Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Amendments to Sections II and IV of the Pricing Schedule, 3278-3282 [2015-00971]
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Federal Register / Vol. 80, No. 14 / Thursday, January 22, 2015 / Notices
believes that waiver of the operative
delay is consistent with investor
protection and the public interest.
Accordingly, the Commission hereby
waives the 30-day operative delay and
designates the proposal operative upon
filing.39
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
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEMKT–2015–02 on the subject line.
tkelley on DSK3SPTVN1PROD with NOTICES
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–NYSEMKT–2015–02. 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 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–
NYSEMKT–2015–02, and should be
submitted on or before February 12,
2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.40
Brent J. Fields,
Secretary.
[FR Doc. 2015–00967 Filed 1–21–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–74062; File No. SR–Phlx–
2015–06]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to
Amendments to Sections II and IV of
the Pricing Schedule
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
13, 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Monthly Market Maker Cap 3 and
40 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Specialists and Market Makers are subject to a
‘‘Monthly Market Maker Cap’’ of $550,000 for: (i)
Electronic and floor Option Transaction Charges;
1 15
39 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
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certain transaction fees applicable to
Specialists 4 and Market Makers 5 that
have reached the Monthly Market Maker
Cap, which are located in the
Exchange’s Pricing Schedule at Section
II, entitled ‘‘Multiply Listed Options.’’ 6
The Exchange also proposes to make
conforming and clarifying amendments
to Section IV, Part A of the Pricing
Schedule entitled ‘‘PIXL Pricing.’’
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 purpose of this filing is to amend
certain Specialist and Market Maker
pricing located in the Exchange’s
Pricing Schedule in Section II, entitled
‘‘Multiply Listed Options’’ in order to
(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.
4 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.
5 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.
6 This includes options overlying equities, ETFs,
ETNs and indexes which are Multiply Listed.
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continue to incentivize Specialists and
Market Makers to transact a greater
amount of volume on Phlx and bring
additional liquidity to the Exchange.
The pricing changes are described in
further detail below.
Today, 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 7 Order or specifically
responding to a PIXL auction.8 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.
Specialists or Market Makers that (i)
are on the contra-side of an
electronically-delivered 9 and executed
Customer order; and (ii) have reached
the Monthly Market Maker Cap are
assessed $0.00 per contract in the
following symbols: AAPL, BAC, EEM,
FB, FXI, IWM, QQQ, TWTR, VXX, and
XLF and $0.17 per contract in Penny
Pilot Options 10 and Non-Penny Pilot
Options.
The Exchange proposes to decrease
the Monthly Market Maker Cap from
$550,000 to $500,000 and amend the
types of trades that qualify for the
Monthly Market Maker Cap to exclude
7 PIXL is the Exchange’s price improvement
mechanism known as Price Improvement XL or
(PIXLSM). See Rule 1080(n).
8 A member may electronically submit for
execution an order it represents as agent on behalf
of a public customer, broker-dealer, or any other
entity (‘‘PIXL Order’’) against principal interest or
against any other order (except as provided in Rule
1080(n)(i)(E)) it represents as agent (‘‘Initiating
Order’’) provided it submits the PIXL order for
electronic execution into the PIXL Auction
(‘‘Auction’’) pursuant to Rule 1080. See Exchange
Rule 1080(n). Non-Initiating Order interest could be
a PIXL Auction Responder or a resting order or
quote that was on the Phlx book prior to the
auction.
9 A transaction resulting from an order that was
electronically delivered utilizes Phlx XL. See
Exchange Rules 1014 and 1080. Electronically
delivered orders do not include orders transacted
on the Exchange floor. A transaction resulting from
an order that is non-electronically-delivered is
represented on the trading floor by a floor broker.
See Exchange Rule 1063. All orders will be either
electronically or non-electronically delivered.
10 The Penny Pilot was established in January
2007 and was last extended in June 30, 2015. See
Securities and Exchange Release No. 73688
(November 25, 2014), 79 FR 71484 (December 2,
2014) (SR–Phlx–2014–77).
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fees specifically responding to a PIXL
auction. While the Exchange is
excluding fees related to responding to
a PIXL auction as eligible transactions to
reach the Monthly Market Maker Cap,
the Exchange believes that lowering the
cap to $500,000 will continue to
incentivize Specialists and Market
Makers to transact greater displayed
liquidity on the Exchange to be eligible
for the Monthly Market Maker Cap and,
in turn, will benefit Phlx members and
the Phlx market.
The Exchange is also proposing to
amend the fees applicable to Specialists
and Market Makers that (i) are on the
contra-side of an electronicallydelivered and executed Customer order,
and (ii) have reached the Monthly
Market Maker Cap to assess: a $0.00 per
contract Fee for Adding Liquidity in
Penny Pilot Options; a $0.17 per
contract Fee for Removing Liquidity in
Penny Pilot Options; and a $0.17 per
contract in Non-Penny Pilot Options.
The Exchange is proposing to amend the
language to state: ‘‘Specialists or Market
Makers that (i) are on the contra-side of
an electronically-delivered and
executed Customer order, excluding
responses to a PIXL auction and (ii)
have reached the Monthly Market Maker
Cap. . .’’
The Exchange would therefore
exclude responses to a PIXL auction
from the Monthly Market Maker Cap
and those responses would be subject to
the pricing in Section IV, A of the
Pricing Schedule, as is the case today
for all other Specialists and Market
Makers that do not qualify for the
Monthly Market Maker Cap, as well as
all other market participants. Today,
Specialists or Market Makers that are on
the contra-side of an electronicallydelivered and executed Customer PIXL
Order and have reached the Monthly
Market Maker Cap are assessed $0.00
per contract in the following symbols:
AAPL, BAC, EEM, FB, FXI, IWM, QQQ,
TWTR, VXX, and XLF and $0.17 per
contract in Penny Pilot Options and
Non-Penny Pilot Options. With this
proposal, an Initiating Order would be
assessed $0.07 per contract or $0.05 per
contract if Customer Rebate Program
Threshold Volume defined in Section B
is greater than 100,000 contracts per day
in a month.11 The Initiating Order Fee
for Professional, Firm, Broker-Dealer,
Specialist and Market Maker orders that
are contra to a Customer PIXL Order
will be reduced to $0.00 if the Customer
PIXL Order is greater than 399 contracts.
11 Any member or member organization under
Common Ownership with another member or
member organization that qualifies for a Customer
Rebate Tier discount in Section B receives the PIXL
Initiating Order discount.
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Also, with respect to executions in
Multiply-Listed Options, when the PIXL
Order is contra to the Initiating Order a
Customer PIXL Order will be assessed
$0.00 per contract and non-Customer
PIXL Orders will be assessed $0.30 per
contract. When a PIXL Order is contra
to a PIXL Auction Responder, a
Customer PIXL Order will be assessed
$0.00 per contract, other market
participants will be assessed $0.30 per
contract in Penny Pilot Options or $0.38
per contract in non-Penny Pilot Options.
A Responder will be assessed $0.30 per
contract in Penny Pilot Options or $0.38
per contract in non-Penny Pilot Options,
unless the Responder is a Customer, in
which case the fee will be $0.00 per
contract. When a PIXL Order is contra
to a resting order or quote a Customer
PIXL Order will be assessed $0.00 per
contract, other market participants will
be assessed $0.30 per contract and the
resting order or quote will be assessed
the appropriate Options Transaction
Charge in Section II. All other fees
discussed in Section II, including
Payment for Order Flow and surcharges,
will also apply as appropriate. The
Exchange proposes to amend Section IV,
A to indicate that the Monthly Market
Maker Cap will no longer apply to PIXL
Orders as noted above. The Exchange
proposes to add the words ‘‘per
contract’’ to Section IV, A where
appropriate for clarity.
The Exchange also proposes to
expand and modify the $0.00 per
contract pricing that today is available
to Specialists and Market Makers that
are on the contra-side of an
electronically-delivered and executed
Customer order and have reached the
Monthly Market Maker Cap in the
following symbols: AAPL, BAC, EEM,
FB, FXI, IWM, QQQ, TWTR, VXX, and
XLF to all Penny Pilot Options,
provided the Specialist or Market Maker
is adding liquidity. The Exchange will
continue to assess a $0.17 per contract
fee to Specialists and Market Makers
that are on the contra-side of an
electronically-delivered and executed
Customer order and have reached the
Monthly Market Maker Cap for Penny
Pilot Options, when removing liquidity
and for Non-Penny Pilot Options when
either adding or removing liquidity.
Finally, the Exchange would also assess
$0.17 per contract in a non-Complex
electronic auction, including the Quote
Exhaust auction and, for purposes of
this fee, the opening process.12
The Exchange believes that
Specialists and Market Makers will
12 A Complex electronic auction includes, but is
not limited to, the Complex Order Live Auction
(‘‘COLA’’).
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continue to be incentivized to transact
a greater amount of liquidity on Phlx
and to add and remove liquidity to the
benefit of all other market participants.
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,13
in general, and with Section 6(b)(4) and
6(b)(5) of the Act,14 in particular, in that
it provides for the equitable allocation
of reasonable dues, fees and other
charges among members and issuers and
other persons using any facility or
system which the Exchange operates or
controls, and is not designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.
The Exchange’s proposal to decrease
the Monthly Market Maker Cap from
$550,000 to $500,000 is reasonable
because by lowering the cap, Specialists
and Market Makers will be able to take
advantage of lower fees presumably
earlier in the month because the cap is
lower.
The Exchange’s proposal to decrease
the Monthly Market Maker Cap from
$550,000 to $500,000 is equitable and
not unfairly discriminatory because this
benefit would be uniformly applied to
all Specialists and Market Makers that
qualified for the Monthly Market Maker
Cap. Specialists and Market Makers
have burdensome quoting obligations 15
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, Payment
for Order Flow (‘‘PFOF’’) 16 and other
costs associated with market making
activities, 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. Customer
liquidity benefits all market participants
by providing more trading
opportunities, which attract Specialists
U.S.C. 78f.
U.S.C. 78f(b)(4) and (5).
15 See Rule 1014 titled ‘‘Obligations and
Restrictions Applicable to Specialists and
Registered Options Traders.’’
16 Specialists and Market Makers, as compared to
other market participants, are assessed PFOF when
transacting Customer electronic orders.
and Market Makers. An increase in the
activity of these market participants in
turn facilitates tighter spreads, which
may cause an additional corresponding
increase in order flow from other market
participants.
The Exchange’s proposal to amend
the types of trades that qualify for the
Monthly Market Maker Cap to exclude
responses to a PIXL auction and assess
Specialists and Market Makers the PIXL
pricing located in Section IV, A of the
Pricing Schedule is reasonable because
all other market participants on Phlx,
including Specialists and Market
Makers that are not subject to the
Monthly Market Maker Cap, are
currently subject to the PIXL pricing
located in Section IV, A of the Pricing
Schedule. Pursuant to this proposal, all
market participants will be uniformly
assessed the same fees when responding
to a PIXL auction. The Exchange
believes that Specialists and Market
Makers will continue to be incentivized
to participate in PIXL, as is the case
today with Specialists and Market
Makers that do not qualify for the
Monthly Market Maker Cap and are
subject to Section IV, A pricing.
The Exchange’s proposal to amend
the types of trades that qualify for the
Monthly Market Maker Cap to exclude
fees related to responding to a PIXL
auction and assess Specialists and
Market Makers the PIXL pricing located
in Section IV, A of the Pricing Schedule
is equitable and not unfairly
discriminatory because the Exchange is
proposing to assess all market
participants, including Specialists and
Market Makers, the same PIXL pricing
located in Section IV, A of the Pricing
Schedule.
The Exchange believes that the
pricing in Section IV, A of the Pricing
Schedule will continue to encourage
market participants to transact a greater
number of PIXL Orders. The proposed
PIXL pricing is competitive with other
rates assessed to Specialists and Market
Makers to transact similar orders on
other options exchanges with price
improvement mechanisms.17 The
Exchange will continue to offer
competitive pricing, including Customer
rebates in Section B of the Pricing
Schedule. The Exchange’s current
Pricing Schedule also offers to reduce
the $0.07 per contract PIXL Initiating
Order Fee to $0.05 per contract if the
Customer Rebate Program Threshold
13 15
14 15
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17 See BOX Options Exchange LLC’s (‘‘BOX’’) Fee
Schedule. Specifically, BOX’s auction transaction
fees are those transactions executed through Price
Improvement Period (‘‘PIP’’), the Complex Order
Price Improvement Period (‘‘COPIP’’), the
Solicitation Auction mechanism, and Facilitation
Auction mechanism.
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Volume, defined in Section B of the
Pricing Schedule, for that member is
greater than 100,000 contracts per day
in a month. Additionally, the Exchange
offers a volume incentive for Specialist
and Market Maker orders (as well as
Professional, Firm and Broker-Dealer
orders) that are contra to a Customer
PIXL Order. In that situation, the
Initiating Order fee is reduced to $0.00
if the Customer PIXL Order is greater
than 399 contracts. The PIXL Initiation
Order Fee reduction to $0.00, when
contra to a Customer PIXL Order, is
similar to the Exchange’s assessment of
fees for Firm Floor Facilitation orders.
Today, the Exchange waives Firm Floor
Options Transaction Charges 18 for
members executing facilitation orders
pursuant to Exchange Rule 1064 when
such members are trading in their own
proprietary account. The Exchange
waives Firm Facilitation Fees because
the waiver of such fees serves to
encourage Firms to facilitate Customer
order flow. Likewise, the Exchange
seeks to similarly assess Specialist and
Market Maker fees for PIXL orders,
which are electronic orders, as
compared to floor orders, by
encouraging Specialists and Market
Makers or other Broker-Dealer members
to initiate PIXL Orders within the PIXL
auction mechanism in an effort to lower
execution charges by transacting with a
Customer PIXL Order. When a Firm
enters an Initiating Order, similar to
Firm Facilitation orders on the
Exchange floor, market participants are
afforded an opportunity to respond to
the order which should in turn generate
additional responders to a PIXL auction.
All market participants are eligible to
respond to an Initiating PIXL Order.
Therefore, offering all market
participants an opportunity to deliver
orders into the PIXL auction, for
purposes of price improvement, benefits
all market participants by incentivizing
order interaction in PIXL.
Further, the Exchange’s proposal to
assess Specialists and Market Makers
the PIXL pricing in Section IV, A
provides market participants the
opportunity to lower fees by transacting
a greater number of Customer orders.
When the PIXL Order is contra to the
Initiating Order a Customer PIXL Order
will be assessed $0.00 per contract and
non-Customer PIXL Orders will be
assessed $0.30 per contract. When a
PIXL Order is contra to a PIXL Auction
Responder, a Customer PIXL Order will
be assessed $0.00 per contract, other
market participants will be assessed
$0.30 per contract in Penny Pilot
Options or $0.38 per contract in non18 See
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Section II of the Pricing Schedule.
22JAN1
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Federal Register / Vol. 80, No. 14 / Thursday, January 22, 2015 / Notices
Penny Pilot Options. A Responder will
be assessed $0.30 per contract in Penny
Pilot Options or $0.38 per contract in
non-Penny Pilot Options, unless the
Responder is a Customer, in which case
the fee will be $0.00 per contract.
Finally, when a PIXL Order is contra to
a resting order or quote a Customer PIXL
Order will be assessed $0.00 per
contract, other market participants will
be assessed $0.30 per contract and the
resting order or quote will be assessed
the appropriate Options Transaction
Charge in Section II. Customer PIXL
Orders will remain free in all instances
and all non-Customer market
participant PIXL Orders will be assessed
a fee of $0.30 per contract in Penny Pilot
Options and $0.38 per contract in NonPenny Pilot Options fee uniformly. All
non-Customers market participants are
assessed the same fees with respect to
Section II when a PIXL Order is contra
to a resting order or quote. In this case
the resting contra-side orders or quotes
will continue to pay the appropriate
Options Transaction Charges in Section
II. For the reasons noted above, the
Exchange believes that the PIXL pricing,
which will be uniformly assessed to all
market participants, is reasonable,
equitable and not unfairly
discriminatory.
The Exchange’s proposal to expand
the $0.00 per contract pricing that today
is available to Specialists and Market
Makers that are on the contra-side of an
electronically-delivered and executed
Customer order and have reached the
Monthly Market Maker Cap in certain
symbols 19 to all Penny Pilot Options
provided the Specialist or Market Maker
is adding liquidity is reasonable because
the Exchange desires to expand this
incentive to all Penny Pilot Options to
enhance the displayed liquidity
available on the Exchange to the benefit
of investors and other market
participants. Specialists and Market
Makers will be able to benefit to a
greater extent and be incentivized to
add liquidity in all Penny Pilot Option
symbols, provided they qualified for the
Monthly Market Maker Cap. All market
participants will benefit from the
increased Customer liquidity brought to
the Exchange by this displayed liquidity
incentive.
The Exchange’s proposal to expand
the $0.00 per contract pricing that today
is available to Specialists and Market
Makers that are on the contra-side of an
electronically-delivered and executed
Customer order and have reached the
Monthly Market Maker Cap in certain
symbols 20 to all Penny Pilot Options
provided the Specialist or Market Maker
is adding liquidity is equitable and not
unfairly discriminatory because
Specialists and Market Makers have
burdensome quoting obligations 21 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, the
proposed fees would apply only in
certain circumstances where the Market
Maker or Specialist is not otherwise
subject to transaction fees (because the
Monthly Market Maker Cap has been
reached) and specifically on the contraside of an electronically-delivered
Customer order.
The Exchange’s proposal to continue
to assess a $0.17 per contract fee to
Specialists and Market Makers that are
on the contra-side of an electronicallydelivered and executed Customer order
and have reached the Monthly Market
Maker Cap for Penny Pilot and NonPenny Pilot Options provided the
Specialist or Market Maker is removing
liquidity is reasonable because the
Exchange will be assessing the same fee
as today. The $0.17 per contract fee will
continue to be assessed to remove
liquidity. Further, this fee subsidizes
Customer rebates offered by the
Exchange.22
The Exchange’s proposal to continue
to assess a $0.17 per contract fee to
Specialists and Market Makers that are
on the contra-side of an electronicallydelivered and executed Customer order
and have reached the Monthly Market
Maker Cap for Penny Pilot and NonPenny Pilot Options provided the
Specialist or Market Maker is removing
liquidity is equitable and not unfairly
discriminatory because Specialists and
Market Makers have burdensome
quoting obligations 23 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, the proposed fees would apply
only in certain circumstances where the
Market Maker or Specialist is not
otherwise subject to transaction fees
(because the Monthly Market Maker Cap
has been reached) and specifically on
20 Id.
symbols are: AAPL, BAC, EEM, FB, FXI,
IWM, QQQ, TWTR, VXX, and XLF.
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note 15.
Section B of the Pricing Schedule.
23 See note 15.
the contra-side of an electronicallydelivered Customer order.
The Exchange’s proposal to continue
to assess a $0.17 per contract fee to
Specialists and Market Makers that are
on the contra-side of an electronicallydelivered and executed Customer order
and have reached the Monthly Market
Maker Cap in a non-Complex electronic
auction, including the Quote Exhaust
auction and, for purposes of this fee, the
opening process is reasonable because
the Exchange will be assessing the same
fee as today. The $0.17 per contract fee
will continue to be assessed to these
auctions and the opening process.
Further, this fee subsidizes Customer
rebates offered by the Exchange.24
The Exchange’s proposal to add the
words ‘‘per contract’’ in Section IV, A of
the Pricing Schedule is reasonable,
equitable and not unfairly
discriminatory because the Exchange
believes the addition of the words ‘‘per
contract’’ will add clarity to the Pricing
Schedule to avoid any confusion as to
the fee.
The Exchange’s proposal to continue
to assess a $0.17 per contract fee to
Specialists and Market Makers that are
on the contra-side of an electronicallydelivered and executed Customer order
and have reached the Monthly Market
Maker Cap in a non-Complex electronic
auction, including the Quote Exhaust
auction and, for purposes of this fee, the
opening process is equitable and not
unfairly discriminatory because
Specialists and Market Makers have
burdensome quoting obligations 25 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, the
proposed fees would apply only in
certain circumstances where the Market
Maker or Specialist is not otherwise
subject to transaction fees (because the
Monthly Market Maker Cap has been
reached) and specifically on the contraside of an electronically-delivered
Customer order.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act because
Specialists and Market Makers will be
offered the opportunity to cap certain
transaction fees and pay lower
21 See
19 The
22 See
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24 See
25 See
E:\FR\FM\22JAN1.SGM
Section B of the Pricing Schedule.
note 15.
22JAN1
tkelley on DSK3SPTVN1PROD with NOTICES
3282
Federal Register / Vol. 80, No. 14 / Thursday, January 22, 2015 / Notices
transaction fees when they transact
$500,000 versus $550,000 of qualifying
transactions. Other market participants
will continue to benefit from the order
interaction and liquidity that Specialists
and Market Markers provide to the
marketplace.
The Exchange does not believe that
amending the types of trades that
qualify for the Monthly Market Maker
Cap by excluding certain transaction
fees related to an order or quote that is
contra to a PIXL Order or assessing
Specialists and Market Makers the PIXL
pricing located in Section IV, A of the
Pricing Schedule will impose an undue
burden on competition because the
Exchange’s proposal results in all
market participants on Phlx being
assessed the same PIXL pricing.
The Exchange’s proposal for
Specialists and Market Makers to pay no
fees after they have satisfied the
obligations related to the Monthly
Market Maker Cap, in all Penny Pilot
Options, provided they have added
liquidity, and to pay lower fees for all
other types of transactions, including
those transacted in auctions and during
the opening process, also does not
provide an undue burden on
competition. As noted above Specialists
and Market Makers have burdensome
quoting obligations to the market that do
not apply to Customers, Professionals,
Firms and Broker-Dealers.26 Specialists
and Market Makers serve an important
role on the Exchange with regard to
order interaction and they provide
liquidity in the marketplace. 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.
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. For these reasons noted
above, the Exchange does not believe
that offering Specialists and Market
Makers the opportunity to cap fees in
certain symbols imposes an undue
burden on competition.
The Exchange operates in a highly
competitive market, comprised of
twelve 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, as described in the 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.27 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.
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–
2015–06 and should be submitted on or
before February 12, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
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. 2015–00971 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–2015–06 on the subject line.
Self-Regulatory Organizations; EDGX
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Clarify the Use of
Certain Data Feeds
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–2015–06. 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
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–74072; File No. SR–EDGX–
2015–02]
January 15, 2015.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that, on January
7, 2015, EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
28 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
26 Id.
VerDate Sep<11>2014
27 15
18:09 Jan 21, 2015
Jkt 235001
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
Frm 00070
Fmt 4703
Sfmt 4703
E:\FR\FM\22JAN1.SGM
22JAN1
]]>Agencies
[Federal Register Volume 80, Number 14 (Thursday, January 22, 2015)]
[Notices]
[Pages 3278-3282]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-00971]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74062; File No. SR-Phlx-2015-06]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
Amendments to Sections II and IV of the Pricing Schedule
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 13, 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 Monthly Market Maker Cap \3\ and
certain transaction fees applicable to Specialists \4\ and Market
Makers \5\ that have reached the Monthly Market Maker Cap, which are
located in the Exchange's Pricing Schedule at Section II, entitled
``Multiply Listed Options.'' \6\ The Exchange also proposes to make
conforming and clarifying amendments to Section IV, Part A of the
Pricing Schedule entitled ``PIXL Pricing.''
---------------------------------------------------------------------------
\3\ 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.
\4\ 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.
\5\ 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.
\6\ This includes options overlying equities, ETFs, ETNs and
indexes which are Multiply Listed.
---------------------------------------------------------------------------
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 purpose of this filing is to amend certain Specialist and
Market Maker pricing located in the Exchange's Pricing Schedule in
Section II, entitled ``Multiply Listed Options'' in order to
[[Page 3279]]
continue to incentivize Specialists and Market Makers to transact a
greater amount of volume on Phlx and bring additional liquidity to the
Exchange. The pricing changes are described in further detail below.
Today, 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 \7\ Order or
specifically responding to a PIXL auction.\8\ 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.
---------------------------------------------------------------------------
\7\ PIXL is the Exchange's price improvement mechanism known as
Price Improvement XL or (PIXL\SM\). See Rule 1080(n).
\8\ A member may electronically submit for execution an order it
represents as agent on behalf of a public customer, broker-dealer,
or any other entity (``PIXL Order'') against principal interest or
against any other order (except as provided in Rule 1080(n)(i)(E))
it represents as agent (``Initiating Order'') provided it submits
the PIXL order for electronic execution into the PIXL Auction
(``Auction'') pursuant to Rule 1080. See Exchange Rule 1080(n). Non-
Initiating Order interest could be a PIXL Auction Responder or a
resting order or quote that was on the Phlx book prior to the
auction.
---------------------------------------------------------------------------
Specialists or Market Makers that (i) are on the contra-side of an
electronically-delivered \9\ and executed Customer order; and (ii) have
reached the Monthly Market Maker Cap are assessed $0.00 per contract in
the following symbols: AAPL, BAC, EEM, FB, FXI, IWM, QQQ, TWTR, VXX,
and XLF and $0.17 per contract in Penny Pilot Options \10\ and Non-
Penny Pilot Options.
---------------------------------------------------------------------------
\9\ A transaction resulting from an order that was
electronically delivered utilizes Phlx XL. See Exchange Rules 1014
and 1080. Electronically delivered orders do not include orders
transacted on the Exchange floor. A transaction resulting from an
order that is non-electronically-delivered is represented on the
trading floor by a floor broker. See Exchange Rule 1063. All orders
will be either electronically or non-electronically delivered.
\10\ The Penny Pilot was established in January 2007 and was
last extended in June 30, 2015. See Securities and Exchange Release
No. 73688 (November 25, 2014), 79 FR 71484 (December 2, 2014) (SR-
Phlx-2014-77).
---------------------------------------------------------------------------
The Exchange proposes to decrease the Monthly Market Maker Cap from
$550,000 to $500,000 and amend the types of trades that qualify for the
Monthly Market Maker Cap to exclude fees specifically responding to a
PIXL auction. While the Exchange is excluding fees related to
responding to a PIXL auction as eligible transactions to reach the
Monthly Market Maker Cap, the Exchange believes that lowering the cap
to $500,000 will continue to incentivize Specialists and Market Makers
to transact greater displayed liquidity on the Exchange to be eligible
for the Monthly Market Maker Cap and, in turn, will benefit Phlx
members and the Phlx market.
The Exchange is also proposing to amend the fees applicable to
Specialists and Market Makers that (i) are on the contra-side of an
electronically-delivered and executed Customer order, and (ii) have
reached the Monthly Market Maker Cap to assess: a $0.00 per contract
Fee for Adding Liquidity in Penny Pilot Options; a $0.17 per contract
Fee for Removing Liquidity in Penny Pilot Options; and a $0.17 per
contract in Non-Penny Pilot Options. The Exchange is proposing to amend
the language to state: ``Specialists or Market Makers that (i) are on
the contra-side of an electronically-delivered and executed Customer
order, excluding responses to a PIXL auction and (ii) have reached the
Monthly Market Maker Cap. . .''
The Exchange would therefore exclude responses to a PIXL auction
from the Monthly Market Maker Cap and those responses would be subject
to the pricing in Section IV, A of the Pricing Schedule, as is the case
today for all other Specialists and Market Makers that do not qualify
for the Monthly Market Maker Cap, as well as all other market
participants. Today, Specialists or Market Makers that are on the
contra-side of an electronically-delivered and executed Customer PIXL
Order and have reached the Monthly Market Maker Cap are assessed $0.00
per contract in the following symbols: AAPL, BAC, EEM, FB, FXI, IWM,
QQQ, TWTR, VXX, and XLF and $0.17 per contract in Penny Pilot Options
and Non-Penny Pilot Options. With this proposal, an Initiating Order
would be assessed $0.07 per contract or $0.05 per contract if Customer
Rebate Program Threshold Volume defined in Section B is greater than
100,000 contracts per day in a month.\11\ The Initiating Order Fee for
Professional, Firm, Broker-Dealer, Specialist and Market Maker orders
that are contra to a Customer PIXL Order will be reduced to $0.00 if
the Customer PIXL Order is greater than 399 contracts. Also, with
respect to executions in Multiply-Listed Options, when the PIXL Order
is contra to the Initiating Order a Customer PIXL Order will be
assessed $0.00 per contract and non-Customer PIXL Orders will be
assessed $0.30 per contract. When a PIXL Order is contra to a PIXL
Auction Responder, a Customer PIXL Order will be assessed $0.00 per
contract, other market participants will be assessed $0.30 per contract
in Penny Pilot Options or $0.38 per contract in non-Penny Pilot
Options. A Responder will be assessed $0.30 per contract in Penny Pilot
Options or $0.38 per contract in non-Penny Pilot Options, unless the
Responder is a Customer, in which case the fee will be $0.00 per
contract. When a PIXL Order is contra to a resting order or quote a
Customer PIXL Order will be assessed $0.00 per contract, other market
participants will be assessed $0.30 per contract and the resting order
or quote will be assessed the appropriate Options Transaction Charge in
Section II. All other fees discussed in Section II, including Payment
for Order Flow and surcharges, will also apply as appropriate. The
Exchange proposes to amend Section IV, A to indicate that the Monthly
Market Maker Cap will no longer apply to PIXL Orders as noted above.
The Exchange proposes to add the words ``per contract'' to Section IV,
A where appropriate for clarity.
---------------------------------------------------------------------------
\11\ Any member or member organization under Common Ownership
with another member or member organization that qualifies for a
Customer Rebate Tier discount in Section B receives the PIXL
Initiating Order discount.
---------------------------------------------------------------------------
The Exchange also proposes to expand and modify the $0.00 per
contract pricing that today is available to Specialists and Market
Makers that are on the contra-side of an electronically-delivered and
executed Customer order and have reached the Monthly Market Maker Cap
in the following symbols: AAPL, BAC, EEM, FB, FXI, IWM, QQQ, TWTR, VXX,
and XLF to all Penny Pilot Options, provided the Specialist or Market
Maker is adding liquidity. The Exchange will continue to assess a $0.17
per contract fee to Specialists and Market Makers that are on the
contra-side of an electronically-delivered and executed Customer order
and have reached the Monthly Market Maker Cap for Penny Pilot Options,
when removing liquidity and for Non-Penny Pilot Options when either
adding or removing liquidity. Finally, the Exchange would also assess
$0.17 per contract in a non-Complex electronic auction, including the
Quote Exhaust auction and, for purposes of this fee, the opening
process.\12\
---------------------------------------------------------------------------
\12\ A Complex electronic auction includes, but is not limited
to, the Complex Order Live Auction (``COLA'').
---------------------------------------------------------------------------
The Exchange believes that Specialists and Market Makers will
[[Page 3280]]
continue to be incentivized to transact a greater amount of liquidity
on Phlx and to add and remove liquidity to the benefit of all other
market participants.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\13\ in general, and with
Section 6(b)(4) and 6(b)(5) of the Act,\14\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees and
other charges among members and issuers and other persons using any
facility or system which the Exchange operates or controls, and is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f.
\14\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Exchange's proposal to decrease the Monthly Market Maker Cap
from $550,000 to $500,000 is reasonable because by lowering the cap,
Specialists and Market Makers will be able to take advantage of lower
fees presumably earlier in the month because the cap is lower.
The Exchange's proposal to decrease the Monthly Market Maker Cap
from $550,000 to $500,000 is equitable and not unfairly discriminatory
because this benefit would be uniformly applied to all Specialists and
Market Makers that qualified for the Monthly Market Maker Cap.
Specialists and Market Makers have burdensome quoting obligations \15\
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, Payment for Order Flow (``PFOF'') \16\ and other costs
associated with market making activities, 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. Customer liquidity benefits all market
participants by providing more trading opportunities, which attract
Specialists and Market Makers. An increase in the activity of these
market participants in turn facilitates tighter spreads, which may
cause an additional corresponding increase in order flow from other
market participants.
---------------------------------------------------------------------------
\15\ See Rule 1014 titled ``Obligations and Restrictions
Applicable to Specialists and Registered Options Traders.''
\16\ Specialists and Market Makers, as compared to other market
participants, are assessed PFOF when transacting Customer electronic
orders.
---------------------------------------------------------------------------
The Exchange's proposal to amend the types of trades that qualify
for the Monthly Market Maker Cap to exclude responses to a PIXL auction
and assess Specialists and Market Makers the PIXL pricing located in
Section IV, A of the Pricing Schedule is reasonable because all other
market participants on Phlx, including Specialists and Market Makers
that are not subject to the Monthly Market Maker Cap, are currently
subject to the PIXL pricing located in Section IV, A of the Pricing
Schedule. Pursuant to this proposal, all market participants will be
uniformly assessed the same fees when responding to a PIXL auction. The
Exchange believes that Specialists and Market Makers will continue to
be incentivized to participate in PIXL, as is the case today with
Specialists and Market Makers that do not qualify for the Monthly
Market Maker Cap and are subject to Section IV, A pricing.
The Exchange's proposal to amend the types of trades that qualify
for the Monthly Market Maker Cap to exclude fees related to responding
to a PIXL auction and assess Specialists and Market Makers the PIXL
pricing located in Section IV, A of the Pricing Schedule is equitable
and not unfairly discriminatory because the Exchange is proposing to
assess all market participants, including Specialists and Market
Makers, the same PIXL pricing located in Section IV, A of the Pricing
Schedule.
The Exchange believes that the pricing in Section IV, A of the
Pricing Schedule will continue to encourage market participants to
transact a greater number of PIXL Orders. The proposed PIXL pricing is
competitive with other rates assessed to Specialists and Market Makers
to transact similar orders on other options exchanges with price
improvement mechanisms.\17\ The Exchange will continue to offer
competitive pricing, including Customer rebates in Section B of the
Pricing Schedule. The Exchange's current Pricing Schedule also offers
to reduce the $0.07 per contract PIXL Initiating Order Fee to $0.05 per
contract if the Customer Rebate Program Threshold Volume, defined in
Section B of the Pricing Schedule, for that member is greater than
100,000 contracts per day in a month. Additionally, the Exchange offers
a volume incentive for Specialist and Market Maker orders (as well as
Professional, Firm and Broker-Dealer orders) that are contra to a
Customer PIXL Order. In that situation, the Initiating Order fee is
reduced to $0.00 if the Customer PIXL Order is greater than 399
contracts. The PIXL Initiation Order Fee reduction to $0.00, when
contra to a Customer PIXL Order, is similar to the Exchange's
assessment of fees for Firm Floor Facilitation orders. Today, the
Exchange waives Firm Floor Options Transaction Charges \18\ for members
executing facilitation orders pursuant to Exchange Rule 1064 when such
members are trading in their own proprietary account. The Exchange
waives Firm Facilitation Fees because the waiver of such fees serves to
encourage Firms to facilitate Customer order flow. Likewise, the
Exchange seeks to similarly assess Specialist and Market Maker fees for
PIXL orders, which are electronic orders, as compared to floor orders,
by encouraging Specialists and Market Makers or other Broker-Dealer
members to initiate PIXL Orders within the PIXL auction mechanism in an
effort to lower execution charges by transacting with a Customer PIXL
Order. When a Firm enters an Initiating Order, similar to Firm
Facilitation orders on the Exchange floor, market participants are
afforded an opportunity to respond to the order which should in turn
generate additional responders to a PIXL auction. All market
participants are eligible to respond to an Initiating PIXL Order.
Therefore, offering all market participants an opportunity to deliver
orders into the PIXL auction, for purposes of price improvement,
benefits all market participants by incentivizing order interaction in
PIXL.
---------------------------------------------------------------------------
\17\ See BOX Options Exchange LLC's (``BOX'') Fee Schedule.
Specifically, BOX's auction transaction fees are those transactions
executed through Price Improvement Period (``PIP''), the Complex
Order Price Improvement Period (``COPIP''), the Solicitation Auction
mechanism, and Facilitation Auction mechanism.
\18\ See Section II of the Pricing Schedule.
---------------------------------------------------------------------------
Further, the Exchange's proposal to assess Specialists and Market
Makers the PIXL pricing in Section IV, A provides market participants
the opportunity to lower fees by transacting a greater number of
Customer orders. When the PIXL Order is contra to the Initiating Order
a Customer PIXL Order will be assessed $0.00 per contract and non-
Customer PIXL Orders will be assessed $0.30 per contract. When a PIXL
Order is contra to a PIXL Auction Responder, a Customer PIXL Order will
be assessed $0.00 per contract, other market participants will be
assessed $0.30 per contract in Penny Pilot Options or $0.38 per
contract in non-
[[Page 3281]]
Penny Pilot Options. A Responder will be assessed $0.30 per contract in
Penny Pilot Options or $0.38 per contract in non-Penny Pilot Options,
unless the Responder is a Customer, in which case the fee will be $0.00
per contract. Finally, when a PIXL Order is contra to a resting order
or quote a Customer PIXL Order will be assessed $0.00 per contract,
other market participants will be assessed $0.30 per contract and the
resting order or quote will be assessed the appropriate Options
Transaction Charge in Section II. Customer PIXL Orders will remain free
in all instances and all non-Customer market participant PIXL Orders
will be assessed a fee of $0.30 per contract in Penny Pilot Options and
$0.38 per contract in Non-Penny Pilot Options fee uniformly. All non-
Customers market participants are assessed the same fees with respect
to Section II when a PIXL Order is contra to a resting order or quote.
In this case the resting contra-side orders or quotes will continue to
pay the appropriate Options Transaction Charges in Section II. For the
reasons noted above, the Exchange believes that the PIXL pricing, which
will be uniformly assessed to all market participants, is reasonable,
equitable and not unfairly discriminatory.
The Exchange's proposal to expand the $0.00 per contract pricing
that today is available to Specialists and Market Makers that are on
the contra-side of an electronically-delivered and executed Customer
order and have reached the Monthly Market Maker Cap in certain symbols
\19\ to all Penny Pilot Options provided the Specialist or Market Maker
is adding liquidity is reasonable because the Exchange desires to
expand this incentive to all Penny Pilot Options to enhance the
displayed liquidity available on the Exchange to the benefit of
investors and other market participants. Specialists and Market Makers
will be able to benefit to a greater extent and be incentivized to add
liquidity in all Penny Pilot Option symbols, provided they qualified
for the Monthly Market Maker Cap. All market participants will benefit
from the increased Customer liquidity brought to the Exchange by this
displayed liquidity incentive.
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\19\ The symbols are: AAPL, BAC, EEM, FB, FXI, IWM, QQQ, TWTR,
VXX, and XLF.
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The Exchange's proposal to expand the $0.00 per contract pricing
that today is available to Specialists and Market Makers that are on
the contra-side of an electronically-delivered and executed Customer
order and have reached the Monthly Market Maker Cap in certain symbols
\20\ to all Penny Pilot Options provided the Specialist or Market Maker
is adding liquidity is equitable and not unfairly discriminatory
because Specialists and Market Makers have burdensome quoting
obligations \21\ 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,
the proposed fees would apply only in certain circumstances where the
Market Maker or Specialist is not otherwise subject to transaction fees
(because the Monthly Market Maker Cap has been reached) and
specifically on the contra-side of an electronically-delivered Customer
order.
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\20\ Id.
\21\ See note 15.
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The Exchange's proposal to continue to assess a $0.17 per contract
fee to Specialists and Market Makers that are on the contra-side of an
electronically-delivered and executed Customer order and have reached
the Monthly Market Maker Cap for Penny Pilot and Non-Penny Pilot
Options provided the Specialist or Market Maker is removing liquidity
is reasonable because the Exchange will be assessing the same fee as
today. The $0.17 per contract fee will continue to be assessed to
remove liquidity. Further, this fee subsidizes Customer rebates offered
by the Exchange.\22\
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\22\ See Section B of the Pricing Schedule.
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The Exchange's proposal to continue to assess a $0.17 per contract
fee to Specialists and Market Makers that are on the contra-side of an
electronically-delivered and executed Customer order and have reached
the Monthly Market Maker Cap for Penny Pilot and Non-Penny Pilot
Options provided the Specialist or Market Maker is removing liquidity
is equitable and not unfairly discriminatory because Specialists and
Market Makers have burdensome quoting obligations \23\ 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, the proposed fees would apply only in
certain circumstances where the Market Maker or Specialist is not
otherwise subject to transaction fees (because the Monthly Market Maker
Cap has been reached) and specifically on the contra-side of an
electronically-delivered Customer order.
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\23\ See note 15.
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The Exchange's proposal to continue to assess a $0.17 per contract
fee to Specialists and Market Makers that are on the contra-side of an
electronically-delivered and executed Customer order and have reached
the Monthly Market Maker Cap in a non-Complex electronic auction,
including the Quote Exhaust auction and, for purposes of this fee, the
opening process is reasonable because the Exchange will be assessing
the same fee as today. The $0.17 per contract fee will continue to be
assessed to these auctions and the opening process. Further, this fee
subsidizes Customer rebates offered by the Exchange.\24\
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\24\ See Section B of the Pricing Schedule.
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The Exchange's proposal to add the words ``per contract'' in
Section IV, A of the Pricing Schedule is reasonable, equitable and not
unfairly discriminatory because the Exchange believes the addition of
the words ``per contract'' will add clarity to the Pricing Schedule to
avoid any confusion as to the fee.
The Exchange's proposal to continue to assess a $0.17 per contract
fee to Specialists and Market Makers that are on the contra-side of an
electronically-delivered and executed Customer order and have reached
the Monthly Market Maker Cap in a non-Complex electronic auction,
including the Quote Exhaust auction and, for purposes of this fee, the
opening process is equitable and not unfairly discriminatory because
Specialists and Market Makers have burdensome quoting obligations \25\
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, the proposed fees would
apply only in certain circumstances where the Market Maker or
Specialist is not otherwise subject to transaction fees (because the
Monthly Market Maker Cap has been reached) and specifically on the
contra-side of an electronically-delivered Customer order.
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\25\ See note 15.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act because Specialists and Market
Makers will be offered the opportunity to cap certain transaction fees
and pay lower
[[Page 3282]]
transaction fees when they transact $500,000 versus $550,000 of
qualifying transactions. Other market participants will continue to
benefit from the order interaction and liquidity that Specialists and
Market Markers provide to the marketplace.
The Exchange does not believe that amending the types of trades
that qualify for the Monthly Market Maker Cap by excluding certain
transaction fees related to an order or quote that is contra to a PIXL
Order or assessing Specialists and Market Makers the PIXL pricing
located in Section IV, A of the Pricing Schedule will impose an undue
burden on competition because the Exchange's proposal results in all
market participants on Phlx being assessed the same PIXL pricing.
The Exchange's proposal for Specialists and Market Makers to pay no
fees after they have satisfied the obligations related to the Monthly
Market Maker Cap, in all Penny Pilot Options, provided they have added
liquidity, and to pay lower fees for all other types of transactions,
including those transacted in auctions and during the opening process,
also does not provide an undue burden on competition. As noted above
Specialists and Market Makers have burdensome quoting obligations to
the market that do not apply to Customers, Professionals, Firms and
Broker-Dealers.\26\ Specialists and Market Makers serve an important
role on the Exchange with regard to order interaction and they provide
liquidity in the marketplace. 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. 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. For these reasons noted
above, the Exchange does not believe that offering Specialists and
Market Makers the opportunity to cap fees in certain symbols imposes an
undue burden on competition.
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\26\ Id.
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The Exchange operates in a highly competitive market, comprised of
twelve 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, as described in the 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.\27\ 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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\27\ 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-2015-06 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-2015-06. 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-2015-06 and should be
submitted on or before February 12, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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\28\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-00971 Filed 1-21-15; 8:45 am]
BILLING CODE 8011-01-P
