Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing of Proposed Rule Change To Delete From Section IX of the Exchange's Options Fee Schedule the PHOTO Historical Data Product, 30917-30920 [2014-12421]

Download as PDF Federal Register / Vol. 79, No. 103 / Thursday, May 29, 2014 / Notices 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 a.m. and 3 p.m. eastern time. Copies of such filings will also 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–NSX– 2014–15 and should be submitted on or before June 19, 2014. For the Commission by the Division of Trading and Markets, pursuant to the delegated authority.25 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–12423 Filed 5–28–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–72225; File No. SR–Phlx– 2014–34] Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing of Proposed Rule Change To Delete From Section IX of the Exchange’s Options Fee Schedule the PHOTO Historical Data Product tkelley on DSK3SPTVN1PROD with NOTICES May 22, 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 May 9, 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, 25 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 17:19 May 28, 2014 Jkt 232001 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 delete from Section IX of the Exchange’s Options Fee Schedule the PHOTO Historical data product. The text of the proposed rule change is below; proposed new language is italicized. * * * * * NASDAQ OMX PHLX LLC Pricing Schedule * * * IX. Proprietary Data Feed Fees Top of PHLX Options (‘‘TOPO’’) No change. TOPO Plus Orders No change. 30917 be charged $750 for the March, 2009 Intra-Day data and $750 for the April, 2009 Intra-Day data, for a total of $1,500, etc.] * * * * * (b) Not applicable. (c) Not applicable. * * * * * 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 PHLX Orders No change. 1. Purpose PHLX Depth Data No change. The Exchange proposes to modify Section IX of the Exchange’s Options Pricing Schedule to delete references to PHLX Options Trade Outline the PHOTO Historical data product. (‘‘PHOTO’’) PHOTO Historical is a stored data product and not a real time data feed. Monthly Account type NASDAQ OMX stores the data on a charge server within a technology subsidiary End of Day Product Subscriber .... $500 that functions like any vendor that Intra-Day Product Subscriber ....... 1,500 receives and stores real time data feed. PHOTO Historical is not a facility of the [PHOTO Historical Data Exchange and fees associated with it do not belong in the Exchange Rule Charge Manual. per calBackground. In September 2010, the Account type endar month re- Exchange established fees for its quested PHOTO market data product.3 PHOTO is a market data product offered by the End of Day Product Subscriber .... $400 Exchange that provides proprietary Intra-Day Product Subscriber ....... 750 electronic trade data to subscribers. PHOTO is available as either an ‘‘Intra9 For example, a subscriber who Day’’ or ‘‘End-of-Day’’ product. PHOTO requests End of Day PHOTO Historical Historical, as the name implies, is not a Data for the Month of March, 2009 real-time product; it is a stored product would be charged $400. A subscriber that permits a subscriber to select a who requests End of Day PHOTO Historical Data for the months of March, particular prior calendar month or months and receive the ‘‘End of Day’’ or 2009 and April, 2009 would be charged ‘‘Intra-Day’’ data for each trading $400 for the March, 2009 End of Day session conducted during the calendar data and $400 for the April, 2009 End month(s) selected. of day data, for a total of $800, etc. A Like PHOTO subscribers, PHOTO subscriber who requests Intra-Day Historical subscribers receive the PHOTO Historical Data for the Month of March, 2009 would be charged $750.00. following data: A subscriber who requests Intra-Day 3 See Securities Exchange Act Release No. 62887 PHOTO Historical Data for the months (September 10, 2010), 75 FR 57092 (September 17, of March, 2009 and April, 2009 would 2010) (SR–Phlx–2010–121). PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 E:\FR\FM\29MYN1.SGM 29MYN1 30918 Federal Register / Vol. 79, No. 103 / Thursday, May 29, 2014 / Notices tkelley on DSK3SPTVN1PROD with NOTICES • Aggregate number of buy and sell transactions in the affected series for each trading session conducted during the specified calendar month(s); • Aggregate volume traded electronically on the Exchange in the affected series for each trading session conducted during the specified calendar month(s); • Aggregate number of trades effected on the Exchange to open a position 4 for each trading session conducted during the specified calendar month(s); • Aggregate number of trades effected on the Exchange to close a position 5 for each trading session conducted during the specified calendar month(s); • Origin of the orders involved in trades on the Exchange in the affected series for each trading session conducted during the specified calendar month(s), specifically aggregated in the following categories of participants: Customers, broker-dealers, market makers (including specialists, Registered Options Traders (‘‘ROTs’’), Streaming Quote Traders (‘‘SQTs’’) 6 and 4 PHOTO Historical Data provides subscribers with the aggregate number of ‘‘opening purchase transactions’’ in the affected series for each trading session conducted during the calendar month(s) selected. An opening purchase transaction is an Exchange options transaction in which the purchaser’s intention is to create or increase a long position in the series of options involved in such transaction. See Exchange Rule 1000(b)(24). PHOTO Historical Data also provides subscribers with the aggregate number of ‘‘opening writing transactions’’ in the affected series for each trading session conducted during the calendar month(s) selected. An opening writing transaction is an Exchange options transaction in which the seller’s (writer’s) intention is to create or increase a short position in the series of options involved in such transaction. See Exchange Rule 1000(b)(25). 5 PHOTO Historical Data provides subscribers with the aggregate number of ‘‘closing purchase transactions’’ in the affected series for each trading session conducted during the calendar month(s) selected. A closing purchase transaction is an Exchange options transaction in which the purchaser’s intention is to reduce or eliminate a short position in the series of options involved in such transaction. See Exchange Rule 1000(b)(27). PHOTO Historical Data will also provide subscribers with the aggregate number of ‘‘closing sale transactions’’ in the affected series for each trading session conducted during the calendar month(s) selected. A closing sale transaction is an Exchange options transaction an Exchange options transaction in which the seller’s intention is to reduce or eliminate a long position in the series of options involved in such transaction. See Exchange Rule 1000(b)(26). 6 An SQT is an Exchange Registered Options Trader (‘‘ROT’’) who has received permission from the Exchange to generate and submit option quotations electronically in options to which such SQT is assigned. See Exchange Rule 1014(b)(ii)(A). VerDate Mar<15>2010 17:19 May 28, 2014 Jkt 232001 Remote Streaming Quote Traders (‘‘RSQTs’’) 7), and professionals.8 The fee for the PHOTO Historical Data End of Day product for subscribers is $400.00 per calendar month selected. The fee for the PHOTO Historical Data Intra-day product subscribers is $750.00 per calendar month selected. Proposal. NASDAQ believes that PHOTO Historical is not a facility of the Exchange within the meaning of the Act, and that previous proposed rule changes with respect to such PHOTO Historical were unnecessary under the Act. Congress enacted the Exchange Act to impose federal regulation on stock exchanges, and included in its definition of ‘‘exchange’’ ‘‘the market facilities maintained by such exchange.’’ 9 The Exchange Act separately defines ‘‘facility,’’ providing that ‘‘[t]he term ‘facility’ when used with respect to an exchange includes [1] its premises, [2] tangible or intangible property whether on the premises or not, [3] any right to the use of such premises or property or any service thereof for the purpose of effecting or reporting a transaction on an exchange (including among other things, any system of communication to or from the exchange, by ticker or otherwise, maintained by or with the consent of the exchange), and [4] any right of the exchange to the use of any property or service.’’ Id. The Commission has not separately interpreted the definition of ‘‘facility.’’ 10 PHOTO Historical does not satisfy any of the four prongs set forth in the statutory definition of ‘‘facility.’’ First, it is not the ‘‘premises’’ of the Exchange. 7 An RSQT is an ROT that is a member or member organization with no physical trading floor presence who has received permission from the Exchange to generate and submit option quotations electronically in options to which such RSQT has been assigned. An RSQT may only submit such quotations electronically from off the floor of the Exchange. See Exchange Rule 1014(b)(ii)(B). 8 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). A professional will be treated in the same manner as an off-floor broker-dealer for purposes of Rules 1014(g) (except with respect to all-or-none orders, which will be treated like customer orders), 1033(e), 1064.02 (except professional orders will be considered customer orders subject to facilitation), and 1080.08 as well as Options Floor Procedure Advices B–6, B– 11 and F–5. Member organizations must indicate whether orders are for professionals. See Exchange Rule 1000(b)(14). 9 15 U.S.C. § 78c(a)(1). 10 Securities Exchange Act Release No. 26708, at 4 n.28 (1989) (recognizing that the definition of the term ‘‘facility’’ has not changed since it was originally adopted and that no hearing testimony referred to it because ‘‘the Committee felt that the definition was ‘self-explanatory’’’) (citation omitted). PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 The term ‘‘premises’’ is generally understood to refer to a building, its land, and appurtenances. Second, PHOTO Historical is not tangible or intangible property of the Exchange. While the Exchange initially distributes the PHOTO product as a facility; NASDAQ OMX stores and distributes PHOTO Historical as any vendor would do. Third, PHOTO Historical is not used on the Exchange’s premises ‘‘for the purpose of effecting or reporting a transaction’’ on an exchange.11 Fourth, PHLX, in its capacity as an exchange, does not hold any right to PHOTO Historical other than as the original distributor of such data for which it receives applicable, filed fees. The Exchange’s proposal is consistent with past precedent regarding the distribution of historical data. Specifically, in 2010, the NASDAQ Stock Market submitted a proposed rule change to eliminate from the NASDAQ rule manual references to Historical TotalView.12 In that case, TotalView was a real-time data product that was stored in a non-exchange subsidiary that then redistributed the stored data in the same manner and capacity as any market data vendor. The proposal was designated as an immediately effective proposal and was not acted upon by the Commission. Conversely, there is no Commission precedent for considering the historical data of an exchange to be considered a facility when re-distributed by a market data vendor. For example, when NASDAQ separated from NASD, the Commission was asked to determine whether TRF LLC, which would operate NASD’s Trade Reporting Facility, was a facility of NASD or the Nasdaq Exchange, which together owned TRF LLC.13 The Nasdaq Exchange was to be ‘‘primarily responsible for the management of the TRF LLC’s business affairs,’’ and all ‘‘profits and losses from the TRF LLC [were] allocated to NASDAQ.’’ Id. at 15; see also id. at 18 (‘‘[T]he Nasdaq Exchange’s parent company controls the board of the TRF LLC, directs all business decisions, provides technology, and will reap the economic benefits of the TRF LLC.’’). Nevertheless, the Commission concluded that the TRF LLC was a facility of NASD, not the Nasdaq Exchange, because the ‘‘Trade Reporting Facility is not a service ‘for the purpose of effecting or reporting a transaction’ on the Nasdaq Exchange.’’ Id. at 18. The 11 15 U.S.C. 78c(a)(2). Exchange Act Release No. 61416 (Jan. 25, 2010) (SR–NASDAQ–2010–010). 13 Securities Exchange Act Release No. 54084 (June 30, 2006). 12 Securities E:\FR\FM\29MYN1.SGM 29MYN1 tkelley on DSK3SPTVN1PROD with NOTICES Federal Register / Vol. 79, No. 103 / Thursday, May 29, 2014 / Notices TRF LLC was instead ‘‘a service for the purpose of reporting transactions to the NASD.’’ Id. Similarly, the Commission concluded that the ACES System, ‘‘a neutral communications service that allows NASDAQ members and non-members to route orders to one another,’’ is not a facility of the NASDAQ Exchange.14 The Commission deemed it significant that the ACES System does not route orders to NASDAQ and does not report executed trades on the Exchange. Id. The Commission emphasized that, because the ACES System is ‘‘not linked to the Exchange’s core systems, including the NASDAQ Market Center,’’ it ‘‘is not possible for an order to be routed to the NASDAQ Market Center via the ACES system.’’ Id. Accordingly, the Commission concluded that ACES does not have ‘‘the purpose of effecting or reporting a transaction on an exchange’’ within the meaning of the Exchange Act. Id. The Commission has also permitted NASDAQ to remove from its rule book fees related to the Mutual Fund Quotation Service and the NASDAQ Index Dissemination Service, both of which disseminated market data not properly considered ‘‘facilities’’ of NASDAQ within the meaning of the Exchange Act.15 Given the plain language of the Exchange Act and the above-referenced precedents, there is no basis in the Act for determining that a real-time market data facility of an exchange retains that character when an affiliated vendor redistributes it on an historical basis. First, the affiliated vendor is not an exclusive processor of such data, unlike the data that PHLX produces directly. Second, historical data does not provide access or order entry capability to the Exchange’s execution system; nor does it carry information from or about executions currently within the execution system. Third, the affiliated vendor receives the data via an armslength agreement and it has no inherent advantage over any other recipient of such data. Moreover, historical data is available via multiple sources. It is a completely voluntary product in that PHLX makes it available on a voluntary basis, and clients purchase it from NASDAQ OMX (or another vendor) only if they voluntarily choose to do so. For all of these reasons, PHLX believes that its PHOTO Historical data service is not a facility of a national 14 Securities Exchange Act Release No. 56237 (August 9, 2007). 15 See Securities Exchange Act Release No. 58392 (August 20, 2008) (removing MFQS from rule book); Securities Exchange Act Release No. 58897 (November 3, 2008) (removing NIDS from rule book). VerDate Mar<15>2010 17:19 May 28, 2014 Jkt 232001 securities exchange within the meaning of the Act and that it is not required under Section 19(b)(1) of the Act 16 and Rule 19b–4 thereunder 17 to file rules regarding the applicable charges. 2. Statutory Basis PHLX believes that PHOTO Historical is not a facility of a national securities exchange within the meaning of the Act and the terms of this service are not rules that must be filed with the Commission under Section 19(b)(1) of the Act 18 and Rule 19b–4 thereunder.19 Therefore, removing the applicable provisions from the PHLX rule book would be consistent with the provisions of Section 6(b) of the Act.20 PHLX’s proposal to remove PHOTO Historical from the rule manual is also consistent with the Exchange Act insofar as it will have no impact on PHLX’s or its members’ compliance with applicable regulations and rules. First, PHLX has no obligation under the Exchange Act, either as an exchange or a vendor, to offer PHOTO Historical to PHLX members. Having chosen to offer such data and to do so on nondiscriminatory terms imposes no continuing obligation to do so. Second, even assuming PHLX did have an obligation to make PHOTO Historical available, it will continue to do so in the same manner if does now. Therefore, to the extent PHLX members utilize PHOTO Historical, that use will be uninterrupted. Third, there are multiple vendors of historical, many of whom are not subject to Commission oversight. B. Self-Regulatory Organization’s Statement on Burden on Competition PHLX does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. To the contrary, PHLX believes that this proposed rule change removing from the PHLX rule manual a service improperly included, promotes competition by removing an impediment to PHLX’s competition with unregulated market data providers with which PHLX competes for these services. Removing barriers to competition has the potential to promote innovation, reduce prices, and increase efficiency. 16 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 18 15 U.S.C. 78s(b)(1). 19 17 CFR 240.19b–4. 20 15 U.S.C. 78f(b). 17 17 PO 00000 Frm 00116 Fmt 4703 Sfmt 4703 30919 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 Within 45 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission shall: (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 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–2014–34 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–Phlx–2014–34. 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 E:\FR\FM\29MYN1.SGM 29MYN1 30920 Federal Register / Vol. 79, No. 103 / Thursday, May 29, 2014 / Notices 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 offices 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– 2014–34, and should be submitted on or before June 19, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–12421 Filed 5–28–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–72224; File No. SR–DTC– 2014–04] Self-Regulatory Organizations; The Depository Trust Company; Order Approving Proposed Rule Change to Effect Changes to the DTC Settlement Service Guide Relating to the Automated Customer Account Transfer Service of National Securities Clearing Corporation May 22, 2014. I. Introduction On March 27, 2014, The Depository Trust Company (‘‘DTC’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 proposed rule change SR– DTC–2014–04 (‘‘Proposed Rule Change’’) 3 to implement changes to the DTC Settlement Service Guide (‘‘Guide’’) that conform with proposed changes to the Automated Customer Account Transfer Service (‘‘ACATS’’) of National Securities Clearing Corporation (‘‘NSCC’’),4 a DTC affiliate. The Proposed Rule Change was published tkelley on DSK3SPTVN1PROD with NOTICES 21 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 DTC will announce the implementation of this Proposed Rule Change via an Important Notice to DTC participants (‘‘Participants’’). 4 NSCC filed a corresponding proposed rule change with the Commission. See Release No. 34– 71887 (Mar. 27, 2014), 79 FR 20290 (Apr. 11, 2014) (SR–NSCC–2014–04) (‘‘NSCC Proposal’’). VerDate Mar<15>2010 17:19 May 28, 2014 Jkt 232001 for comment in the Federal Register on April 11, 2014.5 The Commission did not receive comments to the Proposed Rule Change. This order approves the Proposed Rule Change.6 II. Description A. Current ACATS Process ACATS is an NSCC service that interfaces with DTC for the delivery of customer 7 securities from the account of one Participant (that is also an NSCC member (‘‘Member’’)) to another Participant (that is also a Member). Under the NSCC Proposal, customer account transfers with respect to two types of DTC-eligible securities will be processed through a new NSCC accounting operation (‘‘ACATS Settlement Accounting Operation’’) on an ACATS settlement date. Because of the NSCC Proposal, conforming changes are required to the Guide. The key provision of the NSCC Proposal impacting DTC is that ACATS transactions will no longer have an associated incentive charge applied to them by NSCC as the transactions are processed.8 As such, an ACATS transfer will no longer present a funds settlement risk to NSCC or DTC; thus, ACATS transfers will be processed by DTC free of payment. Accordingly, DTC proposes to change the applicable procedures in the Guide, as described below. Additionally, the Proposed Rule Change includes clarifications in the Guide with respect to the protection of customer securities processed through ACATS. B. Proposed DTC Rule Changes Elimination of Short Cover Charge An ‘‘ACATS short cover charge’’ is a dollar amount guaranteed by NSCC to DTC for the value of securities delivered from a Participant’s DTC account to NSCC for processing by NSCC through its Continuous Net Settlement system (‘‘CNS’’). Because ACATS transfers will be entirely free of payment under the NSCC proposal as described above, a provision in the Guide relating to the processing of ‘‘ACATS short cover charges’’ will be deleted, with related 5 Release No. 34–71886 (Mar. 27, 2014), 79 FR 20260 (Apr. 11, 2014) (SR–DTC–2014–04). 6 Terms not defined herein have the meaning set forth in DTC’s Rules, By-Laws, and Organization Certificate (‘‘Rules’’), available at https://dtcc.com/∼/ media/Files/Downloads/legal/rules/dtc_rules.ashx. 7 For purposes of the Proposed Rule Change, ‘‘customer’’ refers to an accountholder of a Participant whose account is transferred to another Participant by an ACATS transaction. 8 See NSCC Proposal, 79 FR 20290. PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 adjustments to references to the DTC Collateral Monitor.9 Elimination of Long Allocation Reversals At NSCC, under current rules, long allocations of securities made via CNS may be reversed if the NSCC Member receiving the securities fails to meet its NSCC money settlement obligation. Because ACATS transactions will not generate any funds settlement obligations, this reversal is eliminated. The provision in the Guide describing the NSCC reversal will be deleted. Memo Seg Optionality Memo Seg is a systemic mechanism that allows Participants to prevent inventory that is not subject to a lien or claim of DTC (‘‘Minimum Amount’’ or ‘‘MA’’) from falling below a certain number of units.10 In order to extend the Memo Seg option to securities received via ACATS transfers, the Guide will be revised to provide that a Participant may increase its number of units designated for protection under Memo Seg to reflect ACATS receipts. Clarification with Respect to MA Securities ACATS transfers are not subject to any lien or claims by DTC because they are transferred free of payment. Upon receipt into a Participant account, the securities constitute MA securities pursuant to the Rules.11 The Guide currently uses the term ‘‘Deemed MA’’ to reflect this condition. This terminology is no longer necessary because, under the NSCC Proposal, a funds obligation no longer attaches to ACATS transactions. Accordingly, the term ‘‘Deemed MA’’ will be deleted from the Guide, and a new section of the Guide will confirm that ACATS securities received by a Participant will, by virtue of the ACATS transfer, be credited to the Participant’s receiving account as MA.12 9 These adjustments reduce a Participant’s Collateral Monitor with respect to its net ACATS short positions at the start of ACATS settlement date. The Participant then receives credit in its Collateral Monitor for ACATS deliveries as they occur throughout the day. 10 Memo Seg is offered by DTC to its Participants to support their control of fully-paid customer securities, although its effectiveness for that purpose depends entirely on the Participant’s management of its accounts. 11 Securities received through the ACATS Settlement Accounting Operation are not counted as part of the Participant’s Collateral Monitor, unless and until the receiving Participant, in accordance with the Rules, designates those securities as Net Additions (‘‘NA’’). 12 In this regard, a Participant accepting an ACATS free delivery automatically designates the subject securities as MA securities. Therefore, such securities are not counted in the Collateral Monitor E:\FR\FM\29MYN1.SGM 29MYN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 79, Number 103 (Thursday, May 29, 2014)]
[Notices]
[Pages 30917-30920]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-12421]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72225; File No. SR-Phlx-2014-34]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing of Proposed Rule Change To Delete From Section IX of the
Exchange's Options Fee Schedule the PHOTO Historical Data Product

May 22, 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 May 9, 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 delete from Section IX of the Exchange's
Options Fee Schedule the PHOTO Historical data product.
The text of the proposed rule change is below; proposed new
language is italicized.
* * * * *
NASDAQ OMX PHLX LLC Pricing Schedule
* * *
IX. Proprietary Data Feed Fees
Top of PHLX Options (``TOPO'')
No change.
TOPO Plus Orders
No change.
PHLX Orders
No change.
PHLX Depth Data
No change.
PHLX Options Trade Outline (``PHOTO'')

------------------------------------------------------------------------
Monthly
Account type charge
------------------------------------------------------------------------
End of Day Product Subscriber................................ $500
Intra-Day Product Subscriber................................. 1,500
------------------------------------------------------------------------

[PHOTO Historical Data

------------------------------------------------------------------------
Charge
per
Account type calendar
month
requested
------------------------------------------------------------------------
End of Day Product Subscriber................................ $400
Intra-Day Product Subscriber................................. 750
------------------------------------------------------------------------

\9\ For example, a subscriber who requests End of Day PHOTO
Historical Data for the Month of March, 2009 would be charged $400. A
subscriber who requests End of Day PHOTO Historical Data for the months
of March, 2009 and April, 2009 would be charged $400 for the March,
2009 End of Day data and $400 for the April, 2009 End of day data, for
a total of $800, etc. A subscriber who requests Intra-Day PHOTO
Historical Data for the Month of March, 2009 would be charged $750.00.
A subscriber who requests Intra-Day PHOTO Historical Data for the
months of March, 2009 and April, 2009 would be charged $750 for the
March, 2009 Intra-Day data and $750 for the April, 2009 Intra-Day data,
for a total of $1,500, etc.]
* * * * *
(b) Not applicable.
(c) Not applicable.
* * * * *

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 modify Section IX of the Exchange's
Options Pricing Schedule to delete references to the PHOTO Historical
data product. PHOTO Historical is a stored data product and not a real
time data feed. NASDAQ OMX stores the data on a server within a
technology subsidiary that functions like any vendor that receives and
stores real time data feed. PHOTO Historical is not a facility of the
Exchange and fees associated with it do not belong in the Exchange Rule
Manual.
Background. In September 2010, the Exchange established fees for
its PHOTO market data product.\3\ PHOTO is a market data product
offered by the Exchange that provides proprietary electronic trade data
to subscribers. PHOTO is available as either an ``Intra-Day'' or ``End-
of-Day'' product. PHOTO Historical, as the name implies, is not a real-
time product; it is a stored product that permits a subscriber to
select a particular prior calendar month or months and receive the
``End of Day'' or ``Intra-Day'' data for each trading session conducted
during the calendar month(s) selected.
---------------------------------------------------------------------------

\3\ See Securities Exchange Act Release No. 62887 (September 10,
2010), 75 FR 57092 (September 17, 2010) (SR-Phlx-2010-121).
---------------------------------------------------------------------------

Like PHOTO subscribers, PHOTO Historical subscribers receive the
following data:

[[Page 30918]]

Aggregate number of buy and sell transactions in the
affected series for each trading session conducted during the specified
calendar month(s);
Aggregate volume traded electronically on the Exchange in
the affected series for each trading session conducted during the
specified calendar month(s);
Aggregate number of trades effected on the Exchange to
open a position \4\ for each trading session conducted during the
specified calendar month(s);
---------------------------------------------------------------------------

\4\ PHOTO Historical Data provides subscribers with the
aggregate number of ``opening purchase transactions'' in the
affected series for each trading session conducted during the
calendar month(s) selected. An opening purchase transaction is an
Exchange options transaction in which the purchaser's intention is
to create or increase a long position in the series of options
involved in such transaction. See Exchange Rule 1000(b)(24). PHOTO
Historical Data also provides subscribers with the aggregate number
of ``opening writing transactions'' in the affected series for each
trading session conducted during the calendar month(s) selected. An
opening writing transaction is an Exchange options transaction in
which the seller's (writer's) intention is to create or increase a
short position in the series of options involved in such
transaction. See Exchange Rule 1000(b)(25).
---------------------------------------------------------------------------

Aggregate number of trades effected on the Exchange to
close a position \5\ for each trading session conducted during the
specified calendar month(s);
---------------------------------------------------------------------------

\5\ PHOTO Historical Data provides subscribers with the
aggregate number of ``closing purchase transactions'' in the
affected series for each trading session conducted during the
calendar month(s) selected. A closing purchase transaction is an
Exchange options transaction in which the purchaser's intention is
to reduce or eliminate a short position in the series of options
involved in such transaction. See Exchange Rule 1000(b)(27). PHOTO
Historical Data will also provide subscribers with the aggregate
number of ``closing sale transactions'' in the affected series for
each trading session conducted during the calendar month(s)
selected. A closing sale transaction is an Exchange options
transaction an Exchange options transaction in which the seller's
intention is to reduce or eliminate a long position in the series of
options involved in such transaction. See Exchange Rule 1000(b)(26).
---------------------------------------------------------------------------

Origin of the orders involved in trades on the Exchange in
the affected series for each trading session conducted during the
specified calendar month(s), specifically aggregated in the following
categories of participants: Customers, broker-dealers, market makers
(including specialists, Registered Options Traders (``ROTs''),
Streaming Quote Traders (``SQTs'') \6\ and Remote Streaming Quote
Traders (``RSQTs'') \7\), and professionals.\8\
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\6\ An SQT is an Exchange Registered Options Trader (``ROT'')
who has received permission from the Exchange to generate and submit
option quotations electronically in options to which such SQT is
assigned. See Exchange Rule 1014(b)(ii)(A).
\7\ An RSQT is an ROT that is a member or member organization
with no physical trading floor presence who has received permission
from the Exchange to generate and submit option quotations
electronically in options to which such RSQT has been assigned. An
RSQT may only submit such quotations electronically from off the
floor of the Exchange. See Exchange Rule 1014(b)(ii)(B).
\8\ 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). A professional
will be treated in the same manner as an off-floor broker-dealer for
purposes of Rules 1014(g) (except with respect to all-or-none
orders, which will be treated like customer orders), 1033(e),
1064.02 (except professional orders will be considered customer
orders subject to facilitation), and 1080.08 as well as Options
Floor Procedure Advices B-6, B-11 and F-5. Member organizations must
indicate whether orders are for professionals. See Exchange Rule
1000(b)(14).
---------------------------------------------------------------------------

The fee for the PHOTO Historical Data End of Day product for
subscribers is $400.00 per calendar month selected. The fee for the
PHOTO Historical Data Intra-day product subscribers is $750.00 per
calendar month selected.
Proposal. NASDAQ believes that PHOTO Historical is not a facility
of the Exchange within the meaning of the Act, and that previous
proposed rule changes with respect to such PHOTO Historical were
unnecessary under the Act. Congress enacted the Exchange Act to impose
federal regulation on stock exchanges, and included in its definition
of ``exchange'' ``the market facilities maintained by such exchange.''
\9\ The Exchange Act separately defines ``facility,'' providing that
``[t]he term `facility' when used with respect to an exchange includes
[1] its premises, [2] tangible or intangible property whether on the
premises or not, [3] any right to the use of such premises or property
or any service thereof for the purpose of effecting or reporting a
transaction on an exchange (including among other things, any system of
communication to or from the exchange, by ticker or otherwise,
maintained by or with the consent of the exchange), and [4] any right
of the exchange to the use of any property or service.'' Id. The
Commission has not separately interpreted the definition of
``facility.'' \10\
---------------------------------------------------------------------------

\9\ 15 U.S.C. Sec. 78c(a)(1).
\10\ Securities Exchange Act Release No. 26708, at 4 n.28 (1989)
(recognizing that the definition of the term ``facility'' has not
changed since it was originally adopted and that no hearing
testimony referred to it because ``the Committee felt that the
definition was `self-explanatory''') (citation omitted).
---------------------------------------------------------------------------

PHOTO Historical does not satisfy any of the four prongs set forth
in the statutory definition of ``facility.'' First, it is not the
``premises'' of the Exchange. The term ``premises'' is generally
understood to refer to a building, its land, and appurtenances. Second,
PHOTO Historical is not tangible or intangible property of the
Exchange. While the Exchange initially distributes the PHOTO product as
a facility; NASDAQ OMX stores and distributes PHOTO Historical as any
vendor would do. Third, PHOTO Historical is not used on the Exchange's
premises ``for the purpose of effecting or reporting a transaction'' on
an exchange.\11\ Fourth, PHLX, in its capacity as an exchange, does not
hold any right to PHOTO Historical other than as the original
distributor of such data for which it receives applicable, filed fees.
---------------------------------------------------------------------------

\11\ 15 U.S.C. 78c(a)(2).
---------------------------------------------------------------------------

The Exchange's proposal is consistent with past precedent regarding
the distribution of historical data. Specifically, in 2010, the NASDAQ
Stock Market submitted a proposed rule change to eliminate from the
NASDAQ rule manual references to Historical TotalView.\12\ In that
case, TotalView was a real-time data product that was stored in a non-
exchange subsidiary that then redistributed the stored data in the same
manner and capacity as any market data vendor. The proposal was
designated as an immediately effective proposal and was not acted upon
by the Commission.
---------------------------------------------------------------------------

\12\ Securities Exchange Act Release No. 61416 (Jan. 25, 2010)
(SR-NASDAQ-2010-010).
---------------------------------------------------------------------------

Conversely, there is no Commission precedent for considering the
historical data of an exchange to be considered a facility when re-
distributed by a market data vendor. For example, when NASDAQ separated
from NASD, the Commission was asked to determine whether TRF LLC, which
would operate NASD's Trade Reporting Facility, was a facility of NASD
or the Nasdaq Exchange, which together owned TRF LLC.\13\ The Nasdaq
Exchange was to be ``primarily responsible for the management of the
TRF LLC's business affairs,'' and all ``profits and losses from the TRF
LLC [were] allocated to NASDAQ.'' Id. at 15; see also id. at 18
(``[T]he Nasdaq Exchange's parent company controls the board of the TRF
LLC, directs all business decisions, provides technology, and will reap
the economic benefits of the TRF LLC.''). Nevertheless, the Commission
concluded that the TRF LLC was a facility of NASD, not the Nasdaq
Exchange, because the ``Trade Reporting Facility is not a service `for
the purpose of effecting or reporting a transaction' on the Nasdaq
Exchange.'' Id. at 18. The

[[Page 30919]]

TRF LLC was instead ``a service for the purpose of reporting
transactions to the NASD.'' Id.
---------------------------------------------------------------------------

\13\ Securities Exchange Act Release No. 54084 (June 30, 2006).
---------------------------------------------------------------------------

Similarly, the Commission concluded that the ACES System, ``a
neutral communications service that allows NASDAQ members and non-
members to route orders to one another,'' is not a facility of the
NASDAQ Exchange.\14\ The Commission deemed it significant that the ACES
System does not route orders to NASDAQ and does not report executed
trades on the Exchange. Id. The Commission emphasized that, because the
ACES System is ``not linked to the Exchange's core systems, including
the NASDAQ Market Center,'' it ``is not possible for an order to be
routed to the NASDAQ Market Center via the ACES system.'' Id.
Accordingly, the Commission concluded that ACES does not have ``the
purpose of effecting or reporting a transaction on an exchange'' within
the meaning of the Exchange Act. Id. The Commission has also permitted
NASDAQ to remove from its rule book fees related to the Mutual Fund
Quotation Service and the NASDAQ Index Dissemination Service, both of
which disseminated market data not properly considered ``facilities''
of NASDAQ within the meaning of the Exchange Act.\15\
---------------------------------------------------------------------------

\14\ Securities Exchange Act Release No. 56237 (August 9, 2007).
\15\ See Securities Exchange Act Release No. 58392 (August 20,
2008) (removing MFQS from rule book); Securities Exchange Act
Release No. 58897 (November 3, 2008) (removing NIDS from rule book).
---------------------------------------------------------------------------

Given the plain language of the Exchange Act and the above-
referenced precedents, there is no basis in the Act for determining
that a real-time market data facility of an exchange retains that
character when an affiliated vendor redistributes it on an historical
basis. First, the affiliated vendor is not an exclusive processor of
such data, unlike the data that PHLX produces directly. Second,
historical data does not provide access or order entry capability to
the Exchange's execution system; nor does it carry information from or
about executions currently within the execution system. Third, the
affiliated vendor receives the data via an arms-length agreement and it
has no inherent advantage over any other recipient of such data.
Moreover, historical data is available via multiple sources. It is a
completely voluntary product in that PHLX makes it available on a
voluntary basis, and clients purchase it from NASDAQ OMX (or another
vendor) only if they voluntarily choose to do so.
For all of these reasons, PHLX believes that its PHOTO Historical
data service is not a facility of a national securities exchange within
the meaning of the Act and that it is not required under Section
19(b)(1) of the Act \16\ and Rule 19b-4 thereunder \17\ to file rules
regarding the applicable charges.
---------------------------------------------------------------------------

\16\ 15 U.S.C. 78s(b)(1).
\17\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

2. Statutory Basis
PHLX believes that PHOTO Historical is not a facility of a national
securities exchange within the meaning of the Act and the terms of this
service are not rules that must be filed with the Commission under
Section 19(b)(1) of the Act \18\ and Rule 19b-4 thereunder.\19\
Therefore, removing the applicable provisions from the PHLX rule book
would be consistent with the provisions of Section 6(b) of the Act.\20\
---------------------------------------------------------------------------

\18\ 15 U.S.C. 78s(b)(1).
\19\ 17 CFR 240.19b-4.
\20\ 15 U.S.C. 78f(b).
---------------------------------------------------------------------------

PHLX's proposal to remove PHOTO Historical from the rule manual is
also consistent with the Exchange Act insofar as it will have no impact
on PHLX's or its members' compliance with applicable regulations and
rules. First, PHLX has no obligation under the Exchange Act, either as
an exchange or a vendor, to offer PHOTO Historical to PHLX members.
Having chosen to offer such data and to do so on non-discriminatory
terms imposes no continuing obligation to do so. Second, even assuming
PHLX did have an obligation to make PHOTO Historical available, it will
continue to do so in the same manner if does now. Therefore, to the
extent PHLX members utilize PHOTO Historical, that use will be
uninterrupted. Third, there are multiple vendors of historical, many of
whom are not subject to Commission oversight.

B. Self-Regulatory Organization's Statement on Burden on Competition

PHLX does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended. To the contrary,
PHLX believes that this proposed rule change removing from the PHLX
rule manual a service improperly included, promotes competition by
removing an impediment to PHLX's competition with unregulated market
data providers with which PHLX competes for these services. Removing
barriers to competition has the potential to promote innovation, reduce
prices, and increase efficiency.

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

Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission shall: (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 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-2014-34 on the subject line.

Paper Comments

Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2014-34. 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

[[Page 30920]]

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 offices 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-2014-34,
and should be submitted on or before June 19, 2014.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
---------------------------------------------------------------------------

\21\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-12421 Filed 5-28-14; 8:45 am]
BILLING CODE 8011-01-P

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