Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Customer Rebate Program, 3292-3294 [2015-00965]
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3292
Federal Register / Vol. 80, No. 14 / Thursday, January 22, 2015 / Notices
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 advance notice that
are filed with the Commission, and all
written communications relating to the
advance notice 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. Copies of the filing also
will be available for inspection and
copying at the principal office of OCC
and on OCC’s Web site https://
www.theocc.com/components/docs/
legal/rules_and_bylaws/sr_occ_14_
812.pdf.
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–OCC–2014–812 and should
be submitted on or before February 6,
2015.
By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2015–00970 Filed 1–21–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–74059; File No. SR–Phlx–
2015–01]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to
Customer Rebate Program
tkelley on DSK3SPTVN1PROD with NOTICES
January 15, 2015.
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
2, 2015, 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
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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18:09 Jan 21, 2015
Jkt 235001
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
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 the
‘‘Customer Rebate Program,’’ in Section
B of the Pricing Schedule to: (i) Increase
certain Category B rebates; and (ii)
increase the additional Category B Tier
2 and 3 rebates paid to Specialists 3 and
Market Makers 4 that reach the Monthly
Market Maker Cap.5 The Exchange
3 A Specialist is an Exchange member who is
registered as an options specialist pursuant to Rule
1020(a). An options Specialist includes a Remote
Specialist which is defined as an options specialist
in one or more classes that does not have a physical
presence on an Exchange floor and is approved by
the Exchange pursuant to Rule 501.
4 A ‘‘market maker’’ includes Registered Options
Traders (Rule 1014(b)(i) and (ii)), which includes
Streaming Quote Traders (see Rule 1014(b)(ii)(A))
and Remote Streaming Quote Traders (see Rule
1014(b)(ii)(B)). Directed Participants are also market
makers.
5 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
PO 00000
Frm 00080
Fmt 4703
Sfmt 4703
believes that the proposed increased
rebates will encourage market
participants to direct a greater number
of Customer orders to the Exchange.
Currently, the Exchange has a
Customer Rebate Program consisting of
five tiers that pays Customer rebates on
two Categories, A 6 and B,7 of
transactions.8 A Phlx member qualifies
for a certain rebate tier based on the
percentage of total national customer
volume in multiply-listed options that it
transacts monthly on Phlx. The
Exchange calculates Customer volume
in Multiply Listed Options by totaling
electronically-delivered and executed
volume, excluding volume associated
with electronic Qualified Contingent
Cross (‘‘QCC’’) Orders,9 as defined in
Exchange Rule 1080(o).10
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 Section II) are excluded
from the Monthly Market Maker Cap.
6 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 4 or
higher in the Customer Rebate Program, Customer
PIXL Orders that execute against a PIXL Initiating
Order will be paid a rebate of $0.14 per contract.
7 Category B rebates are paid to members
executing electronically-delivered Customer
Complex Orders in Penny Pilot Options and NonPenny Pilot Options in Section II symbols. Rebates
are paid on Customer PIXL Complex Orders in
Section II symbols that execute against nonInitiating Order interest. In the instance where
member organizations qualify for Tier 4 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 Category B Rebate is not
paid when an electronically-delivered Customer
Complex Order, including Customer Complex PIXL
Order, executes against another electronicallydelivered Customer Complex Order.
8 See Section B of the Pricing Schedule.
9 A QCC Order is comprised of an order to buy
or sell at least 1000 contracts that is identified as
being part of a qualified contingent trade, as that
term is defined in Rule 1080(o)(3), coupled with a
contra-side order to buy or sell an equal number of
contracts. The QCC Order must be executed at a
price at or between the National Best Bid and Offer
and be rejected if a Customer order is resting on the
Exchange book at the same price. A QCC Order
shall only be submitted electronically from off the
floor to the PHLX XL II System. See Rule 1080(o).
See also Securities Exchange Act Release No. 64249
(April 7, 2011), 76 FR 20773 (April 13, 2011) (SR–
Phlx–2011–47) (a rule change to establish a QCC
Order to facilitate the execution of stock/option
Qualified Contingent Trades (‘‘QCTs’’) that satisfy
the requirements of the trade through exemption in
connection with Rule 611(d) of the Regulation
NMS).
10 Members and member organizations under
common ownership may aggregate their Customer
volume for purposes of calculating the Customer
Rebate Tiers and receiving rebates. Common
ownership means members or member
organizations under 75% common ownership or
control.
E:\FR\FM\22JAN1.SGM
22JAN1
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Federal Register / Vol. 80, No. 14 / Thursday, January 22, 2015 / Notices
The Exchange pays the following
rebates: 11
Customer rebate tiers
Tier
Tier
Tier
Tier
Tier
1
2
3
4
5
........................
........................
........................
........................
........................
Percentage thresholds of national customer volume in multiply-listed equity and ETF
options classes, excluding SPY options (monthly)
0.00%–0.60% ....................................................................................................................
Above 0.60%–1.10% ........................................................................................................
Above 1.10%–1.60% ........................................................................................................
Above 1.60%–2.50% ........................................................................................................
Above 2.50% ....................................................................................................................
The Exchange proposes to increase
the Tier 4 and 5 Category B rebates from
$0.19 to $0.20 per contract.
Currently, the Exchange offers
Specialists and Market Makers, or its
affiliate under Common Ownership,12
that have reached the Monthly Market
Maker Cap 13 an increased $0.02 per
contract Category A and B rebate in
addition to the Tier 2 and 3 rebates. The
Exchange proposes to increase the
additional Category B rebate, which is
currently paid in addition to the
applicable Tier 2 or 3 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, from $0.02 to $0.03 per contract.
The Exchange will continue to pay
Specialists and Market Makers, or its
affiliate under Common Ownership, that
have reached the Monthly Market Maker
Cap an increased $0.02 per contract
Category A rebate in addition to the Tier
2 and 3 rebates.
tkelley on DSK3SPTVN1PROD with NOTICES
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the Act,14
in general, and with Section 6(b)(4) and
6(b)(5) of the Act,15 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 that the Exchange operates or
controls, and is not designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.
The Exchange’s proposal to increase
the Tier 4 and 5 Category B rebates will
encourage market participants to send a
greater amount of Customer liquidity to
Phlx. Customer liquidity benefits all
market participants by providing more
trading opportunities, which attract
11 Options overlying SPY are 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, rebates are not paid for
electronic executions in options overlying SPY.
12 The term ‘‘Common Ownership’’ means
members or member organizations under 75%
common ownership or control.
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18:09 Jan 21, 2015
Jkt 235001
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 believes that its
proposal to increase the Tier 4 and 5
Category B rebates 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 believes that its
proposal to pay an increased $0.03 per
contract Category B rebate, in addition
to the applicable Tier 2 or 3 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 is reasonable because the Exchange
intends to continue to encourage
Specialists and Market Makers to
transact Customer Complex Orders on
the Exchange to receive the enhanced
rebate. The Exchange will continue to
encourage Specialists and Market
Makers to transact Customer Simple
Orders on the Exchange by offering the
additional $0.02 per contract Category A
rebate in addition to the applicable Tier
2 or 3 rebate.
The Exchange believes that its
proposal to pay an increased $0.03 per
contract Category B rebate, in addition
to the applicable Tier 2 or 3 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 is equitable and not unfairly
discriminatory because unlike other
market participants, Specialists and
Market Makers have burdensome
quoting obligations 16 to the market that
13 See
note 5.
U.S.C. 78f.
15 15 U.S.C. 78f(b)(4) and (5).
16 See Rule 1014 titled ‘‘Obligations and
Restrictions Applicable to Specialists and
Registered Options Traders.’’
17 Specialists and Market Makers pay for certain
data feeds including the SQF Port Fee. SQF Port
14 15
PO 00000
Frm 00081
Fmt 4703
Sfmt 4703
Category
A
$0.00
* 0.10
* 0.12
0.16
0.17
Category
B
$0.00
* 0.17
* 0.17
0.19
0.19
do not apply to Customers,
Professionals, Firms and Broker-Dealers.
Specialists and Market Makers serve an
important role on the Exchange with
regard to order interaction and they
provide liquidity in the marketplace.
Additionally, Specialists and Market
Makers incur costs unlike other market
participants including, but not limited
to, PFOF and other costs associated with
market making activities,17 which
results in a higher average cost per
execution as compared to Firms, BrokerDealers and Professionals. The proposed
differentiation as between Specialists
and Market Makers as compared to
other market participants recognizes the
differing contributions made to the
trading environment on the Exchange by
these market participants.
Additionally, the Exchange believes
that it is reasonable, equitable and not
unfairly discriminatory to pay
Specialists and Market Makers different
rebates for transacting Simple versus
Complex Orders. Today, the Exchange
pays different Category A (Simple
Order) and Category B (Complex Order)
rebates. The Exchange also differentiates
pricing for Simple and Complex Orders
transaction fees in Section I as do other
options exchanges.
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. Certain market
participants will receive higher Tier 4
and 5 Category B rebates for transacting
the same Customer order flow as today.
The Exchange believes that the
Fees are listed in the Exchange’s Pricing Schedule
at Section VII. SQF is an interface that allows
Specialists and Market Makers to connect and send
quotes into Phlx XL and assists them in responding
to auctions and providing liquidity to the market.
E:\FR\FM\22JAN1.SGM
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Federal Register / Vol. 80, No. 14 / Thursday, January 22, 2015 / Notices
Customer Rebate Program will continue
to encourage Customer order flow to be
directed to the Exchange. By
incentivizing members to route
Customer orders, the Exchange desires
to attract liquidity to the Exchange,
which in turn benefits all market
participants. All market participants are
eligible to qualify for a Customer Rebate.
The Exchange believes 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.
The Exchange does not believe that
offering Specialists and Market Makers
an enhanced Category B rebate of $0.03
per contract in addition to the
applicable Tier 2 or 3 rebate creates an
undue burden on competition because
Specialists and Market Makers have
burdensome quoting obligations 18 to
the market that do not apply to
Customers, Professionals, Firms and
Broker-Dealers. Specialists and Market
Makers serve an important role on the
Exchange with regard to order
interaction and they provide liquidity in
the marketplace. In addition, paying
different rebates for Simple and
Complex Orders is not novel. Other
options exchanges today similarly
differentiate rebates.19
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
tkelley on DSK3SPTVN1PROD with NOTICES
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
18 See
note 16.
the Chicago Board Options Exchange, Inc.’s
Fees Schedule and the International Securities
Exchange, LLC’s Schedule of Fees.
19 See
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18:09 Jan 21, 2015
Jkt 235001
19(b)(3)(A)(ii) of the Act.20 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.
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–
2015–01 and should be submitted on or
before February 12, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Brent J. Fields,
Secretary.
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:
[FR Doc. 2015–00965 Filed 1–21–15; 8:45 am]
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–2015–01 on the subject line.
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of
Amendments No. 1 and No. 2 and
Order Granting Accelerated Approval
of a Proposed Rule Change, as
Modified by Amendment Nos. 1 and 2,
to List and Trade Shares of the iShares
Interest Rate Hedged 0–5 Year High
Yield Bond ETF, iShares Interest Rate
Hedged 10+ Year Credit Bond ETF, and
the iShares Interest Rate Hedged
Emerging Markets Bond ETF Under
NYSE Arca Equities Rule 8.600
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–2015–01. 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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. All comments received will
20 15
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
Frm 00082
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BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–74058; File No. SR–
NYSEArca–2014–114]
January 15, 2015.
I. Introduction
On September 29, 2014, NYSE Arca,
Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’) 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 a proposed rule
change to list and trade shares
(‘‘Shares’’) of the iShares Interest Rate
Hedged 0–5 Year High Yield Bond ETF
(‘‘High Yield Bond Fund’’), iShares
Interest Rate Hedged 10+ Year Credit
Bond ETF (‘‘Credit Bond Fund’’), and
the iShares Interest Rate Hedged
Emerging Markets Bond ETF (‘‘Emerging
Markets Bond Fund’’) (collectively ‘‘the
Funds’’) under NYSE Arca Equities Rule
8.600. The proposed rule change was
published for comment in the Federal
Register on October 17, 2014.3 The
Commission received one supporting
comment on the proposal,4 and on
21 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 73342
(Oct. 10, 2014), 79 FR 62492.
4 Letter to SEC from Anonymous Commenter,
dated November 7, 2014. Comments regarding the
1 15
2 17
E:\FR\FM\22JAN1.SGM
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]]>Agencies
[Federal Register Volume 80, Number 14 (Thursday, January 22, 2015)]
[Notices]
[Pages 3292-3294]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-00965]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74059; File No. SR-Phlx-2015-01]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
Customer Rebate Program
January 15, 2015.
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 2, 2015, NASDAQ OMX PHLX LLC (``Phlx'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III, below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the 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 the ``Customer Rebate Program,'' in
Section B of the Pricing Schedule to: (i) Increase certain Category B
rebates; and (ii) increase the additional Category B Tier 2 and 3
rebates paid to Specialists \3\ and Market Makers \4\ that reach the
Monthly Market Maker Cap.\5\ The Exchange believes that the proposed
increased rebates will encourage market participants to direct a
greater number of Customer orders to the Exchange.
---------------------------------------------------------------------------
\3\ A Specialist is an Exchange member who is registered as an
options specialist pursuant to Rule 1020(a). An options Specialist
includes a Remote Specialist which is defined as an options
specialist in one or more classes that does not have a physical
presence on an Exchange floor and is approved by the Exchange
pursuant to Rule 501.
\4\ A ``market maker'' includes Registered Options Traders (Rule
1014(b)(i) and (ii)), which includes Streaming Quote Traders (see
Rule 1014(b)(ii)(A)) and Remote Streaming Quote Traders (see Rule
1014(b)(ii)(B)). Directed Participants are also market makers.
\5\ 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 Section
II) are excluded from the Monthly Market Maker Cap.
---------------------------------------------------------------------------
Currently, the Exchange has a Customer Rebate Program consisting of
five tiers that pays Customer rebates on two Categories, A \6\ and
B,\7\ of transactions.\8\ A Phlx member qualifies for a certain rebate
tier based on the percentage of total national customer volume in
multiply-listed options that it transacts monthly on Phlx. The Exchange
calculates Customer volume in Multiply Listed Options by totaling
electronically-delivered and executed volume, excluding volume
associated with electronic Qualified Contingent Cross (``QCC'')
Orders,\9\ as defined in Exchange Rule 1080(o).\10\
---------------------------------------------------------------------------
\6\ 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 4 or higher in the Customer Rebate Program, Customer PIXL
Orders that execute against a PIXL Initiating Order will be paid a
rebate of $0.14 per contract.
\7\ 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 symbols. 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 4 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 Category B Rebate is not paid when an electronically-
delivered Customer Complex Order, including Customer Complex PIXL
Order, executes against another electronically-delivered Customer
Complex Order.
\8\ See Section B of the Pricing Schedule.
\9\ A QCC Order is comprised of an order to buy or sell at least
1000 contracts that is identified as being part of a qualified
contingent trade, as that term is defined in Rule 1080(o)(3),
coupled with a contra-side order to buy or sell an equal number of
contracts. The QCC Order must be executed at a price at or between
the National Best Bid and Offer and be rejected if a Customer order
is resting on the Exchange book at the same price. A QCC Order shall
only be submitted electronically from off the floor to the PHLX XL
II System. See Rule 1080(o). See also Securities Exchange Act
Release No. 64249 (April 7, 2011), 76 FR 20773 (April 13, 2011) (SR-
Phlx-2011-47) (a rule change to establish a QCC Order to facilitate
the execution of stock/option Qualified Contingent Trades (``QCTs'')
that satisfy the requirements of the trade through exemption in
connection with Rule 611(d) of the Regulation NMS).
\10\ Members and member organizations under common ownership may
aggregate their Customer volume for purposes of calculating the
Customer Rebate Tiers and receiving rebates. Common ownership means
members or member organizations under 75% common ownership or
control.
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[[Page 3293]]
The Exchange pays the following rebates: \11\
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\11\ Options overlying SPY are 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, rebates are not paid for electronic executions in options
overlying SPY.
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Percentage thresholds of national
customer volume in multiply-listed
Customer rebate tiers equity and ETF options classes, Category A Category B
excluding SPY options (monthly)
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Tier 1..................................... 0.00%-0.60%........................ $0.00 $0.00
Tier 2..................................... Above 0.60%-1.10%.................. * 0.10 * 0.17
Tier 3..................................... Above 1.10%-1.60%.................. * 0.12 * 0.17
Tier 4..................................... Above 1.60%-2.50%.................. 0.16 0.19
Tier 5..................................... Above 2.50%........................ 0.17 0.19
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The Exchange proposes to increase the Tier 4 and 5 Category B
rebates from $0.19 to $0.20 per contract.
Currently, the Exchange offers Specialists and Market Makers, or
its affiliate under Common Ownership,\12\ that have reached the Monthly
Market Maker Cap \13\ an increased $0.02 per contract Category A and B
rebate in addition to the Tier 2 and 3 rebates. The Exchange proposes
to increase the additional Category B rebate, which is currently paid
in addition to the applicable Tier 2 or 3 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,
from $0.02 to $0.03 per contract. The Exchange will continue to pay
Specialists and Market Makers, or its affiliate under Common Ownership,
that have reached the Monthly Market Maker Cap an increased $0.02 per
contract Category A rebate in addition to the Tier 2 and 3 rebates.
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\12\ The term ``Common Ownership'' means members or member
organizations under 75% common ownership or control.
\13\ See note 5.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\14\ in general, and with
Section 6(b)(4) and 6(b)(5) of the Act,\15\ 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 that the Exchange operates or controls, and is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\14\ 15 U.S.C. 78f.
\15\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange's proposal to increase the Tier 4 and 5 Category B
rebates will encourage market participants to send a greater amount of
Customer liquidity to Phlx. 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 believes that its proposal to increase the Tier 4 and
5 Category B rebates 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 believes that its proposal to pay an increased $0.03
per contract Category B rebate, in addition to the applicable Tier 2 or
3 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 is reasonable because the Exchange intends
to continue to encourage Specialists and Market Makers to transact
Customer Complex Orders on the Exchange to receive the enhanced rebate.
The Exchange will continue to encourage Specialists and Market Makers
to transact Customer Simple Orders on the Exchange by offering the
additional $0.02 per contract Category A rebate in addition to the
applicable Tier 2 or 3 rebate.
The Exchange believes that its proposal to pay an increased $0.03
per contract Category B rebate, in addition to the applicable Tier 2 or
3 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 is equitable and not unfairly
discriminatory because unlike other market participants, Specialists
and Market Makers have burdensome quoting obligations \16\ to the
market that do not apply to Customers, Professionals, Firms and Broker-
Dealers. Specialists and Market Makers serve an important role on the
Exchange with regard to order interaction and they provide liquidity in
the marketplace. Additionally, Specialists and Market Makers incur
costs unlike other market participants including, but not limited to,
PFOF and other costs associated with market making activities,\17\
which results in a higher average cost per execution as compared to
Firms, Broker-Dealers and Professionals. The proposed differentiation
as between Specialists and Market Makers as compared to other market
participants recognizes the differing contributions made to the trading
environment on the Exchange by these market participants.
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\16\ See Rule 1014 titled ``Obligations and Restrictions
Applicable to Specialists and Registered Options Traders.''
\17\ Specialists and Market Makers pay for certain data feeds
including the SQF Port Fee. SQF Port Fees are listed in the
Exchange's Pricing Schedule at Section VII. SQF is an interface that
allows Specialists and Market Makers to connect and send quotes into
Phlx XL and assists them in responding to auctions and providing
liquidity to the market.
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Additionally, the Exchange believes that it is reasonable,
equitable and not unfairly discriminatory to pay Specialists and Market
Makers different rebates for transacting Simple versus Complex Orders.
Today, the Exchange pays different Category A (Simple Order) and
Category B (Complex Order) rebates. The Exchange also differentiates
pricing for Simple and Complex Orders transaction fees in Section I as
do other options exchanges.
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. Certain market participants will
receive higher Tier 4 and 5 Category B rebates for transacting the same
Customer order flow as today. The Exchange believes that the
[[Page 3294]]
Customer Rebate Program will continue to encourage Customer order flow
to be directed to the Exchange. By incentivizing members to route
Customer orders, the Exchange desires to attract liquidity to the
Exchange, which in turn benefits all market participants. All market
participants are eligible to qualify for a Customer Rebate. The
Exchange believes 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.
The Exchange does not believe that offering Specialists and Market
Makers an enhanced Category B rebate of $0.03 per contract in addition
to the applicable Tier 2 or 3 rebate creates an undue burden on
competition because Specialists and Market Makers have burdensome
quoting obligations \18\ to the market that do not apply to Customers,
Professionals, Firms and Broker-Dealers. Specialists and Market Makers
serve an important role on the Exchange with regard to order
interaction and they provide liquidity in the marketplace. In addition,
paying different rebates for Simple and Complex Orders is not novel.
Other options exchanges today similarly differentiate rebates.\19\
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\18\ See note 16.
\19\ See the Chicago Board Options Exchange, Inc.'s Fees
Schedule and the International Securities Exchange, LLC's Schedule
of Fees.
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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.\20\ 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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\20\ 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-2015-01 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-2015-01. 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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-Phlx-2015-01 and should be
submitted on or before February 12, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-00965 Filed 1-21-15; 8:45 am]
BILLING CODE 8011-01-P
