Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Permit Fees, 1976-1980 [2016-00569]

Download as PDF 1976 Federal Register / Vol. 81, No. 9 / Thursday, January 14, 2016 / Notices In addition, the following provisions shall be part of this 17d–2 Agreement: Securities Exchange Act of 1934: Section 15(f) * * * * * III. Date of Effectiveness of the Proposed Plan and Timing for Commission Action Pursuant to Section 17(d)(1) of the Act 14 and Rule 17d–2 thereunder,15 after January 29, 2016, the Commission may, by written notice, declare the plan submitted by NSX and FINRA, File No. 4–694, to be effective if the Commission finds that the plan is necessary or appropriate in the public interest and for the protection of investors, to foster cooperation and coordination among self-regulatory organizations, or to remove impediments to and foster the development of the national market system and a national system for the clearance and settlement of securities transactions and in conformity with the factors set forth in Section 17(d) of the Act. IV. Solicitation of Comments In order to assist the Commission in determining whether to approve the proposed 17d–2 Plan and to relieve NSX of the responsibilities which would be assigned to FINRA, interested persons are invited to submit written data, views, and arguments concerning the foregoing. Comments may be submitted by any of the following methods: mstockstill on DSK4VPTVN1PROD with NOTICES Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/other.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number 4– 694 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, Station Place, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number 4–694. 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/ other.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed plan that are filed with the Commission, and all written communications relating to the proposed plan 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, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the plan also will be available for inspection and copying at the principal offices of NSX and FINRA. 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 4–694 and should be submitted on or before January 29, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–00567 Filed 1–13–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–76858; File No. SR–Phlx– 2015–109) Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Permit Fees January 8, 2016. 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 December 30, 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 the Substance of the Proposed Rule Change The Exchange proposes to amend the Exchange’s Pricing Schedule at Section VI, entitled ‘‘Membership Fees.’’ The Exchange also proposes to correct a 16 17 CFR 200.30–3(a)(34). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 14 15 U.S.C. 78q(d)(1). 15 17 CFR 240.17d–2. VerDate Sep<11>2014 16:39 Jan 13, 2016 1 15 Jkt 238001 PO 00000 Frm 00040 Fmt 4703 Sfmt 4703 reference to The NASDAQ OMX Group, Inc. within the Pricing Schedule. The Exchange purposes to increase certain permit fees. The Exchange’s permit fees remain competitive with those of other options Exchanges. While the changes proposed herein are effective upon filing, the Exchange has designated the amendments to become operative on January 4, 2016. 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 increase permit fees to allocate its costs to various options market participants, specifically floor participants. The Exchange assesses Permit Fees by market participant. Today, the Exchange assesses the same monthly Permit Fees of $2,300 to Floor Brokers,3 Specialists 4 and Market Makers.5 All other market 3 A ‘‘Floor Broker’’ is defined in Phlx Rule 1060 as ‘‘[a]n individual who is registered with the Exchange for the purpose, while on the Options Floor, of accepting and executing options orders received from members and member organizations.’’ 4 A ‘‘Specialist’’ is an Exchange member who is registered as an options specialist. See Phlx Rule 1020(a). 5 A ‘‘Market Maker’’ includes Registered Options Traders (‘‘ROTs’’) (see Rule 1014(b)(i) and (ii)), which includes Streaming Quote Traders (‘‘SQTs’’) (see Rule 1014(b)(ii)(A)) and Remote Streaming Quote Traders (‘‘RSQTs’’) (see Rule 1014(b)(ii)(B)). An RSQT is defined in Exchange Rule in 1014(b)(ii)(B) as an ROT that is a member affiliated with an Remote Streaming Quote Trader Organization or ‘‘RSQTO’’ with no physical trading floor presence who has received permission from the Exchange to generate and submit option quotations electronically in options to which such RSQT has been assigned. A RSQTO, which may also be referred to as a Remote Market Making Organization (‘‘RMO’’), is a member organization in E:\FR\FM\14JAN1.SGM 14JAN1 Federal Register / Vol. 81, No. 9 / Thursday, January 14, 2016 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES participants (Professionals,6 Firms 7 and Broker-Dealers,8 collectively ‘‘Other Market Participants’’) are assessed a Permit Fee of $4,000 in a given month, unless the member or member organization or those member organizations under Common Ownership,9 execute at least 100 options in a Phlx house account that is assigned to one of the member organizations in a given month, in which case the Permit Fee is $2,300 for that month. The Exchange believes that 100 options in a given month continues to be a reasonable level given the volume of options transacted on Phlx to receive the lower Permit Fee. Also, today, option members and member organizations pay an additional Permit Fee for each sponsored options participant, which fee is the Permit Fee that is assessed to the member or member organization sponsoring the options participant,10 of either $2,300 or $4,000. The Exchange is not amending the Permit Fees for Other Market Participants or the criteria of the lower Permit Fee of $2,300 per month for members and member organizations that execute a certain amount of volume on the Exchange.11 good standing that satisfies the RSQTO readiness requirements in Rule 507(a). An SQT is defined in Exchange Rule 1014(b)(ii)(A) as an ROT who has received permission from the Exchange to generate and submit option quotations electronically in options to which such SQT is assigned. 6 The term ‘‘Professional’’ means any person or entity that (i) is not a broker or dealer in securities, and (ii) places more than 390 orders in listed options per day on average during a calendar month for its own beneficial account(s). See Rule 1000(b)(14). 7 The term ‘‘Firm’’ applies to any transaction that is identified by a member or member organization for clearing in the Firm range at The Options Clearing Corporation. 8 The term ‘‘Broker-Dealer’’ applies to any transaction that is not subject to any of the other transaction fees applicable within a particular category. 9 The term ‘‘Common Ownership’’ shall mean members or member organizations under 75% common ownership or control. See Preface to Exchange’s Pricing Schedule. 10 See Exchange Rule 1094 titled Sponsored Participants. A Sponsored Participant may obtain authorized access to the Exchange only if such access is authorized in advance by one or more Sponsoring Member Organizations. Sponsored Participants must enter into and maintain participant agreements with one or more Sponsoring Member Organizations establishing a proper relationship(s) and account(s) through which the Sponsored Participant may trade on the Exchange. 11 A Series A–1 permit shall only be issued to an individual who is a natural person of at least twenty-one (21) years of age. A Series A–1 permit shall only be issued to a corporation who meets the eligibility and application requirements set forth in the By-Laws and Rules, including, without limitation, Rule 972, and no individual shall hold more than a single Series A–1 permit. See Rule 908. All members are required to have a permit. A VerDate Sep<11>2014 16:39 Jan 13, 2016 Jkt 238001 The Exchange also proposes to correct a reference to The NASDAQ OMX Group, Inc. within the Pricing Schedule. The amendments are detailed below. Permit Fee Amendments • The Exchange proposes to increase the Floor Broker Permit Fee from $2,300 to $3,000 per month. • The Exchange proposes to increase the Floor Specialist 12 and Floor Market Maker 13 Permit Fee from $2,300 to $4,500 per month. • The Exchange proposes to increase the Permit Fee for Remote Specialists and Remote Market Makers 14 from $2,300 to $4,000 15 and offer Remote Specialists and Remote Market Makers an opportunity to lower the Permit Fee to $2,300 provided the member or member organization, or member organizations under Common Ownership, executes at least 100 options in a Phlx house account that is assigned to one of the member organizations in a given month. The Exchange believes that these increased fees will raise revenue for the Exchange. The Exchange believes that these Permit Fees remain competitive with fees at other options exchanges 16 and reasonably allocate costs based on Exchange resources consumed by these market participants. Name Change • The Exchange proposes to correct a reference to The NASDAQ OMX Group, Inc. within the Pricing Schedule to newly named Nasdaq, Inc. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 17 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act 18 in particular, in that it provides for the equitable allocation of member organization will be billed for each permit that is affiliated with the member organization. Each Floor Brokers must obtain a permit to transact business on the trading floor. Each Market Maker must obtain a permit to transact business either electronically or on the trading floor. Each member organization must have at least one member qualifying the firm and that one member will be billed a permit. 12 A Floor Specialist is a Specialist that does have a physical presence on the Exchange’s trading floor. 13 A Floor Market Maker is a Market Maker that does have a physical presence on the Exchange’s trading floor. 14 Remote Specialists and Remote Market Makers do not have a physical presence on an Exchange floor. 15 While this Permit fee for Remote Specialists and Remote Market Makers is being increased, today all Remote Specialists and Remote Market Makers qualify for the lower Permit Fee of $2,300. 16 See note 25 below. 17 15 U.S.C. 78f(b). 18 15 U.S.C. 78f(b)(4) and (5). PO 00000 Frm 00041 Fmt 4703 Sfmt 4703 1977 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 Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, for example, the Commission indicated that market forces should generally determine the price of non-core market data because national market system regulation ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 19 Likewise, in NetCoalition v. NYSE Arca, Inc. [sic] 20 (‘‘NetCoalition’’) the DC Circuit upheld the Commission’s use of a market-based approach in evaluating the fairness of market data fees against a challenge claiming that Congress mandated a costbased approach.21 As the court emphasized, the Commission ‘‘intended in Regulation NMS that ‘market forces, rather than regulatory requirements’ play a role in determining the market data . . . to be made available to investors and at what cost.’’ 22 Further, ‘‘[n]o one disputes that competition for order flow is ‘fierce.’ . . . As the SEC explained, ‘[i]n the U.S. national market system, buyers and sellers of securities, and the brokerdealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution’; [and] ‘no exchange can afford to take its market share percetages for granted’ because ‘no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers’. . . .’’ 23 Although the court and the SEC were discussing the cash equities markets, the Exchange believes that these views apply with equal force to the options markets. Amendments to Permit Fees The Exchange’s proposal to increase Floor Broker Permit Fees from $2,300 to $3,000 and Floor Specialist and Floor Market Maker Permit Fees from $2,300 to $4,500 is reasonable because the 19 Securities Exchange Act Release No. 51808 [sic] at 37499 (June 9, 2005) (‘‘Regulation NMS Adopting Release’’). 20 NetCoalition v. NYSE Arca, Inc. [sic] 615 F.3d 525 (D.C. Cir. 2010). 21 See NetCoalition, at 534. 22 Id. at 537. 23 Id. at 539 (quoting ArcaBook Order, 73 FR at 74782–74783). E:\FR\FM\14JAN1.SGM 14JAN1 1978 Federal Register / Vol. 81, No. 9 / Thursday, January 14, 2016 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES Exchange incurs costs in operating and maintaining a trading floor that are unique to a floor operation. The Exchange believes it is reasonable to allocate the Exchange’s expenses, among the market participants on the trading floor, and raise the floor Permit Fees because of the unique resources consumed by each category of floor market participant and additional floor services. The proposed increase covers the rising facility costs and staffing expenses required to service the floor community, process trading tickets and service the trading floor. The Exchange has not increased these fees in two years. Floor Specialists and Floor Market Makers benefit from the access they have to interact with orders which are made available in open outcry on the trading floor. These market participants may choose to conduct their business either electronically or on the trading floor, unlike Floor Brokers, who have a business model that is naturally tied to the physical trading space. The Exchange offers Specialists and Market Makers a choice on how to conduct business, electronic or floor. The Exchange believes that it is reasonable to assess Floor Specialists and Floor Market Makers the higher floor permits because it is offering different trading experiences to these market participants. The Exchange notes that assessing different Permit Fee rates to different types of market participants is not novel.24 Both CBOE and NYSE Arca have different fixed and transaction fees for floor as compared to electronically transmitted orders. Also, the proposed Permit Fees are competitive with fees at other options exchanges. Both CBOE and NYSE Arca assess different fees to Floor Brokers and Market Makers.25 The Exchange’s proposal to increase Floor Broker Permit Fees from $2,300 to 24 The Chicago Board Options Exchange, Incorporated (‘‘CBOE’’), the International Securities Exchange, LLC (‘‘ISE’’) and Miami International Securities Exchange LLC (‘‘MIAX’’) assess different Trading Permit Fees to different market participants. See CBOE’s Fees Schedule, ISE’s Fee Schedule and MIAX’s Fee Schedule. 25 See CBOE’s Fees Schedule. A Market-Maker Trading Permit is $5,500 per month, except for ETH only permits which are $1,000 per month. A Floor Broker Trading Permit is $9,000 per month. An Electronic Access Permit is $1,600 per month, except for ETH only which is $500 per month. There are also other permits for SPX and VIX trading and some waivers apply to ETH for the first permit. See also NYSE Arca, Inc.’s (‘‘NYSE Arca’’) Options Trading Participation Rights in NYSE Arca Options Fees and Charges. Floor Brokers on NYSE Arca are assessed a $1,000 per month options trading participant rights (‘‘OTP’’) fee for the first OTP and $250 for each additional OTP. NYSE Arca Market Makers are assessed $6,000 for the first OTP and then the OTP fee declines on a scale down to $1,000 for additional OTPs. VerDate Sep<11>2014 18:58 Jan 13, 2016 Jkt 238001 $3,000 and Floor Specialist and Floor Market Maker from $2,300 to $4,500 is equitable and not unfairly discriminatory because the Exchange seeks to allocate the costs in a fair and equitable manner by assessing fees consistent with the consumption of resources. The differentiation in fees as between electronic trading and floor trading recognizes these different business models. For example, Floor Brokers are registered with the Exchange for the purpose, while on the options floor, of accepting and executing options orders received from members and member organizations.26 This type of business model is distinct from that of an electronic trader. Additionally, Floor Specialists and Floor Market Makers have the opportunity to interact with Floor Broker order flow on the Exchange floor and to provide liquidity to the Exchange. The proposed Permit Fee structure recognizes the resources consumed by these market participants on the trading floor. The Exchange is one of only four options exchanges that offer a trading floor environment in addition to the electronic environment. The Exchange is required to staff the trading floor with regulatory personnel and provide a physical infrastructure in addition to other costs which are also incurred to operate an electronic environment. The floor environment offers floor market participants the choice of transacting certain complex transactions, i.e. a Complex Order 27 with multiple legs, on the trading floor in open outcry or the electronic market. Certain FLEX transactions,28 transfers 29 or accommodation transactions 30 also lend themselves to the trading floor environment and the Exchange. The Exchange believes that the increased Permit Fees to Floor Brokers, Floor Specialists and Floor Market Makers is equitable and not unfairly discriminatory because the Exchange is allocating the additional floor cost to the market participants that benefit from the trading floor. Further, the Exchange believes that it is equitable and not 26 See Exchange Rule 1060. Complex Order is any order involving the simultaneous purchase and/or sale of two or more different options series in the same underlying security, priced at a net debit or credit based on the relative prices of the individual components, for the same account, for the purpose of executing a particular investment strategy. Furthermore, a Complex Order can also be a stock-option order, which is an order to buy or sell a stated number of units of an underlying stock or ETF coupled with the purchase or sale of options contract(s). See Exchange Rule 1080, Commentary .08(a)(i). 28 See Phlx Rule 1079. 29 See Phlx Rule 1058. 30 See Phlx Rule 1059. 27 A PO 00000 Frm 00042 Fmt 4703 Sfmt 4703 unfairly discriminatory to assess Floor Specialists and Floor Market Makers the higher floor Permit Fees among all floor participants because Specialists and Market Makers may decide to stream remotely or conduct their business on the trading floor in open outcry. These market participants are offered the opportunity to also avail themselves of both means to access the Exchange, whereby they may interact with order floor in the electronic Order Book and/ or interact with order floor in the trading crowd on the Exchange’s trading floor. This opportunity to conduct their business on the trading floor and access the Exchange through both avenues comes at a cost to the Exchange,31 which costs is being allocated to Floor Specialists and Floor Market Makers through higher Permit Fees as compared to Floor Brokers. The Exchange’s proposal to increase Permit Fees for Remote Specialists and Remote Market Makers from $2,300 to $4,000 is reasonable because the Exchange is allocating costs differently as between electronic and floor trading. The differentiation in fees as between electronic trading and floor trading recognizes the distinctions in these business models. The Exchange’s proposal will also offer Remote Specialists and Remote Market Makers the opportunity to reduce the Permit Fee from $4,000 to $2,300 by directing at least 100 option contracts to the Exchange in a given month.32 This proposal allocates costs to each market participants based on their chosen business model. The Exchange’s proposal to increase Permit Fees for Remote Specialists and Remote Market Makers that conduct an electronic business from $2,300 to $4,000 is equitable and not unfairly discriminatory as all electronic market participants will uniformly be assessed a $4,000 a month Permit Fee and will uniformly be offered an opportunity to decrease that Permit Fee to $2,300 by directing at least 100 option contracts in a given month to the Exchange. This liquidity benefits all market participants and in turn brings revenue to the Exchange through transaction fees assessed to these orders. The Exchange believes that assessing different rates for 31 As noted herein, the Exchange staffs the trading floor with regulatory personnel and provides a physical infrastructure for the trading floor. Surveillances for the floor and electronic environment may also differ. For example, the Exchange monitors Specialist and Market Maker quoting obligations separately for electronic quoting versus floor quoting. 32 The Exchange believes that 100 options in a given month continues to be a reasonable level given the volume of options transacted on Phlx to receive the lower Permit Fee. E:\FR\FM\14JAN1.SGM 14JAN1 Federal Register / Vol. 81, No. 9 / Thursday, January 14, 2016 / Notices floor market participants as compared to electronic market participants for Permit Fees is equitable and not unfairly discriminatory because of the increasing costs incurred by the Exchange in operating and maintaining the trading floor, which costs have increased over the years. The Exchange believes that it is equitable and not unfairly discriminatory to assess Remote Specialists and Remote Market Makers a lower rate than Floor Specialists and Floor Market Makers. Specialists and Market Makers have the ability to operate an electronic business on the Exchange, as compared to Floor Brokers, who have a business model that is naturally tied to the physical trading space. Floor Specialists and Floor Market Makers desiring to interact with the order flow generated by these Floor Brokers are offered the opportunity to transact business on the trading floor in addition to the electronic market. This opportunity comes at a cost for the Exchange which is being equitably allocated to the consumers of this resource. mstockstill on DSK4VPTVN1PROD with NOTICES Name Change The Exchange’s proposal to correct the reference to The NASDAQ OMX Group, Inc. within the reference to the trademark PHLX® to recently renamed Nasdaq, Inc.33 is reasonable, equitable and not unfairly discriminatory because the amendment simply updates the name. 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. In terms of inter-market competition, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their 33 See Securities Exchange Act Release No. 75421 (July 16, 2015), 80 FR 42136 (July 10, 2015) (SR– BSECC–2015–001; SR–BX–2015–030; SR– NASDAQ–2015–058; SR–Phlx–2015–46; SR–SCCP– 2015–01). VerDate Sep<11>2014 16:39 Jan 13, 2016 Jkt 238001 order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited. The Exchange’s proposal to increase Floor Broker Permit Fees from $2,300 to $3,000 and Floor Specialist and Floor Market Maker from $2,300 to $4,500 does not impose an undue burden on intra-market competition because the Exchange proposes to allocate the costs to floor participants because they consume a greater amount of Exchange resources. The Exchange is required to staff the trading floor with regulatory personnel and provide a physical infrastructure in addition to other costs which are also incurred to operate an electronic environment. The Exchange has incurred increasing costs in operating and maintaining the trading floor, which costs have increased over the years. Specialists and Market Makers have the ability to operate an electronic business on the Exchange, as compared to Floor Brokers, who have a business model that is naturally tied to the physical trading space. Floor Specialists and Floor Market Makers desiring to interact with the order flow generated by these Floor Brokers are offered the opportunity to transact business on the trading floor in addition to the electronic market. This opportunity comes at a cost for the Exchange. The Exchange believes that the increased fee to Floor Specialists and Floor Market Makers does not impose an undue burden on intramarket competition because the Exchange is allocating the additional floor cost to the participants that benefit from such a dual structure. The Exchange’s proposal to increase Permit Fees for Remote Specialists and Remote Market Makers from $2,300 to $4,000 does not impose an undue burden on intra-market competition because all electronic market participants will uniformly be assessed a $4,000 a month Permit Fee and will uniformly be offered an opportunity to decrease that fee by directing at least 100 option contracts in a given month. This liquidity benefits all market participants and in turn brings revenue to the Exchange through transaction fees assessed to these orders. The Exchange believes that assessing Remote Specialists and Remote Market Makers a lower rate than Floor Specialists and Floor Market Makers does not impose an undue burden on intra-market competition because Specialists and Market Makers have the ability to operate an electronic business on the Exchange, as compared to Floor Brokers, who have a business model that is PO 00000 Frm 00043 Fmt 4703 Sfmt 4703 1979 naturally tied to the physical trading space. Specialists and Market Makers desiring to interact with the order flow generated by these Floor Brokers are offered the opportunity to transact business on the trading floor in addition to the electronic market. This opportunity comes at a cost for the Exchange. The proposed Permit Fees are competitive with fees at other options exchanges.34 If the changes proposed herein are unattractive to market participants, it is likely that the Exchange will lose market share as a result. Accordingly, the Exchange does not believe that the proposed changes will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets. Name Change The Exchange’s proposal to correct the reference to The NASDAQ OMX Group, Inc. within the reference to the trademark PHLX® to recently renamed Nasdaq, Inc. does not impose any undue burden on intra-market competition because the amendment simply updates the name. 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.35 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: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. 34 See 35 15 E:\FR\FM\14JAN1.SGM note 25 above. U.S.C. 78s(b)(3)(A)(ii). 14JAN1 1980 Federal Register / Vol. 81, No. 9 / Thursday, January 14, 2016 / Notices Comments may be submitted by any of the following methods: SECURITIES AND EXCHANGE COMMISSION Electronic Comments [Release No. 34–76857; File No. SR–CBOE– 2016–003] • 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–2015–109 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. mstockstill on DSK4VPTVN1PROD with NOTICES All submissions should refer to File Number SR–Phlx–2015–109. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the 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– 2015–109, and should be submitted on or before February 4, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.36 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–00569 Filed 1–13–16; 8:45 am] BILLING CODE 8011–01–P Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Limit Order Price Protections for Stock-Option Orders January 8, 2016. 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 5, 2016, Chicago Board Options Exchange, Incorporated (the ‘‘Exchange’’ or ‘‘CBOE’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) thereunder.4 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 seeks to amend Exchange rules related to limit order price protections for stock-option orders. The text of the proposed rule change is provided below. (additions are italicized; deletions are [bracketed]) * * * * * Chicago Board Options Exchange, Incorporated Rules * * * * * Rule 6.12. CBOE Hybrid Order Handling System This rule describes the process for routing orders through the Exchange’s order handling system in classes designated for trading on the CBOE Hybrid System. The order handling system is a feature within the Hybrid System to route orders for automatic execution, book entry, open outcry, or further handling by a broker, agent, or PAR Official, in a manner consistent with Exchange Rules and the Act (e.g., 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b–4(f)(6). 2 17 36 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 18:58 Jan 13, 2016 Jkt 238001 PO 00000 Frm 00044 Fmt 4703 Sfmt 4703 resubmit the order to the Hybrid System for automatic execution, route the order from a booth to a PAR workstation, cancel the order, contact the customer for further instructions, and/or otherwise handle the order in accordance with Exchange Rules and the order’s terms.). (a) Orders may route through the order handling system for electronic processing in the Hybrid System or to a designated order management terminal or PAR Workstation in any of the circumstances described below. Routing designations may be established based on various parameters defined by the Exchange, order entry firm or Trading Permit Holder, as applicable. * * * * * (5) Limit Order Price Parameter for Stock-Option Orders: Limit orders received after a series is opened will be cancelled if the order is priced at a net debit that is more than an acceptable tick distance above the opposite side derived net market using the Exchange’s best bid or offer in the individual series leg and the national best bid or offer of the stock component comprising the stock-option order or the order is priced at a net credit that is more than an acceptable tick distance below the opposite side derived net market based on the Exchange’s best bid or offer in the individual series leg and the national best bid or offer of the stock component comprising the stock-option order. For purposes of this subparagraph (a)(5): An ‘‘acceptable tick distance’’ (which is also referred to as an ‘‘ATD’’), as determined by the Exchange on a class by class and net premium basis and announced to the Trading Permit Holders via Regulatory Circular, shall be no less than 5 minimum net price increment ticks for stock-option orders. The Exchange may determine on a class by class basis and announce via Regulatory Circular whether to apply paragraph (a)(5) to immediate-or-cancel complex orders. The limit order price parameter will take precedence over another routing parameter to the extent that both are applicable to an incoming limit order. [(5)] (6) Direct Routing: Orders may route directly from an order entry firm for electronic processing or to an order management terminal or a PAR workstation based on parameters prescribed by the order entry firm. [(6)] (7) System Disruptions or Malfunctions: Orders will route to an order management terminal designated by the order entry firm or Trading Permit Holder, or a terminal designated and maintained by the Exchange as a E:\FR\FM\14JAN1.SGM 14JAN1

Agencies

[Federal Register Volume 81, Number 9 (Thursday, January 14, 2016)]
[Notices]
[Pages 1976-1980]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-00569]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76858; File No. SR-Phlx-2015-109)


Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Permit Fees

January 8, 2016.
    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 December 30, 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.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's Pricing Schedule at 
Section VI, entitled ``Membership Fees.'' The Exchange also proposes to 
correct a reference to The NASDAQ OMX Group, Inc. within the Pricing 
Schedule.
    The Exchange purposes to increase certain permit fees. The 
Exchange's permit fees remain competitive with those of other options 
Exchanges. While the changes proposed herein are effective upon filing, 
the Exchange has designated the amendments to become operative on 
January 4, 2016.
    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 increase permit fees to allocate its costs 
to various options market participants, specifically floor 
participants. The Exchange assesses Permit Fees by market participant. 
Today, the Exchange assesses the same monthly Permit Fees of $2,300 to 
Floor Brokers,\3\ Specialists \4\ and Market Makers.\5\ All other 
market

[[Page 1977]]

participants (Professionals,\6\ Firms \7\ and Broker-Dealers,\8\ 
collectively ``Other Market Participants'') are assessed a Permit Fee 
of $4,000 in a given month, unless the member or member organization or 
those member organizations under Common Ownership,\9\ execute at least 
100 options in a Phlx house account that is assigned to one of the 
member organizations in a given month, in which case the Permit Fee is 
$2,300 for that month. The Exchange believes that 100 options in a 
given month continues to be a reasonable level given the volume of 
options transacted on Phlx to receive the lower Permit Fee. Also, 
today, option members and member organizations pay an additional Permit 
Fee for each sponsored options participant, which fee is the Permit Fee 
that is assessed to the member or member organization sponsoring the 
options participant,\10\ of either $2,300 or $4,000.
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    \3\ A ``Floor Broker'' is defined in Phlx Rule 1060 as ``[a]n 
individual who is registered with the Exchange for the purpose, 
while on the Options Floor, of accepting and executing options 
orders received from members and member organizations.''
    \4\ A ``Specialist'' is an Exchange member who is registered as 
an options specialist. See Phlx Rule 1020(a).
    \5\ A ``Market Maker'' includes Registered Options Traders 
(``ROTs'') (see Rule 1014(b)(i) and (ii)), which includes Streaming 
Quote Traders (``SQTs'') (see Rule 1014(b)(ii)(A)) and Remote 
Streaming Quote Traders (``RSQTs'') (see Rule 1014(b)(ii)(B)). An 
RSQT is defined in Exchange Rule in 1014(b)(ii)(B) as an ROT that is 
a member affiliated with an Remote Streaming Quote Trader 
Organization or ``RSQTO'' with no physical trading floor presence 
who has received permission from the Exchange to generate and submit 
option quotations electronically in options to which such RSQT has 
been assigned. A RSQTO, which may also be referred to as a Remote 
Market Making Organization (``RMO''), is a member organization in 
good standing that satisfies the RSQTO readiness requirements in 
Rule 507(a). An SQT is defined in Exchange Rule 1014(b)(ii)(A) as an 
ROT who has received permission from the Exchange to generate and 
submit option quotations electronically in options to which such SQT 
is assigned.
    \6\ The term ``Professional'' means any person or entity that 
(i) is not a broker or dealer in securities, and (ii) places more 
than 390 orders in listed options per day on average during a 
calendar month for its own beneficial account(s). See Rule 
1000(b)(14).
    \7\ The term ``Firm'' applies to any transaction that is 
identified by a member or member organization for clearing in the 
Firm range at The Options Clearing Corporation.
    \8\ The term ``Broker-Dealer'' applies to any transaction that 
is not subject to any of the other transaction fees applicable 
within a particular category.
    \9\ The term ``Common Ownership'' shall mean members or member 
organizations under 75% common ownership or control. See Preface to 
Exchange's Pricing Schedule.
    \10\ See Exchange Rule 1094 titled Sponsored Participants. A 
Sponsored Participant may obtain authorized access to the Exchange 
only if such access is authorized in advance by one or more 
Sponsoring Member Organizations. Sponsored Participants must enter 
into and maintain participant agreements with one or more Sponsoring 
Member Organizations establishing a proper relationship(s) and 
account(s) through which the Sponsored Participant may trade on the 
Exchange.
---------------------------------------------------------------------------

    The Exchange is not amending the Permit Fees for Other Market 
Participants or the criteria of the lower Permit Fee of $2,300 per 
month for members and member organizations that execute a certain 
amount of volume on the Exchange.\11\
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    \11\ A Series A-1 permit shall only be issued to an individual 
who is a natural person of at least twenty-one (21) years of age. A 
Series A-1 permit shall only be issued to a corporation who meets 
the eligibility and application requirements set forth in the By-
Laws and Rules, including, without limitation, Rule 972, and no 
individual shall hold more than a single Series A-1 permit. See Rule 
908. All members are required to have a permit. A member 
organization will be billed for each permit that is affiliated with 
the member organization. Each Floor Brokers must obtain a permit to 
transact business on the trading floor. Each Market Maker must 
obtain a permit to transact business either electronically or on the 
trading floor. Each member organization must have at least one 
member qualifying the firm and that one member will be billed a 
permit.
---------------------------------------------------------------------------

    The Exchange also proposes to correct a reference to The NASDAQ OMX 
Group, Inc. within the Pricing Schedule. The amendments are detailed 
below.
Permit Fee Amendments
     The Exchange proposes to increase the Floor Broker Permit 
Fee from $2,300 to $3,000 per month.
     The Exchange proposes to increase the Floor Specialist 
\12\ and Floor Market Maker \13\ Permit Fee from $2,300 to $4,500 per 
month.
---------------------------------------------------------------------------

    \12\ A Floor Specialist is a Specialist that does have a 
physical presence on the Exchange's trading floor.
    \13\ A Floor Market Maker is a Market Maker that does have a 
physical presence on the Exchange's trading floor.
---------------------------------------------------------------------------

     The Exchange proposes to increase the Permit Fee for 
Remote Specialists and Remote Market Makers \14\ from $2,300 to $4,000 
\15\ and offer Remote Specialists and Remote Market Makers an 
opportunity to lower the Permit Fee to $2,300 provided the member or 
member organization, or member organizations under Common Ownership, 
executes at least 100 options in a Phlx house account that is assigned 
to one of the member organizations in a given month.
---------------------------------------------------------------------------

    \14\ Remote Specialists and Remote Market Makers do not have a 
physical presence on an Exchange floor.
    \15\ While this Permit fee for Remote Specialists and Remote 
Market Makers is being increased, today all Remote Specialists and 
Remote Market Makers qualify for the lower Permit Fee of $2,300.
---------------------------------------------------------------------------

    The Exchange believes that these increased fees will raise revenue 
for the Exchange. The Exchange believes that these Permit Fees remain 
competitive with fees at other options exchanges \16\ and reasonably 
allocate costs based on Exchange resources consumed by these market 
participants.
---------------------------------------------------------------------------

    \16\ See note 25 below.
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Name Change
     The Exchange proposes to correct a reference to The NASDAQ 
OMX Group, Inc. within the Pricing Schedule to newly named Nasdaq, Inc.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \17\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act \18\ 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.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, for example, the Commission indicated that market forces should 
generally determine the price of non-core market data because national 
market system regulation ``has been remarkably successful in promoting 
market competition in its broader forms that are most important to 
investors and listed companies.'' \19\ Likewise, in NetCoalition v. 
NYSE Arca, Inc. [sic] \20\ (``NetCoalition'') the DC Circuit upheld the 
Commission's use of a market-based approach in evaluating the fairness 
of market data fees against a challenge claiming that Congress mandated 
a cost-based approach.\21\ As the court emphasized, the Commission 
``intended in Regulation NMS that `market forces, rather than 
regulatory requirements' play a role in determining the market data . . 
. to be made available to investors and at what cost.'' \22\
---------------------------------------------------------------------------

    \19\ Securities Exchange Act Release No. 51808 [sic] at 37499 
(June 9, 2005) (``Regulation NMS Adopting Release'').
    \20\ NetCoalition v. NYSE Arca, Inc. [sic] 615 F.3d 525 (D.C. 
Cir. 2010).
    \21\ See NetCoalition, at 534.
    \22\ Id. at 537.
---------------------------------------------------------------------------

    Further, ``[n]o one disputes that competition for order flow is 
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their order-routing agents, have a wide range of choices of 
where to route orders for execution'; [and] `no exchange can afford to 
take its market share percetages for granted' because `no exchange 
possesses a monopoly, regulatory or otherwise, in the execution of 
order flow from broker dealers'. . . .'' \23\ Although the court and 
the SEC were discussing the cash equities markets, the Exchange 
believes that these views apply with equal force to the options 
markets.
---------------------------------------------------------------------------

    \23\ Id. at 539 (quoting ArcaBook Order, 73 FR at 74782-74783).
---------------------------------------------------------------------------

Amendments to Permit Fees
    The Exchange's proposal to increase Floor Broker Permit Fees from 
$2,300 to $3,000 and Floor Specialist and Floor Market Maker Permit 
Fees from $2,300 to $4,500 is reasonable because the

[[Page 1978]]

Exchange incurs costs in operating and maintaining a trading floor that 
are unique to a floor operation. The Exchange believes it is reasonable 
to allocate the Exchange's expenses, among the market participants on 
the trading floor, and raise the floor Permit Fees because of the 
unique resources consumed by each category of floor market participant 
and additional floor services. The proposed increase covers the rising 
facility costs and staffing expenses required to service the floor 
community, process trading tickets and service the trading floor. The 
Exchange has not increased these fees in two years.
    Floor Specialists and Floor Market Makers benefit from the access 
they have to interact with orders which are made available in open 
outcry on the trading floor. These market participants may choose to 
conduct their business either electronically or on the trading floor, 
unlike Floor Brokers, who have a business model that is naturally tied 
to the physical trading space. The Exchange offers Specialists and 
Market Makers a choice on how to conduct business, electronic or floor. 
The Exchange believes that it is reasonable to assess Floor Specialists 
and Floor Market Makers the higher floor permits because it is offering 
different trading experiences to these market participants.
    The Exchange notes that assessing different Permit Fee rates to 
different types of market participants is not novel.\24\ Both CBOE and 
NYSE Arca have different fixed and transaction fees for floor as 
compared to electronically transmitted orders. Also, the proposed 
Permit Fees are competitive with fees at other options exchanges. Both 
CBOE and NYSE Arca assess different fees to Floor Brokers and Market 
Makers.\25\
---------------------------------------------------------------------------

    \24\ The Chicago Board Options Exchange, Incorporated 
(``CBOE''), the International Securities Exchange, LLC (``ISE'') and 
Miami International Securities Exchange LLC (``MIAX'') assess 
different Trading Permit Fees to different market participants. See 
CBOE's Fees Schedule, ISE's Fee Schedule and MIAX's Fee Schedule.
    \25\ See CBOE's Fees Schedule. A Market-Maker Trading Permit is 
$5,500 per month, except for ETH only permits which are $1,000 per 
month. A Floor Broker Trading Permit is $9,000 per month. An 
Electronic Access Permit is $1,600 per month, except for ETH only 
which is $500 per month. There are also other permits for SPX and 
VIX trading and some waivers apply to ETH for the first permit. See 
also NYSE Arca, Inc.'s (``NYSE Arca'') Options Trading Participation 
Rights in NYSE Arca Options Fees and Charges. Floor Brokers on NYSE 
Arca are assessed a $1,000 per month options trading participant 
rights (``OTP'') fee for the first OTP and $250 for each additional 
OTP. NYSE Arca Market Makers are assessed $6,000 for the first OTP 
and then the OTP fee declines on a scale down to $1,000 for 
additional OTPs.
---------------------------------------------------------------------------

    The Exchange's proposal to increase Floor Broker Permit Fees from 
$2,300 to $3,000 and Floor Specialist and Floor Market Maker from 
$2,300 to $4,500 is equitable and not unfairly discriminatory because 
the Exchange seeks to allocate the costs in a fair and equitable manner 
by assessing fees consistent with the consumption of resources. The 
differentiation in fees as between electronic trading and floor trading 
recognizes these different business models. For example, Floor Brokers 
are registered with the Exchange for the purpose, while on the options 
floor, of accepting and executing options orders received from members 
and member organizations.\26\ This type of business model is distinct 
from that of an electronic trader. Additionally, Floor Specialists and 
Floor Market Makers have the opportunity to interact with Floor Broker 
order flow on the Exchange floor and to provide liquidity to the 
Exchange. The proposed Permit Fee structure recognizes the resources 
consumed by these market participants on the trading floor. The 
Exchange is one of only four options exchanges that offer a trading 
floor environment in addition to the electronic environment. The 
Exchange is required to staff the trading floor with regulatory 
personnel and provide a physical infrastructure in addition to other 
costs which are also incurred to operate an electronic environment. The 
floor environment offers floor market participants the choice of 
transacting certain complex transactions, i.e. a Complex Order \27\ 
with multiple legs, on the trading floor in open outcry or the 
electronic market. Certain FLEX transactions,\28\ transfers \29\ or 
accommodation transactions \30\ also lend themselves to the trading 
floor environment and the Exchange.
---------------------------------------------------------------------------

    \26\ See Exchange Rule 1060.
    \27\ A Complex Order is any order involving the simultaneous 
purchase and/or sale of two or more different options series in the 
same underlying security, priced at a net debit or credit based on 
the relative prices of the individual components, for the same 
account, for the purpose of executing a particular investment 
strategy. Furthermore, a Complex Order can also be a stock-option 
order, which is an order to buy or sell a stated number of units of 
an underlying stock or ETF coupled with the purchase or sale of 
options contract(s). See Exchange Rule 1080, Commentary .08(a)(i).
    \28\ See Phlx Rule 1079.
    \29\ See Phlx Rule 1058.
    \30\ See Phlx Rule 1059.
---------------------------------------------------------------------------

    The Exchange believes that the increased Permit Fees to Floor 
Brokers, Floor Specialists and Floor Market Makers is equitable and not 
unfairly discriminatory because the Exchange is allocating the 
additional floor cost to the market participants that benefit from the 
trading floor. Further, the Exchange believes that it is equitable and 
not unfairly discriminatory to assess Floor Specialists and Floor 
Market Makers the higher floor Permit Fees among all floor participants 
because Specialists and Market Makers may decide to stream remotely or 
conduct their business on the trading floor in open outcry. These 
market participants are offered the opportunity to also avail 
themselves of both means to access the Exchange, whereby they may 
interact with order floor in the electronic Order Book and/or interact 
with order floor in the trading crowd on the Exchange's trading floor. 
This opportunity to conduct their business on the trading floor and 
access the Exchange through both avenues comes at a cost to the 
Exchange,\31\ which costs is being allocated to Floor Specialists and 
Floor Market Makers through higher Permit Fees as compared to Floor 
Brokers.
---------------------------------------------------------------------------

    \31\ As noted herein, the Exchange staffs the trading floor with 
regulatory personnel and provides a physical infrastructure for the 
trading floor. Surveillances for the floor and electronic 
environment may also differ. For example, the Exchange monitors 
Specialist and Market Maker quoting obligations separately for 
electronic quoting versus floor quoting.
---------------------------------------------------------------------------

    The Exchange's proposal to increase Permit Fees for Remote 
Specialists and Remote Market Makers from $2,300 to $4,000 is 
reasonable because the Exchange is allocating costs differently as 
between electronic and floor trading. The differentiation in fees as 
between electronic trading and floor trading recognizes the 
distinctions in these business models. The Exchange's proposal will 
also offer Remote Specialists and Remote Market Makers the opportunity 
to reduce the Permit Fee from $4,000 to $2,300 by directing at least 
100 option contracts to the Exchange in a given month.\32\ This 
proposal allocates costs to each market participants based on their 
chosen business model.
---------------------------------------------------------------------------

    \32\ The Exchange believes that 100 options in a given month 
continues to be a reasonable level given the volume of options 
transacted on Phlx to receive the lower Permit Fee.
---------------------------------------------------------------------------

    The Exchange's proposal to increase Permit Fees for Remote 
Specialists and Remote Market Makers that conduct an electronic 
business from $2,300 to $4,000 is equitable and not unfairly 
discriminatory as all electronic market participants will uniformly be 
assessed a $4,000 a month Permit Fee and will uniformly be offered an 
opportunity to decrease that Permit Fee to $2,300 by directing at least 
100 option contracts in a given month to the Exchange. This liquidity 
benefits all market participants and in turn brings revenue to the 
Exchange through transaction fees assessed to these orders. The 
Exchange believes that assessing different rates for

[[Page 1979]]

floor market participants as compared to electronic market participants 
for Permit Fees is equitable and not unfairly discriminatory because of 
the increasing costs incurred by the Exchange in operating and 
maintaining the trading floor, which costs have increased over the 
years. The Exchange believes that it is equitable and not unfairly 
discriminatory to assess Remote Specialists and Remote Market Makers a 
lower rate than Floor Specialists and Floor Market Makers. Specialists 
and Market Makers have the ability to operate an electronic business on 
the Exchange, as compared to Floor Brokers, who have a business model 
that is naturally tied to the physical trading space. Floor Specialists 
and Floor Market Makers desiring to interact with the order flow 
generated by these Floor Brokers are offered the opportunity to 
transact business on the trading floor in addition to the electronic 
market. This opportunity comes at a cost for the Exchange which is 
being equitably allocated to the consumers of this resource.
Name Change
    The Exchange's proposal to correct the reference to The NASDAQ OMX 
Group, Inc. within the reference to the trademark PHLX[supreg] to 
recently renamed Nasdaq, Inc.\33\ is reasonable, equitable and not 
unfairly discriminatory because the amendment simply updates the name.
---------------------------------------------------------------------------

    \33\ See Securities Exchange Act Release No. 75421 (July 16, 
2015), 80 FR 42136 (July 10, 2015) (SR-BSECC-2015-001; SR-BX-2015-
030; SR-NASDAQ-2015-058; SR-Phlx-2015-46; SR-SCCP-2015-01).
---------------------------------------------------------------------------

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. In terms of inter-market 
competition, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem fee levels at a particular venue to be 
excessive, or rebate opportunities available at other venues to be more 
favorable. In such an environment, the Exchange must continually adjust 
its fees to remain competitive with other exchanges and with 
alternative trading systems that have been exempted from compliance 
with the statutory standards applicable to exchanges. Because 
competitors are free to modify their own fees in response, and because 
market participants may readily adjust their order routing practices, 
the Exchange believes that the degree to which fee changes in this 
market may impose any burden on competition is extremely limited.
    The Exchange's proposal to increase Floor Broker Permit Fees from 
$2,300 to $3,000 and Floor Specialist and Floor Market Maker from 
$2,300 to $4,500 does not impose an undue burden on intra-market 
competition because the Exchange proposes to allocate the costs to 
floor participants because they consume a greater amount of Exchange 
resources. The Exchange is required to staff the trading floor with 
regulatory personnel and provide a physical infrastructure in addition 
to other costs which are also incurred to operate an electronic 
environment. The Exchange has incurred increasing costs in operating 
and maintaining the trading floor, which costs have increased over the 
years. Specialists and Market Makers have the ability to operate an 
electronic business on the Exchange, as compared to Floor Brokers, who 
have a business model that is naturally tied to the physical trading 
space.
    Floor Specialists and Floor Market Makers desiring to interact with 
the order flow generated by these Floor Brokers are offered the 
opportunity to transact business on the trading floor in addition to 
the electronic market. This opportunity comes at a cost for the 
Exchange. The Exchange believes that the increased fee to Floor 
Specialists and Floor Market Makers does not impose an undue burden on 
intra-market competition because the Exchange is allocating the 
additional floor cost to the participants that benefit from such a dual 
structure.
    The Exchange's proposal to increase Permit Fees for Remote 
Specialists and Remote Market Makers from $2,300 to $4,000 does not 
impose an undue burden on intra-market competition because all 
electronic market participants will uniformly be assessed a $4,000 a 
month Permit Fee and will uniformly be offered an opportunity to 
decrease that fee by directing at least 100 option contracts in a given 
month. This liquidity benefits all market participants and in turn 
brings revenue to the Exchange through transaction fees assessed to 
these orders. The Exchange believes that assessing Remote Specialists 
and Remote Market Makers a lower rate than Floor Specialists and Floor 
Market Makers does not impose an undue burden on intra-market 
competition because Specialists and Market Makers have the ability to 
operate an electronic business on the Exchange, as compared to Floor 
Brokers, who have a business model that is naturally tied to the 
physical trading space. Specialists and Market Makers desiring to 
interact with the order flow generated by these Floor Brokers are 
offered the opportunity to transact business on the trading floor in 
addition to the electronic market. This opportunity comes at a cost for 
the Exchange.
    The proposed Permit Fees are competitive with fees at other options 
exchanges.\34\ If the changes proposed herein are unattractive to 
market participants, it is likely that the Exchange will lose market 
share as a result. Accordingly, the Exchange does not believe that the 
proposed changes will impair the ability of members or competing order 
execution venues to maintain their competitive standing in the 
financial markets.
---------------------------------------------------------------------------

    \34\ See note 25 above.
---------------------------------------------------------------------------

Name Change
    The Exchange's proposal to correct the reference to The NASDAQ OMX 
Group, Inc. within the reference to the trademark PHLX[supreg] to 
recently renamed Nasdaq, Inc. does not impose any undue burden on 
intra-market competition because the amendment simply updates the name.

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.\35\
---------------------------------------------------------------------------

    \35\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

    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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act.

[[Page 1980]]

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-2015-109 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-2015-109. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the 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-2015-109, and should be 
submitted on or before February 4, 2016.
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    \36\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\36\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-00569 Filed 1-13-16; 8:45 am]
 BILLING CODE 8011-01-P
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