. The
Exchange added a new Tier 2 rebate to the Customer Rebate Program and
is proposing to apply the higher rebates to the newly renamed Tier 4
rebate at this time to incentivize market participants to add a greater
amount of Customer volume.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\13\ in general, and with
Section 6(b)(4) and 6(b)(5) of the Act,\14\ 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.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f.
\14\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Exchange's proposal to lower the Tier 1 percentage threshold
from 0.00% -0.75% to 0.00%-0.45% is reasonable because the Exchange is
proposing to adopt a Tier 2 rebate for volume between 0.45%-1.00%.
Members that currently qualify for a non-paying Tier 1 rebate by
transacting greater than 0.75% of national customer volume in multiply
listed equity and ETF options (excluding SPY) may qualify for the newly
added Tier 2 rebate, which pays a Category A rebate of $0.11 per
contract and a Category B rebate of $0.17 per contract, by transacting
greater than 0.45% of national customer volume in multiply listed
equity and ETF options (excluding SPY). The Exchange believes that the
new Tier 2 will offer members an opportunity to earn a Customer rebate
because the volume threshold is lower with new Tier 2 than with current
Tier 1.
The Exchange's proposal to lower the Tier 1 percentage threshold
from 0.00% -0.75% to 0.00%-0.45% is equitable and not unfairly
discriminatory because it will be applied to all market participants in
a uniform matter. Any market participant is eligible to receive the
rebate provided they transact a qualifying amount of electronic
Customer volume.
The Exchange's proposal to adopt a Tier 2 rebate of above 0.45%-
1.00% is reasonable because, as stated above, members that today do not
earn a Customer Rebate in current Tier 1 may be able to qualify for the
new Tier 2 rebate. Some members that currently qualify for the current
Tier 2 (0.75%-1.60%) rebate would receive a lower Category A rebate as
the new Tier 2 rebate pays a Category A rebate of $0.11 per contract
and the current Tier 2 Category A rebate is $0.12 per contract. The
Category B rebate is $0.17 per contract in both the current and
proposed Tier 2. However, the volume requirement for the new Tier 2
rebate (0.45%-1.00%) is lower than the current Tier 2 rebate (0.75%-
1.60%). The Exchange believes that despite the lower Category A rebate,
the new Tier 2 will continue to encourage members to transact Customer
orders on Phlx. Certain members that currently qualify for the current
Tier 2 rebate will need to transact above 1.00% of national customer
volume in multiply listed equity and ETF options (excluding SPY) to
continue to receive the higher Category A rebate of $0.12 per contract.
In addition Specialists and Market Makers that currently qualify for
the $0.02 Rebate will need to transact the increased volume of at least
1.00% of national customer volume in multiply listed equity and ETF
options (excluding SPY) to qualify for the $0.02 Rebate. The Exchange
believes that members will be encouraged to transact a greater number
of Customer contracts to receive higher rebates, despite the reduced
Category A rebate with the new Tier 2.
The Exchange's proposal to adopt a new Tier 2 rebate of above
0.45%-1.00% is equitable and not unfairly discriminatory because it
will be applied to all market participants in a uniform matter. Any
market participant is eligible to receive the rebate provided they
transact a qualifying amount of electronic Customer volume.
The Exchange's proposal to increase the current Tier 3 rebate from
above 0.75%-1.60% to above 1.00%-1.60% is reasonable because it should
incentivize members to direct a greater number of Customer orders to
the Exchange to qualify for the newly named Tier 3 rebate. As explained
above, certain members that currently qualify for the current Tier 2
rebate will need to transact above 1.00% of national customer volume in
multiply listed equity and ETF options (excluding SPY) to continue to
receive the higher Category A rebate of $0.12 per contract.\15\ The
Exchange believes that members will be encouraged to transact a greater
number of Customer contracts to receive the higher Category A rebate in
newly named Tier 3. In addition Specialists and Market Makers that
currently qualify for the $0.02 Rebate will need to transact the
increased volume of at least 1.00% of national customer volume in
multiply listed equity and ETF options (excluding SPY) to qualify for
the $0.02 Rebate. This should also incentivize Specialists and Market
Makers to transact a greater number of Customer orders on the Exchange.
Phlx offers members certain Customer rebates to encourage Phlx member
organizations to direct Customer order flow to the Exchange, and the
$0.02 Rebate provides an additional incentive for Customer order flow.
Customer liquidity benefits all market participants by providing more
trading opportunities, which attract Specialists and Market Makers. An
increase in the activity of these market participants in turn
facilitates tighter spreads, which may cause an additional
corresponding increase in order flow from other market participants.
---------------------------------------------------------------------------
\15\ The Category B rebate is $0.17 per contract with new Tier 2
and newly named Tier 3.
---------------------------------------------------------------------------
The Exchange's proposal to increase the current Tier 3 rebate from
above 0.75%-1.60% to above 1.00%-1.60% is equitable and not unfairly
discriminatory because it will be 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.
The Exchange's proposal to renumber the Customer Rebate Tiers to
accommodate the new Tier 2 is reasonable, equitable and not unfairly
discriminatory to clarify the Pricing Schedule.
The Exchange's proposal to add the words ``member or member
organization'' before ``affiliate'' is reasonable, equitable and not
unfairly discriminatory because the addition of these words further
clarifies the intent of the $0.02 Rebate to apply to affiliates that
are members or member organizations of the Exchange. The proposed
amendment is not substantive as this is the manner in which the Common
Ownership is applied today.
The Exchange's proposal to replace Tier 3 with Tier 4 in order to
receive the
[[Page 2492]]
higher Category A rebate of $0.14 per contract or the higher Category B
rebate of $0.17 per contract in the instance where member organizations
qualify for Tier 3 or higher in the Customer Rebate Program, Customer
PIXL Orders that execute against a PIXL Initiating Order or member
organizations qualify for Tier 3 or higher in the Customer Rebate
Program, Customer Complex PIXL Orders that execute against a Complex
PIXL Initiating Order, respectively, is reasonable to encourage market
participants to add a greater amount of Customer volume on Phlx. The
Exchange believes that members will be encouraged to transact a greater
amount of Customer volume to obtain the higher rebates.
The Exchange believes that replacing Tier 3 with Tier 4 in order to
receive the higher Category A rebate of $0.14 per contract or the
higher Category B rebate of $0.17 is equitable and not unfairly
discriminatory because the Exchange will pay rebates to all market
participants in a uniform manner provided they meet the requirements to
obtain the higher rebate.
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. Customer
liquidity benefits all market participants by providing more trading
opportunities, which attract Specialists and Market Makers. An increase
in the activity of these market participants in turn facilitates
tighter spreads, which may cause an additional corresponding increase
in order flow from other market participants. All market participants
are eligible to qualify for a Customer Rebate.
The Exchange believes the proposed amendments would allow market
participants to qualify for the new Tier 2 rebate and possibly higher
rebates if they direct a qualifying number of Customer orders to the
Exchange. The Exchange believes this pricing amendment does not impose
a burden on competition but rather that the proposed rule change will
continue to promote competition on the Exchange. A market participant
requires less Customer volume with this proposal to earn a Customer
rebate. The current Tier 2 rebate requires above 0.75% of national
customer volume in multiply listed equity and ETF options (excluding
SPY) while the new Tier 2 rebate requires above 0.45% of national
customer volume in multiply listed equity and ETF options (excluding
SPY). While some participants will be required to transact a greater
number of Customer orders to continue to earn the newly named Tier 3
Category A rebate, the Exchange believes that members will be
encouraged to transact a greater number of Customer contracts to
receive the higher rebate, which will promote competition.
In addition Specialists and Market Makers that currently qualify
for the $0.02 Rebate will need to transact the increased volume of at
least 1.00% of national customer volume in multiply listed equity and
ETF options (excluding SPY) to qualify for the $0.02 Rebate. This
proposal should incentivize Specialists and Market Makers to transact a
greater number of Customer orders on the Exchange to achieve the $0.02
Rebate and therefore would not create an undue burden on competition,
but would instead encourage competition.
The Exchange believes that replacing Tier 3 with Tier 4 in order to
receive the higher Category A rebate of $0.14 per contract or the
higher Category B rebate of $0.17 does not impose an undue burden on
competition because the Exchange will pay the higher rebate to all
market participants that qualify for the rebate and the rebate is
intended to promote competition by encouraging market participants to
transact a greater number of Customer orders.
The remainder of the proposed amendments are clarifying and would
not impose an undue burden on competition.
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.\16\ 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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\16\ 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-2014-03 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-2014-03. 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 2493]]
Commission and any person, other than those that may be withheld from
the public in accordance with the provisions of 5 U.S.C. 552, will be
available for Web site viewing and printing in the Commission's Public
Reference Room, 100 F Street NE., Washington, DC 20549 on official
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of
such filing also will be available for inspection and copying at the
principal office of the Exchange. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-Phlx-2014-03, and should be submitted on or before
February 4, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-00465 Filed 1-13-14; 8:45 am]
BILLING CODE 8011-01-P
