Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Section II of the Exchange's Pricing Schedule, 10693-10698 [2016-04357]
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Federal Register / Vol. 81, No. 40 / Tuesday, March 1, 2016 / Notices
Summary of the Application
1. The Adviser will serve as the
investment adviser to the Funds
pursuant to an investment advisory
agreement with the Trust (the ‘‘Advisory
Agreement’’).2 The Adviser will provide
the Funds with continuous and
comprehensive investment management
services subject to the supervision of,
and policies established by, each Fund’s
board of trustees (‘‘Board’’). The
Advisory Agreement permits the
Adviser, subject to the approval of the
Board, to delegate to one or more subadvisers (each, a ‘‘Sub-Adviser’’ and
collectively, the ‘‘Sub-Advisers’’) the
responsibility to provide the day-to-day
portfolio investment management of
each Fund, subject to the supervision
and direction of the Adviser. The
primary responsibility for managing the
Funds will remain vested in the
Adviser. The Adviser will hire,
evaluate, allocate assets to and oversee
the Sub-Advisers, including
determining whether a Sub-Adviser
should be terminated, at all times
subject to the authority of the Board.
2. Applicants request an exemption to
permit the Adviser, subject to Board
approval, to hire certain Sub-Advisers
pursuant to Sub-Advisory Agreements
and materially amend existing SubAdvisory Agreements without obtaining
the shareholder approval required under
section 15(a) of the Act and rule 18f–2
under the Act.3 Applicants also seek an
exemption from the Disclosure
Requirements to permit a Fund to
disclose (as both a dollar amount and a
percentage of the Fund’s net assets): (a)
The aggregate fees paid to the Adviser
and any Affiliated Sub-Adviser; and (b)
the aggregate fees paid to Sub-Advisers
other than Affiliated Sub-Advisers
(collectively, ‘‘Aggregate Fee
Disclosure’’). For any Fund that
employs an Affiliated Sub-Adviser, the
Fund will provide separate disclosure of
asabaliauskas on DSK5VPTVN1PROD with NOTICES
2 Applicants
request relief with respect to any
existing and any future series of the Trust and any
other registered open-end management company or
series thereof that: (a) Is advised by LoCorr or its
successor or by a person controlling, controlled by,
or under common control with LoCorr or its
successor (each, also an ‘‘Adviser’’); (b) uses the
manager of managers structure described in the
application; and (c) complies with the terms and
conditions of the application (any such series, a
‘‘Fund’’ and collectively, the ‘‘Funds’’). For
purposes of the requested order, ‘‘successor’’ is
limited to an entity that results from a
reorganization into another jurisdiction or a change
in the type of business organization.
3 The requested relief will not extend to any SubAdviser that is an affiliated person, as defined in
section 2(a)(3) of the Act, of a Fund or the Adviser,
other than by reason of serving as a sub-adviser to
one or more of the Funds (‘‘Affiliated SubAdviser’’).
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any fees paid to the Affiliated SubAdviser.
3. Applicants agree that any order
granting the requested relief will be
subject to the terms and conditions
stated in the Application. Such terms
and conditions provide for, among other
safeguards, appropriate disclosure to
Fund shareholders and notification
about sub-advisory changes and
enhanced Board oversight to protect the
interests of the Funds’ shareholders.
4. Section 6(c) of the Act provides that
the Commission may exempt any
person, security, or transaction or any
class or classes of persons, securities, or
transactions from any provisions of the
Act, or any rule thereunder, if such
relief is necessary or appropriate in the
public interest and consistent with the
protection of investors and purposes
fairly intended by the policy and
provisions of the Act. Applicants
believe that the requested relief meets
this standard because, as further
explained in the Application, the
Advisory Agreements will remain
subject to shareholder approval, while
the role of the Sub-Advisers is
substantially similar to that of
individual portfolio managers, so that
requiring shareholder approval of SubAdvisory Agreements would impose
unnecessary delays and expenses on the
Funds. Applicants believe that the
requested relief from the Disclosure
Requirements meets this standard
because it will improve the Adviser’s
ability to negotiate fees paid to the SubAdvisers that are more advantageous for
the Funds.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–04352 Filed 2–29–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77221; File No. SR–Phlx–
2016–26]
Self-Regulatory Organizations;
NASDAQ PHLX LLC; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change To Amend
Section II of the Exchange’s Pricing
Schedule
February 24, 2016.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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10693
notice is hereby given that on February
10, 2016, NASDAQ PHLX LLC (‘‘Phlx’’
or the ‘‘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
Exchange’s Pricing Schedule (‘‘Pricing
Schedule’’) at section II, entitled
‘‘Multiply Listed Options Fees,’’ 3 to: (1)
Exclude floor volume from the Monthly
Market Maker Cap; (2) increase the
assessment for select Firm electronic
simple orders; and (3) state that Phlx
members that have executed MARS
Eligible Contracts may receive the
MARS Payment.4
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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this filing is to amend
the Exchange’s Pricing Schedule at
section II to: (1) Exclude floor volume
from the Monthly Market Maker Cap; (2)
increase the assessment for select Firm
electronic simple orders; and (3) state
3 Multiply Listed Options Fees include options
overlying equities, exchange traded funds (‘‘ETFs’’),
exchange traded notes (‘‘ETNs’’) and indexes which
are Multiply Listed.
4 Monthly Market Maker Cap and MARS are
discussed below.
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Federal Register / Vol. 81, No. 40 / Tuesday, March 1, 2016 / Notices
that Phlx members that have executed
MARS Eligible Contracts may receive
the MARS Payment.
asabaliauskas on DSK5VPTVN1PROD with NOTICES
Change 1—Multiply Listed Options
Fees—Monthly Market Maker Cap
In Change 1 the Exchange proposes to
exclude floor volume from the
calculation of the Monthly Market
Maker Cap. Offering the Monthly
Market Maker Cap as proposed, and as
discussed below, will continue to
incentivize market participants to bring
liquidity and order flow to the Exchange
for the benefit of all market participants.
Liquidity benefits all market
participants by providing more trading
opportunities, which attracts 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.
Currently, the Monthly Market Maker
Cap in section II in the Pricing Schedule
states:
• Specialists and Market Makers are
subject to a ‘‘Monthly Market Maker
Cap’’ of $500,000 for: (i) Electronic and
floor Option Transaction Charges; and
(ii) QCC Transaction Fees (as defined in
Exchange Rule 1080(o) and Floor QCC
Orders, as defined in 1064(e)). The
trading activity of separate Specialist
and Market Maker member
organizations will be aggregated in
calculating the Monthly Market Maker
Cap if there is Common Ownership
between the member organizations. All
dividend, merger, short stock interest,
reversal and conversion, jelly roll and
box spread strategy executions (as
defined in this section II) will be
excluded from the Monthly Market
Maker Cap. 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 will be assessed fees as follows:
Fee per contract
$0.05 per contract Fee for Adding
Liquidity in Penny Pilot Options.
$0.18 per contract Fee for Removing
Liquidity in Penny Pilot Options.
$0.18 per contract in Non-Penny Pilot
Options.
$0.18 per contract in a non-Complex
electronic auction, including the Quote
Exhaust auction and, for purposes of
this fee, the opening process. A
Complex electronic auction includes,
but is not limited to, the Complex Order
Live Auction (‘‘COLA’’). Transactions
which execute against an order for
which the Exchange broadcast an order
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exposure alert in an electronic auction
will be subject to this fee.
Today, the Exchange applies certain
caps 5 on Multiply Listed Option Fees
assessed to Customer,6 Professional,7
Specialist,8 Market Maker,9 BrokerDealer,10 and Firm.11 Today, Specialists
and Market Makers are subject to a
‘‘Monthly Market Maker Cap’’ of
$500,000 for: (i) electronic and floor
Option Transaction Charges; and (ii)
qualified contingent cross (‘‘QCC’’)
Transaction Fees (as defined in
Exchange Rule 1080(o) and Floor QCC
Orders,12 as defined in 1064(e)).13 The
trading activity of separate Specialist
and Market Maker member
organizations is aggregated in
5 These caps reflect different levels for different
strategies. For example, there is a $1,500 cap for
certain dividend, merger and short stock interest
strategies; and there is a $700 cap for certain
reversal and conversion, jelly roll and box spread
floor option transaction strategies. The Exchange
further separately caps each member organization
for dividend, merger, short stock interest, reversal
and conversion, jelly roll and box spread strategy
executions in Multiply Listed Options, combined in
a month when trading in their own proprietary
accounts (‘‘Monthly Strategy Cap’’) at $65,000 per
member organization, per month.
6 The term ‘‘Customer’’ applies to any transaction
that is identified by a member or member
organization for clearing in the Customer range at
The Options Clearing Corporation (‘‘OCC’’) which
is not for the account of broker or dealer or for the
account of a ‘‘Professional’’ (as that term is defined
in Rule 1000(b)(14).
7 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).
8 A ‘‘Specialist’’ is an Exchange member who is
registered as an options specialist pursuant to Rule
1020(a).
9 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.
10 The term ‘‘Broker-Dealer’’ applies to any
transaction which is not subject to any of the other
transaction fees applicable within a particular
category.
11 The term ‘‘Firm’’ applies to any transaction that
is identified by a member or member organization
for clearing in the Firm range at OCC.
12 A QCC Order is comprised of an order to buy
or sell at least 1000 contracts that is identified as
being part of a qualified contingent trade, as that
term is defined in Rule 1080(o)(3), coupled with a
contra-side order to buy or sell an equal number of
contracts. A Floor QCC Order must: (i) Be for at
least 1,000 contracts, (ii) meet the six requirements
of Rule 1080(o)(3) which are modeled on the
Qualified Contingent Trade (‘‘QCT’’) Exemption,
(iii) be executed at a price at or between the
National Best Bid and Offer (‘‘NBBO’’); and (iv) be
rejected if a Customer order is resting on the
Exchange book at the same price. See Rule 1064(e).
See also Securities Exchange Act Release No. 64688
(June 16, 2011), 76 FR 36606 (June 22, 2011) (SR–
Phlx–2011–56).
13 Certain strategy executions, discussed below,
will be excluded from the Monthly Market Maker
Cap.
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calculating the Monthly Market Maker
Cap if there is Common Ownership 14
between the member organizations. All
dividend, merger, short stock interest,
reversal and conversion, jelly roll,15 and
box spread strategy executions (as
defined in Section II in the Pricing
Schedule) are excluded from the
Monthly Market Maker Cap (together
the ‘‘excluded strategies’’).16 The
Exchange proposes to exclude floor
volume from the Monthly Market Maker
Cap.
The Exchange’s proposal to exclude
floor volume from the calculation of the
Monthly Market Maker Cap is
reasonable and proper because, despite
the change, the Exchange will, through
the Monthly Market Maker Cap,
continue to offer members an
opportunity to pay lower fees. The
trading activity of separate Specialist
and Market Maker member
organizations will continue to be
aggregated in calculating the Monthly
Market Maker Cap if there is Common
Ownership between the member
organizations. Specialists and Market
Makers will continue to be subject to the
Monthly Market Maker Cap, and once
the Monthly Market Maker Cap of
$500,000 is reached, the members to
whom the cap applies will not have to
pay for additional strategy executions
14 The term ‘‘Common Ownership’’ means
members or member organizations under 75%
common ownership or control.
15 A dividend strategy is defined as transactions
done to achieve a dividend arbitrage involving the
purchase, sale and exercise of in-the-money options
of the same class, executed the first business day
prior to the date on which the underlying stock goes
ex-dividend. A merger strategy is defined as
transactions done to achieve a merger arbitrage
involving the purchase, sale and exercise of options
of the same class and expiration date, executed the
first business day prior to the date on which
shareholders of record are required to elect their
respective form of consideration, i.e., cash or stock.
A short stock interest strategy is defined as
transactions done to achieve a short stock interest
arbitrage involving the purchase, sale and exercise
of in-the-money options of the same class. A
reversal or conversion strategies is a transaction that
employ calls and puts of the same strike price and
the underlying stock.
16 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 will be assessed separately. 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)(F)) 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. PIXL is the Exchange’s price improvement
mechanism known as Price Improvement XL or
PIXL. See Rule 1080(n).
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(sans excluded strategies) for the
remainder of that month as a result of
the fee cap.
The Exchange is making the proposal
to exclude floor volume from the
calculation of the Monthly Market
Maker Cap because the Exchange floor
incurs additional costs (e.g., personnel,
equipment, surveillance) related to a
business model that includes floorbased trading. This proposal helps the
Exchange to recover such costs while
continuing to offer the Monthly Market
Cap, which incentivizes market
participants to bring liquidity and order
flow to the Exchange.
Change 2—Multiply Listed Options
Fees—Firm Electronic Simple Orders
In Change 2 the Exchange proposes to
increase the assessment for select Firm
electronic simple (non-complex) 17
orders because the Exchange is trying to
keep up with rising expenses and this
modest fee increase will help the
Exchange to defray them.
The select symbols AAPL, BAC, EEM,
FB, FXI, IWM, QQQ, TWTR, VXX and
XLF are high volume Penny Pilot 18
Options listed on the Exchange. The
Exchange is proposing a modest
increase in the assessment from $0.34 to
$0.37, so that as proposed Note 12 will
read as follows:
‘‘12Firm electronic simple orders in AAPL,
BAC, EEM, FB, FXI, IWM, QQQ, TWTR, VXX
and XLF will be assessed $0.37.’’
asabaliauskas on DSK5VPTVN1PROD with NOTICES
The proposed increase for the Firm
electronic simple orders in the noted
options is not an outlier; rather, it is
similar to and competitive with what is
offered by other options markets.19 The
Exchange believes that the Multiply
Listed Options Fees schedule continues
17 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. A complex order can
also be a stock-option order. See Exchange Rule
1080, Commentary .07(a)(i).
18 The Penny Pilot was established in January
2007 and was last extended in 2015. See Securities
Exchange Act Release Nos. 55153 (January 23,
2007), 72 FR 4553 (January 31, 2007) (SR–Phlx–
2006–74) (notice of filing and approval order
establishing Penny Pilot); and 75286 (June 24,
2015), 80 FR 37333 (June 30, 2015) (SR–Phlx–2015–
54) (notice of filing and immediate effectiveness
extending the Penny Pilot through June 30, 2016).
Penny Pilot Options listed on the Exchange can be
found at https://www.nasdaqtrader.com/
Micro.aspx?id=phlx.
19 See, e.g., the pricing schedule of NYSE AMEX
OPTIONS (AMEX) at https://www.nyse.com/
publicdocs/nyse/markets/amex-options/NYSE_
Amex_Options_Fee_Schedule.pdf, and of MIAX
OPTIONS (MIAX) at https://www.miaxoptions.com/
content/fees. See also, e.g., the pricing schedule of
NASDAQ PHLX LLC (‘‘Phlx’’) and NASDAQ
Options Market (‘‘NOM’’).
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as constructed to be competitive and
encourage market participants to bring
liquidity to the Exchange.
Change 3—Other Transaction Fees—
MARS Payment
The Exchange proposes to state that
Phlx members that have executed the
required MARS Eligible Contracts may
receive the Market Access and Routing
Subsidy (‘‘MARS’’) Payment on all their
MARS Eligible Contracts. The Exchange
believes that, as discussed below,
expanding who is eligible to receive
MARS Payment will incentivize market
participants to bring liquidity and order
flow to the Exchange for the benefit of
all market participants. Liquidity
benefits all market participants by
providing more trading opportunities.
Currently, section IV E. in the Pricing
Schedule states:
MARS Payment
Phlx members that have System Eligibility
and have executed the Eligible Contracts in
a month may receive the MARS Payment of
$0.10 per contract. This MARS Payment will
be paid only on executed Firm orders routed
to Phlx through a participating Phlx
member’s System. No payment will be made
with respect to orders that are routed to Phlx,
but not executed.
10695
proposes to expand the participant
types besides Firm (BD, JBO,
Professional) that are eligible for MARS
Payment.21
The Exchange proposes to indicate
what qualifying volume will be eligible
for MARS Payment (no longer only
Firm) and to state that Phlx members
that have executed the prerequisite
MARS Eligible Contracts may receive
the MARS Payment of $0.10 per
contract. For the purpose of qualifying
for the MARS Payment, Eligible
Contracts include the following: Firm,
Broker-Dealer, Joint Back Office or
‘‘JBO’’ or Professional equity option
orders that are electronically delivered
and executed.22 A MARS Payment will
be made to Phlx members that have
System Eligibility and have routed at
least 30,000 Eligible Contracts daily in
a month, which were executed on Phlx.
As proposed Section IV E. in the
Pricing Schedule will read as follows:
MARS Payment
Phlx members that have System Eligibility
and have executed the Eligible Contracts in
a month may receive the MARS Payment of
$0.10 per contract for all Eligible Contracts
routed to Phlx through a participating Phlx
member’s System. No payment will be made
with respect to orders that are routed to Phlx,
but not executed.
Currently, a MARS Payment will be
paid only on executed Firm orders
routed to Phlx through a participating
Phlx member’s System.
Today, to qualify for MARS, a Phlx
member’s routing system (‘‘System’’)
would be required to: (1) enable the
electronic routing of orders to all of the
U.S. options exchanges, including Phlx;
(2) provide current consolidated market
data from the U.S. options exchanges;
and (3) be capable of interfacing with
Phlx’s application program interface
(‘‘API’’) to access current Phlx match
engine functionality. Further, the
member’s System would also need to
cause Phlx to be the one of the top three
default destination exchanges for
individually executed marketable orders
if Phlx is at the NBBO, regardless of size
or time, but allow any user to manually
override Phlx as a default destination on
an order-by-order basis.20 Today, MARS
Payment is only on Firm orders routed
to Phlx through a participating Phlx
member’s System. The Exchange
2. Statutory Basis
The Exchange believes that its
proposal to amend its Pricing Schedule
is consistent with section 6(b) of the
Act 23 in general, and furthers the
objectives of section 6(b)(4) and (b)(5) of
the Act 24 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 Phlx 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
20 Notwithstanding the above, complex orders
would not be required to enable the electronic
routing of orders to all of the U.S. options
exchanges or provide current consolidated market
data from the U.S. options exchanges. Any Phlx
member would be permitted to avail itself of this
arrangement, provided that its order routing
functionality incorporates the features described
above and satisfies Phlx that it appears to be robust
and reliable. The member remains solely
responsible for implementing and operating its
system. Section IV E. in the Pricing Schedule.
21 To be eligible, as discussed, Eligible Contracts
must be routed through a participating Phlx
member’s System.
22 The Exchange is removing the word ‘‘may’’ to
tighten up the language regarding what Eligible
Contracts qualify for MARS Payment. Eligible
Contracts do not include floor-based orders,
qualified contingent cross or ‘‘QCC’’ orders, price
improvement or ‘‘PIXL’’ orders, Mini Option orders
or Singly Listed Orders.
23 15 U.S.C. 78f(b).
24 15 U.S.C. 78f(b)(4), (5).
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The Exchange believes that the fees
and rebates in its Pricing Schedule are
structured to attract liquidity. Despite
the proposed changes, Phlx members
and the Phlx market will continue to be
encouraged to transact greater liquidity
on the Exchange.
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Federal Register / Vol. 81, No. 40 / Tuesday, March 1, 2016 / Notices
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. In Regulation NMS, while
adopting a series of steps to improve the
current market model, the Commission
highlighted the importance of market
forces in determining prices and SRO
revenues and, also, recognized that
current regulation of the market system
‘‘has been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 25
Likewise, in NetCoalition v. Securities
and Exchange Commission 26
(‘‘NetCoalition’’) the D.C. 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. 27 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.’’ 28
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 percentages for granted’
because ‘no exchange possesses a
monopoly, regulatory or otherwise, in
the execution of order flow from broker
dealers’. . . .’’ 29 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.
Change 1—Multiply Listed Options
Fees—Monthly Market Maker Cap
asabaliauskas on DSK5VPTVN1PROD with NOTICES
In Change 1 the Exchange proposes to
exclude floor volume from the
calculation of the Monthly Market
Maker Cap that applies to Specialists
and Market Makers when calculating
the Monthly Market Maker Cap.
The Exchange believes that the
proposed change is reasonable,
equitable and not unfairly
25 Securities Exchange Act Release No. 51808 at
37499 (June 9, 2005) (‘‘Regulation NMS Adopting
Release’’).
26 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir.
2010).
27 See id. at 534–535.
28 See id. at 537.
29 Id. at 539 (quoting Securities Exchange Release
No. 59039 (December 2, 2008), 73 FR 74770
(December 9, 2008) (SR–NYSEArca–2006–21) at 73
FR at 74782–74783).
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discriminatory for the following
reasons.
The Exchange’s proposal to exclude
floor volume from the calculation of the
Monthly Market Maker Cap is
reasonable because, despite the change,
the Exchange will continue to offer
members an opportunity to pay lower
fees. The trading activity of separate
Specialist and Market Maker member
organizations will continue to be
aggregated in calculating the Monthly
Market Maker Cap if there is Common
Ownership between the member
organizations. Specialists and Market
Makers 30 will continue to be subject to
the Monthly Market Maker Cap, and
once the Monthly Market Maker Cap of
$500,000 is reached, the members to
whom the cap applies will not have to
pay for additional strategy executions
for the remainder of that month as a
result of the fee cap.
Excluding floor Options Transaction
Charges from the Monthly Market Maker
Cap is reasonable, equitable and not
unfairly discriminatory because
electronic Options Transaction Charges
would continue to be capped as part of
the Monthly Market Maker Cap, which
applies only to Specialists and Market
Makers. The Exchange would include
floor option transaction charges related
to reversal and conversion, jelly roll and
box spread strategies in the Monthly
Strategy Cap for Professionals, and
Broker Dealers, when such members are
trading in their own proprietary
accounts, because these market
participants are not subject to the
Monthly Firm Fee Cap or other similar
cap. While Specialists and Market
Makers are subject to a Monthly Market
Maker Cap on electronic options
transaction charges, reversal and
conversion, jelly roll and box spread
transactions, which are included in the
Monthly Strategy Cap, are excluded
from the Monthly Market Maker Cap.
The Exchange believes also that its
proposal to exclude floor transactions
from the Monthly Market Maker Cap is
reasonable because the Exchange floor
incurs additional costs (e.g., personnel,
equipment, surveillance) related to a
30 Specialists and Market Makers on the Exchange
are valuable market participants that provide
liquidity in the marketplace. They also have
obligations to the market and regulatory
requirements, which normally do not apply to other
market participants. These obligations include: to
make continuous markets, engage in a course of
dealings reasonably calculated to contribute to the
maintenance of a fair and orderly market, and not
make bids or offers or enter into transactions that
are inconsistent with a course of dealings. See Rule
1014 titled ‘‘Obligations and Restrictions
Applicable to Specialists and Registered Options
Traders.’’
PO 00000
Frm 00132
Fmt 4703
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business model that includes floorbased trading.
For the reasons described above, the
Exchange believes that continuing to
offer the Monthly Market Maker Cap as
proposed will continue to incentivize
market participants to bring liquidity
and order flow to the Exchange for the
benefit of all market participants.
Liquidity benefits all market
participants by providing more trading
opportunities, which attracts 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. Specialists and Market
Makers have obligations to make
continuous markets, engage in a course
of dealings reasonably calculated to
contribute to the maintenance of a fair
and orderly market, and not make bids
or offers or enter into transactions that
are inconsistent with a course of
dealings. Moreover, the proposed
change to the fee structure and rebate
structure will be applied uniformly to
all.
Change 2—Multiply Listed Options
Fees—Firm Electronic Simple Orders
In Change 2 the Exchange proposes to
increase the assessment from $0.34 to
$0.37 per contract for select Firm
electronic simple orders in AAPL, BAC,
EEM, FB, FXI, IWM, QQQ, TWTR, VXX,
and XLF. The assessment for the noted
simple orders is in the Multiply Listed
Options Fees schedule for options
overlying equities, ETFs, ETNs, and
certain indexes.
The Exchange believes that the
proposed change for the Firm electronic
simple orders in the noted options,
which are high volume Penny Pilot
Options listed on the Exchange,31 is
reasonable. This is because the
proposed change is very modest and is
not an outlier; rather, it is similar to and
competitive with what is offered by
other options markets.32 The the [sic]
Multiply Listed Options Fees schedule
continues as constructed to be
competitive and encourage market
participants to bring liquidity to the
Exchange. The Exchange believes that
despite the proposed increase, which
will help the Exchange to recover costs,
Firms will continue to be incentivized
31 The high volume in the noted options is
present across other options exchanges.
32 See, e.g., the pricing schedule of NYSE AMEX
OPTIONS (AMEX) at https://www.nyse.com/
publicdocs/nyse/markets/amex-options/NYSE_
Amex_Options_Fee_Schedule.pdf, and of MIAX
OPTIONS (MIAX) at https://www.miaxoptions.com/
content/fees. See also, e.g., the pricing schedule of
NASDAQ PHLX LLC (‘‘Phlx’’) and NASDAQ
Options Market (‘‘NOM’’).
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Federal Register / Vol. 81, No. 40 / Tuesday, March 1, 2016 / Notices
to transact electronic simple orders in
AAPL, BAC, EEM, FB, FXI, IWM, QQQ,
TWTR, VXX, and XLF on the Exchange.
The Exchange believes that the
modest change from $0.34 to $0.37 in
Note 12 is equitable and not unfairly
discriminatory because the assessment
is modest and will be applied uniformly
to all Firms that send in electronic
simple orders in AAPL, BAC, EEM, FB,
FXI, IWM, QQQ, TWTR, VXX, and
XLF.33
Change 3—Other Transaction Fees—
MARS Payment
In Change 3 the Exchange proposes to
state that Phlx members that have
executed MARS Eligible Contracts may
receive the MARS Payment.
The Exchange believes that the
proposed change is reasonable,
equitable and not unfairly
discriminatory.
Where currently a MARS Payment
will be paid only on executed Firm
orders, the proposed change would
allow all qualifying MARS volume to
receive a MARS Payment. With the
proposed change, all Phlx members that
have executed MARS Eligible Contracts
may receive the MARS Payment of
$0.10 per contract. The Exchange
believes that this is reasonable because
it incentivizes more Phlx members to
rout Eligible Contracts for execution on
the Exchange.
The Exchange believes that the
proposed change is equitable and not
unfairly discriminatory because the
increased ability to receive MARS
Payment will be applied uniformly to
all. Thus, a MARS Payment will be
made to Phlx members that have System
Eligibility and have routed at least
30,000 Eligible Contracts daily in a
month, which were executed on Phlx.34
The Exchange desires to continue to
incentivize members and member
organizations, through the Exchange’s
rebate and fee structure, to select Phlx
as a venue for bringing liquidity and
trading by offering competitive pricing.
Such competitive, differentiated pricing
exists today on other options exchanges.
asabaliauskas on DSK5VPTVN1PROD with NOTICES
33 The
Exchange notes that, as discussed, Note 12
continues to apply only to certain Firm orders. Note
12 does not apply to other fee liable members (e.g.,
Broker Dealer, Specialist and Market Maker,
Professional, Customer), and as such the proposed
change does not effectively change the fee
relationship between Firms and such members.
34 For the purpose of qualifying for the MARS
Payment, Eligible Contracts include the following:
Firm, Broker-Dealer, Joint Back Office or ‘‘JBO’’ or
Professional equity option orders that are
electronically delivered and executed. Eligible
Contracts must be routed through a participating
Phlx member’s System and do not include floorbased orders, qualified contingent cross or ‘‘QCC’’
orders, price improvement or ‘‘PIXL’’ orders, Mini
Option orders or Singly Listed Orders.
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20:18 Feb 29, 2016
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The Exchange’s goal is creating and
increasing incentives to attract orders to
the Exchange that will, in turn, benefit
all market participants through
increased liquidity at the Exchange.
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. The
Exchange believes that its proposal to
exclude floor volume from the Monthly
Market Maker Cap, increase the
assessment for select Firm electronic
simple orders, and state that all Phlx
members that have executed MARS
Eligible Contracts may receive the
MARS Payment does not impose a
burden on competition. The Exchange’s
proposal will continue to encourage
eligible market participants to transact
orders on the Exchange in order to
obtain the Monthly Market Maker Cap
and MARS Payments.
The Exchange operates in a highly
competitive market, comprised of at
least twelve options exchanges, in
which market participants can easily
and readily direct order flow to
competing venues if they deem fee
levels at a particular venue to be
excessive or rebates to be inadequate.
Accordingly, the fees that are assessed
and the rebates paid by the Exchange
described in the above proposal are
influenced by these robust market forces
and therefore must remain competitive
with fees charged and rebates paid by
other venues and therefore must
continue to be reasonable and equitably
allocated to those members that opt to
direct orders to the Exchange rather
than competing venues.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to section
19(b)(3)(A)(ii) of the Act.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
35 15
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
Frm 00133
Fmt 4703
Sfmt 4703
10697
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.
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–2016–26 on the subject line.
Paper comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–Phlx–2016–26. 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–
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10698
Federal Register / Vol. 81, No. 40 / Tuesday, March 1, 2016 / Notices
2016–26, and should be submitted on or
before March 22, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.36
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–04357 Filed 2–29–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Dated: February 24, 2016.
Robert W. Errett,
Deputy Secretary.
Submission for OMB Review;
Comment Request
[FR Doc. 2016–04441 Filed 2–29–16; 8:45 am]
Upon Written Request Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE., Washington, DC
20549–2736.
asabaliauskas on DSK5VPTVN1PROD with NOTICES
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget
(‘‘OMB’’) this request for an extension of
the previously approved collection of
information discussed below.
Form S–1 (17 CFR 239.11) is the form
used by issuers to register the offer and
sale of securities under the Securities
Act of 1933 (15 U.S.C. 77a et seq.) when
no other form is authorized or
prescribed. The information collected is
intended to ensure that the information
required to be filed by the Commission
permits verification of compliance with
securities law requirements and assures
the public availability of such
information. Form S–1 takes
approximately 667 hours per response
and is filed by approximately 901
respondents. We estimate that 25% of
the 667 hours per response (166.75
hours) is prepared by the registrant for
a total annual reporting burden of
150,242 hours (166.75 hours per
response × 901 responses).
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid OMB
control number.
The public may view the background
documentation for this information
collection at the following Web site,
www.reginfo.gov. Comments should be
directed to: (i) Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Office of Management and
CFR 200.30–3(a)(12).
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20:18 Feb 29, 2016
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BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Proposed Collection; Comment
Request
Extension:
Form S–1, SEC File No. 270–058, OMB
Control No. 3235–0065.
36 17
Budget, Room 10102, New Executive
Office Building, Washington, DC 20503,
or by sending an email to: Shagufta_
Ahmed@omb.eop.gov; and (ii) Pamela
Dyson, Director/Chief Information
Officer, Securities and Exchange
Commission, c/o Remi Pavlik-Simon,
100 F Street NE., Washington, DC 20549
or send an email to: PRA_Mailbox@
sec.gov. Comments must be submitted to
OMB within 30 days of this notice.
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE., Washington, DC
20549–2736.
Extension: Rule 19d–3, SEC File No. 270–
245, OMB Control No. 3235–0204.
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.) (‘‘PRA’’), the
Securities and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the existing collection of information
provided for in Rule 19d–3 (17 CFR
240.19d–3) under the Securities
Exchange Act of 1934 (17 U.S.C. 78a et
seq.) (‘‘Exchange Act’’). The
Commission plans to submit this
existing collection of information to the
Office of Management and Budget
(‘‘OMB’’) for extension and approval.
Rule 19d–3 prescribes the form and
content of applications to the
Commission by persons seeking
Commission review of final disciplinary
actions against them taken by selfregulatory organizations (‘‘SROs’’) for
which the Commission is the
appropriate regulatory agency. The
Commission uses the information
provided in the application filed
pursuant to Rule 19d–3 to review final
actions taken by SROs including: (1)
Final disciplinary sanctions; (2) denial
or conditioning of membership,
participation or association; and (3)
prohibitions or limitations of access to
services offered by a SRO or member
thereof.
It is estimated that approximately six
respondents will utilize this application
procedure annually, with a total burden
of approximately 108 hours, for all
respondents to complete all
PO 00000
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Fmt 4703
Sfmt 4703
submissions. This figure is based upon
past submissions. It is estimated that
each respondent will submit
approximately one response. The staff
estimates that the average number of
hours necessary to comply with the
requirements of Rule 19d–3 will be
approximately eighteen hours. The
average cost per hour, to complete each
submission, is approximately $101.
Therefore, it is estimated the internal
labor cost of compliance for all
respondents is approximately $10,908 (6
submissions × 18 hours per response ×
$101 per hour).
Written comments are invited on: (a)
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information shall have practical utility;
(b) the accuracy of the Commission’s
estimates of the burden of the proposed
collection of information; (c) ways to
enhance the quality, utility and clarity
of the information collected; and (d)
ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted in
writing within 60 days of this
publication.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
Please direct your written comments
to: Pamela C. Dyson, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Remi PavlikSimon, 100 F Street NE., Washington,
DC 20549 or send an email to: PRA_
Mailbox@sec.gov.
Dated: February 24, 2016.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–04349 Filed 2–29–16; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #14639 and #14640]
New Jersey Disaster #NJ–00045
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
This is a notice of an
Administrative declaration of a disaster
for the State of NEW JERSEY dated 02/
22/2016.
Incident: Severe Winter Snow Storm.
SUMMARY:
E:\FR\FM\01MRN1.SGM
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]]>Agencies
[Federal Register Volume 81, Number 40 (Tuesday, March 1, 2016)]
[Notices]
[Pages 10693-10698]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-04357]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77221; File No. SR-Phlx-2016-26]
Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Section II
of the Exchange's Pricing Schedule
February 24, 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 February 10, 2016, NASDAQ PHLX LLC (``Phlx'' or the ``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 Exchange's Pricing Schedule
(``Pricing Schedule'') at section II, entitled ``Multiply Listed
Options Fees,'' \3\ to: (1) Exclude floor volume from the Monthly
Market Maker Cap; (2) increase the assessment for select Firm
electronic simple orders; and (3) state that Phlx members that have
executed MARS Eligible Contracts may receive the MARS Payment.\4\
---------------------------------------------------------------------------
\3\ Multiply Listed Options Fees include options overlying
equities, exchange traded funds (``ETFs''), exchange traded notes
(``ETNs'') and indexes which are Multiply Listed.
\4\ Monthly Market Maker Cap and MARS are discussed below.
---------------------------------------------------------------------------
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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this filing is to amend the Exchange's Pricing
Schedule at section II to: (1) Exclude floor volume from the Monthly
Market Maker Cap; (2) increase the assessment for select Firm
electronic simple orders; and (3) state
[[Page 10694]]
that Phlx members that have executed MARS Eligible Contracts may
receive the MARS Payment.
Change 1--Multiply Listed Options Fees--Monthly Market Maker Cap
In Change 1 the Exchange proposes to exclude floor volume from the
calculation of the Monthly Market Maker Cap. Offering the Monthly
Market Maker Cap as proposed, and as discussed below, will continue to
incentivize market participants to bring liquidity and order flow to
the Exchange for the benefit of all market participants. Liquidity
benefits all market participants by providing more trading
opportunities, which attracts 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.
Currently, the Monthly Market Maker Cap in section II in the
Pricing Schedule states:
Specialists and Market Makers are subject to a ``Monthly
Market Maker Cap'' of $500,000 for: (i) Electronic and floor Option
Transaction Charges; and (ii) QCC Transaction Fees (as defined in
Exchange Rule 1080(o) and Floor QCC Orders, as defined in 1064(e)). The
trading activity of separate Specialist and Market Maker member
organizations will be aggregated in calculating the Monthly Market
Maker Cap if there is Common Ownership between the member
organizations. All dividend, merger, short stock interest, reversal and
conversion, jelly roll and box spread strategy executions (as defined
in this section II) will be excluded from the Monthly Market Maker Cap.
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 will be assessed fees as follows:
Fee per contract
$0.05 per contract Fee for Adding Liquidity in Penny Pilot Options.
$0.18 per contract Fee for Removing Liquidity in Penny Pilot
Options.
$0.18 per contract in Non-Penny Pilot Options.
$0.18 per contract in a non-Complex electronic auction, including
the Quote Exhaust auction and, for purposes of this fee, the opening
process. A Complex electronic auction includes, but is not limited to,
the Complex Order Live Auction (``COLA''). Transactions which execute
against an order for which the Exchange broadcast an order exposure
alert in an electronic auction will be subject to this fee.
Today, the Exchange applies certain caps \5\ on Multiply Listed
Option Fees assessed to Customer,\6\ Professional,\7\ Specialist,\8\
Market Maker,\9\ Broker-Dealer,\10\ and Firm.\11\ Today, Specialists
and Market Makers are subject to a ``Monthly Market Maker Cap'' of
$500,000 for: (i) electronic and floor Option Transaction Charges; and
(ii) qualified contingent cross (``QCC'') Transaction Fees (as defined
in Exchange Rule 1080(o) and Floor QCC Orders,\12\ as defined in
1064(e)).\13\ 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 \14\ between the member
organizations. All dividend, merger, short stock interest, reversal and
conversion, jelly roll,\15\ and box spread strategy executions (as
defined in Section II in the Pricing Schedule) are excluded from the
Monthly Market Maker Cap (together the ``excluded strategies'').\16\
The Exchange proposes to exclude floor volume from the Monthly Market
Maker Cap.
---------------------------------------------------------------------------
\5\ These caps reflect different levels for different
strategies. For example, there is a $1,500 cap for certain dividend,
merger and short stock interest strategies; and there is a $700 cap
for certain reversal and conversion, jelly roll and box spread floor
option transaction strategies. The Exchange further separately caps
each member organization for dividend, merger, short stock interest,
reversal and conversion, jelly roll and box spread strategy
executions in Multiply Listed Options, combined in a month when
trading in their own proprietary accounts (``Monthly Strategy Cap'')
at $65,000 per member organization, per month.
\6\ The term ``Customer'' applies to any transaction that is
identified by a member or member organization for clearing in the
Customer range at The Options Clearing Corporation (``OCC'') which
is not for the account of broker or dealer or for the account of a
``Professional'' (as that term is defined in Rule 1000(b)(14).
\7\ 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).
\8\ A ``Specialist'' is an Exchange member who is registered as
an options specialist pursuant to Rule 1020(a).
\9\ 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.
\10\ The term ``Broker-Dealer'' applies to any transaction which
is not subject to any of the other transaction fees applicable
within a particular category.
\11\ The term ``Firm'' applies to any transaction that is
identified by a member or member organization for clearing in the
Firm range at OCC.
\12\ A QCC Order is comprised of an order to buy or sell at
least 1000 contracts that is identified as being part of a qualified
contingent trade, as that term is defined in Rule 1080(o)(3),
coupled with a contra-side order to buy or sell an equal number of
contracts. A Floor QCC Order must: (i) Be for at least 1,000
contracts, (ii) meet the six requirements of Rule 1080(o)(3) which
are modeled on the Qualified Contingent Trade (``QCT'') Exemption,
(iii) be executed at a price at or between the National Best Bid and
Offer (``NBBO''); and (iv) be rejected if a Customer order is
resting on the Exchange book at the same price. See Rule 1064(e).
See also Securities Exchange Act Release No. 64688 (June 16, 2011),
76 FR 36606 (June 22, 2011) (SR-Phlx-2011-56).
\13\ Certain strategy executions, discussed below, will be
excluded from the Monthly Market Maker Cap.
\14\ The term ``Common Ownership'' means members or member
organizations under 75% common ownership or control.
\15\ A dividend strategy is defined as transactions done to
achieve a dividend arbitrage involving the purchase, sale and
exercise of in-the-money options of the same class, executed the
first business day prior to the date on which the underlying stock
goes ex-dividend. A merger strategy is defined as transactions done
to achieve a merger arbitrage involving the purchase, sale and
exercise of options of the same class and expiration date, executed
the first business day prior to the date on which shareholders of
record are required to elect their respective form of consideration,
i.e., cash or stock. A short stock interest strategy is defined as
transactions done to achieve a short stock interest arbitrage
involving the purchase, sale and exercise of in-the-money options of
the same class. A reversal or conversion strategies is a transaction
that employ calls and puts of the same strike price and the
underlying stock.
\16\ 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 will be assessed separately. 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)(F)) 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. PIXL is the Exchange's
price improvement mechanism known as Price Improvement XL or PIXL.
See Rule 1080(n).
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The Exchange's proposal to exclude floor volume from the
calculation of the Monthly Market Maker Cap is reasonable and proper
because, despite the change, the Exchange will, through the Monthly
Market Maker Cap, continue to offer members an opportunity to pay lower
fees. The trading activity of separate Specialist and Market Maker
member organizations will continue to be aggregated in calculating the
Monthly Market Maker Cap if there is Common Ownership between the
member organizations. Specialists and Market Makers will continue to be
subject to the Monthly Market Maker Cap, and once the Monthly Market
Maker Cap of $500,000 is reached, the members to whom the cap applies
will not have to pay for additional strategy executions
[[Page 10695]]
(sans excluded strategies) for the remainder of that month as a result
of the fee cap.
The Exchange is making the proposal to exclude floor volume from
the calculation of the Monthly Market Maker Cap because the Exchange
floor incurs additional costs (e.g., personnel, equipment,
surveillance) related to a business model that includes floor-based
trading. This proposal helps the Exchange to recover such costs while
continuing to offer the Monthly Market Cap, which incentivizes market
participants to bring liquidity and order flow to the Exchange.
Change 2--Multiply Listed Options Fees--Firm Electronic Simple Orders
In Change 2 the Exchange proposes to increase the assessment for
select Firm electronic simple (non-complex) \17\ orders because the
Exchange is trying to keep up with rising expenses and this modest fee
increase will help the Exchange to defray them.
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\17\ 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. A complex order can also be a stock-option order. See
Exchange Rule 1080, Commentary .07(a)(i).
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The select symbols AAPL, BAC, EEM, FB, FXI, IWM, QQQ, TWTR, VXX and
XLF are high volume Penny Pilot \18\ Options listed on the Exchange.
The Exchange is proposing a modest increase in the assessment from
$0.34 to $0.37, so that as proposed Note 12 will read as follows:
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\18\ The Penny Pilot was established in January 2007 and was
last extended in 2015. See Securities Exchange Act Release Nos.
55153 (January 23, 2007), 72 FR 4553 (January 31, 2007) (SR-Phlx-
2006-74) (notice of filing and approval order establishing Penny
Pilot); and 75286 (June 24, 2015), 80 FR 37333 (June 30, 2015) (SR-
Phlx-2015-54) (notice of filing and immediate effectiveness
extending the Penny Pilot through June 30, 2016). Penny Pilot
Options listed on the Exchange can be found at https://www.nasdaqtrader.com/Micro.aspx?id=phlx.
``\12\Firm electronic simple orders in AAPL, BAC, EEM, FB, FXI,
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IWM, QQQ, TWTR, VXX and XLF will be assessed $0.37.''
The proposed increase for the Firm electronic simple orders in the
noted options is not an outlier; rather, it is similar to and
competitive with what is offered by other options markets.\19\ The
Exchange believes that the Multiply Listed Options Fees schedule
continues as constructed to be competitive and encourage market
participants to bring liquidity to the Exchange.
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\19\ See, e.g., the pricing schedule of NYSE AMEX OPTIONS (AMEX)
at https://www.nyse.com/publicdocs/nyse/markets/amex-options/NYSE_Amex_Options_Fee_Schedule.pdf, and of MIAX OPTIONS (MIAX) at
https://www.miaxoptions.com/content/fees. See also, e.g., the pricing
schedule of NASDAQ PHLX LLC (``Phlx'') and NASDAQ Options Market
(``NOM'').
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Change 3--Other Transaction Fees--MARS Payment
The Exchange proposes to state that Phlx members that have executed
the required MARS Eligible Contracts may receive the Market Access and
Routing Subsidy (``MARS'') Payment on all their MARS Eligible
Contracts. The Exchange believes that, as discussed below, expanding
who is eligible to receive MARS Payment will incentivize market
participants to bring liquidity and order flow to the Exchange for the
benefit of all market participants. Liquidity benefits all market
participants by providing more trading opportunities.
Currently, section IV E. in the Pricing Schedule states:
MARS Payment
Phlx members that have System Eligibility and have executed the
Eligible Contracts in a month may receive the MARS Payment of $0.10
per contract. This MARS Payment will be paid only on executed Firm
orders routed to Phlx through a participating Phlx member's System.
No payment will be made with respect to orders that are routed to
Phlx, but not executed.
Currently, a MARS Payment will be paid only on executed Firm orders
routed to Phlx through a participating Phlx member's System.
Today, to qualify for MARS, a Phlx member's routing system
(``System'') would be required to: (1) enable the electronic routing of
orders to all of the U.S. options exchanges, including Phlx; (2)
provide current consolidated market data from the U.S. options
exchanges; and (3) be capable of interfacing with Phlx's application
program interface (``API'') to access current Phlx match engine
functionality. Further, the member's System would also need to cause
Phlx to be the one of the top three default destination exchanges for
individually executed marketable orders if Phlx is at the NBBO,
regardless of size or time, but allow any user to manually override
Phlx as a default destination on an order-by-order basis.\20\ Today,
MARS Payment is only on Firm orders routed to Phlx through a
participating Phlx member's System. The Exchange proposes to expand the
participant types besides Firm (BD, JBO, Professional) that are
eligible for MARS Payment.\21\
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\20\ Notwithstanding the above, complex orders would not be
required to enable the electronic routing of orders to all of the
U.S. options exchanges or provide current consolidated market data
from the U.S. options exchanges. Any Phlx member would be permitted
to avail itself of this arrangement, provided that its order routing
functionality incorporates the features described above and
satisfies Phlx that it appears to be robust and reliable. The member
remains solely responsible for implementing and operating its
system. Section IV E. in the Pricing Schedule.
\21\ To be eligible, as discussed, Eligible Contracts must be
routed through a participating Phlx member's System.
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The Exchange proposes to indicate what qualifying volume will be
eligible for MARS Payment (no longer only Firm) and to state that Phlx
members that have executed the prerequisite MARS Eligible Contracts may
receive the MARS Payment of $0.10 per contract. For the purpose of
qualifying for the MARS Payment, Eligible Contracts include the
following: Firm, Broker-Dealer, Joint Back Office or ``JBO'' or
Professional equity option orders that are electronically delivered and
executed.\22\ A MARS Payment will be made to Phlx members that have
System Eligibility and have routed at least 30,000 Eligible Contracts
daily in a month, which were executed on Phlx.
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\22\ The Exchange is removing the word ``may'' to tighten up the
language regarding what Eligible Contracts qualify for MARS Payment.
Eligible Contracts do not include floor-based orders, qualified
contingent cross or ``QCC'' orders, price improvement or ``PIXL''
orders, Mini Option orders or Singly Listed Orders.
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As proposed Section IV E. in the Pricing Schedule will read as
follows:
MARS Payment
Phlx members that have System Eligibility and have executed the
Eligible Contracts in a month may receive the MARS Payment of $0.10
per contract for all Eligible Contracts routed to Phlx through a
participating Phlx member's System. No payment will be made with
respect to orders that are routed to Phlx, but not executed.
The Exchange believes that the fees and rebates in its Pricing
Schedule are structured to attract liquidity. Despite the proposed
changes, Phlx members and the Phlx market will continue to be
encouraged to transact greater liquidity on the Exchange.
2. Statutory Basis
The Exchange believes that its proposal to amend its Pricing
Schedule is consistent with section 6(b) of the Act \23\ in general,
and furthers the objectives of section 6(b)(4) and (b)(5) of the Act
\24\ 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 Phlx operates or
controls, and is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\23\ 15 U.S.C. 78f(b).
\24\ 15 U.S.C. 78f(b)(4), (5).
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The Commission and the courts have repeatedly expressed their
preference
[[Page 10696]]
for competition over regulatory intervention in determining prices,
products, and services in the securities markets. In Regulation NMS,
while adopting a series of steps to improve the current market model,
the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \25\ Likewise, in
NetCoalition v. Securities and Exchange Commission \26\
(``NetCoalition'') the D.C. 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. \27\ 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.'' \28\
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\25\ Securities Exchange Act Release No. 51808 at 37499 (June 9,
2005) (``Regulation NMS Adopting Release'').
\26\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\27\ See id. at 534-535.
\28\ See id. at 537.
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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 percentages for granted' because `no exchange
possesses a monopoly, regulatory or otherwise, in the execution of
order flow from broker dealers'. . . .'' \29\ 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.
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\29\ Id. at 539 (quoting Securities Exchange Release No. 59039
(December 2, 2008), 73 FR 74770 (December 9, 2008) (SR-NYSEArca-
2006-21) at 73 FR at 74782-74783).
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Change 1--Multiply Listed Options Fees--Monthly Market Maker Cap
In Change 1 the Exchange proposes to exclude floor volume from the
calculation of the Monthly Market Maker Cap that applies to Specialists
and Market Makers when calculating the Monthly Market Maker Cap.
The Exchange believes that the proposed change is reasonable,
equitable and not unfairly discriminatory for the following reasons.
The Exchange's proposal to exclude floor volume from the
calculation of the Monthly Market Maker Cap is reasonable because,
despite the change, the Exchange will continue to offer members an
opportunity to pay lower fees. The trading activity of separate
Specialist and Market Maker member organizations will continue to be
aggregated in calculating the Monthly Market Maker Cap if there is
Common Ownership between the member organizations. Specialists and
Market Makers \30\ will continue to be subject to the Monthly Market
Maker Cap, and once the Monthly Market Maker Cap of $500,000 is
reached, the members to whom the cap applies will not have to pay for
additional strategy executions for the remainder of that month as a
result of the fee cap.
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\30\ Specialists and Market Makers on the Exchange are valuable
market participants that provide liquidity in the marketplace. They
also have obligations to the market and regulatory requirements,
which normally do not apply to other market participants. These
obligations include: to make continuous markets, engage in a course
of dealings reasonably calculated to contribute to the maintenance
of a fair and orderly market, and not make bids or offers or enter
into transactions that are inconsistent with a course of dealings.
See Rule 1014 titled ``Obligations and Restrictions Applicable to
Specialists and Registered Options Traders.''
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Excluding floor Options Transaction Charges from the Monthly Market
Maker Cap is reasonable, equitable and not unfairly discriminatory
because electronic Options Transaction Charges would continue to be
capped as part of the Monthly Market Maker Cap, which applies only to
Specialists and Market Makers. The Exchange would include floor option
transaction charges related to reversal and conversion, jelly roll and
box spread strategies in the Monthly Strategy Cap for Professionals,
and Broker Dealers, when such members are trading in their own
proprietary accounts, because these market participants are not subject
to the Monthly Firm Fee Cap or other similar cap. While Specialists and
Market Makers are subject to a Monthly Market Maker Cap on electronic
options transaction charges, reversal and conversion, jelly roll and
box spread transactions, which are included in the Monthly Strategy
Cap, are excluded from the Monthly Market Maker Cap. The Exchange
believes also that its proposal to exclude floor transactions from the
Monthly Market Maker Cap is reasonable because the Exchange floor
incurs additional costs (e.g., personnel, equipment, surveillance)
related to a business model that includes floor-based trading.
For the reasons described above, the Exchange believes that
continuing to offer the Monthly Market Maker Cap as proposed will
continue to incentivize market participants to bring liquidity and
order flow to the Exchange for the benefit of all market participants.
Liquidity benefits all market participants by providing more trading
opportunities, which attracts 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.
Specialists and Market Makers have obligations to make continuous
markets, engage in a course of dealings reasonably calculated to
contribute to the maintenance of a fair and orderly market, and not
make bids or offers or enter into transactions that are inconsistent
with a course of dealings. Moreover, the proposed change to the fee
structure and rebate structure will be applied uniformly to all.
Change 2--Multiply Listed Options Fees--Firm Electronic Simple Orders
In Change 2 the Exchange proposes to increase the assessment from
$0.34 to $0.37 per contract for select Firm electronic simple orders in
AAPL, BAC, EEM, FB, FXI, IWM, QQQ, TWTR, VXX, and XLF. The assessment
for the noted simple orders is in the Multiply Listed Options Fees
schedule for options overlying equities, ETFs, ETNs, and certain
indexes.
The Exchange believes that the proposed change for the Firm
electronic simple orders in the noted options, which are high volume
Penny Pilot Options listed on the Exchange,\31\ is reasonable. This is
because the proposed change is very modest and is not an outlier;
rather, it is similar to and competitive with what is offered by other
options markets.\32\ The the [sic] Multiply Listed Options Fees
schedule continues as constructed to be competitive and encourage
market participants to bring liquidity to the Exchange. The Exchange
believes that despite the proposed increase, which will help the
Exchange to recover costs, Firms will continue to be incentivized
[[Page 10697]]
to transact electronic simple orders in AAPL, BAC, EEM, FB, FXI, IWM,
QQQ, TWTR, VXX, and XLF on the Exchange.
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\31\ The high volume in the noted options is present across
other options exchanges.
\32\ See, e.g., the pricing schedule of NYSE AMEX OPTIONS (AMEX)
at https://www.nyse.com/publicdocs/nyse/markets/amex-options/NYSE_Amex_Options_Fee_Schedule.pdf, and of MIAX OPTIONS (MIAX) at
https://www.miaxoptions.com/content/fees. See also, e.g., the pricing
schedule of NASDAQ PHLX LLC (``Phlx'') and NASDAQ Options Market
(``NOM'').
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The Exchange believes that the modest change from $0.34 to $0.37 in
Note 12 is equitable and not unfairly discriminatory because the
assessment is modest and will be applied uniformly to all Firms that
send in electronic simple orders in AAPL, BAC, EEM, FB, FXI, IWM, QQQ,
TWTR, VXX, and XLF.\33\
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\33\ The Exchange notes that, as discussed, Note 12 continues to
apply only to certain Firm orders. Note 12 does not apply to other
fee liable members (e.g., Broker Dealer, Specialist and Market
Maker, Professional, Customer), and as such the proposed change does
not effectively change the fee relationship between Firms and such
members.
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Change 3--Other Transaction Fees--MARS Payment
In Change 3 the Exchange proposes to state that Phlx members that
have executed MARS Eligible Contracts may receive the MARS Payment.
The Exchange believes that the proposed change is reasonable,
equitable and not unfairly discriminatory.
Where currently a MARS Payment will be paid only on executed Firm
orders, the proposed change would allow all qualifying MARS volume to
receive a MARS Payment. With the proposed change, all Phlx members that
have executed MARS Eligible Contracts may receive the MARS Payment of
$0.10 per contract. The Exchange believes that this is reasonable
because it incentivizes more Phlx members to rout Eligible Contracts
for execution on the Exchange.
The Exchange believes that the proposed change is equitable and not
unfairly discriminatory because the increased ability to receive MARS
Payment will be applied uniformly to all. Thus, a MARS Payment will be
made to Phlx members that have System Eligibility and have routed at
least 30,000 Eligible Contracts daily in a month, which were executed
on Phlx.\34\
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\34\ For the purpose of qualifying for the MARS Payment,
Eligible Contracts include the following: Firm, Broker-Dealer, Joint
Back Office or ``JBO'' or Professional equity option orders that are
electronically delivered and executed. Eligible Contracts must be
routed through a participating Phlx member's System and do not
include floor-based orders, qualified contingent cross or ``QCC''
orders, price improvement or ``PIXL'' orders, Mini Option orders or
Singly Listed Orders.
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The Exchange desires to continue to incentivize members and member
organizations, through the Exchange's rebate and fee structure, to
select Phlx as a venue for bringing liquidity and trading by offering
competitive pricing. Such competitive, differentiated pricing exists
today on other options exchanges. The Exchange's goal is creating and
increasing incentives to attract orders to the Exchange that will, in
turn, benefit all market participants through increased liquidity at
the Exchange.
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. The Exchange believes that its
proposal to exclude floor volume from the Monthly Market Maker Cap,
increase the assessment for select Firm electronic simple orders, and
state that all Phlx members that have executed MARS Eligible Contracts
may receive the MARS Payment does not impose a burden on competition.
The Exchange's proposal will continue to encourage eligible market
participants to transact orders on the Exchange in order to obtain the
Monthly Market Maker Cap and MARS Payments.
The Exchange operates in a highly competitive market, comprised of
at least twelve options exchanges, in which market participants can
easily and readily direct order flow to competing venues if they deem
fee levels at a particular venue to be excessive or rebates to be
inadequate. Accordingly, the fees that are assessed and the rebates
paid by the Exchange described in the above proposal are influenced by
these robust market forces and therefore must remain competitive with
fees charged and rebates paid by other venues and therefore must
continue to be reasonable and equitably allocated to those members that
opt to direct orders to the Exchange rather than competing venues.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to section
19(b)(3)(A)(ii) of the Act.\35\
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\35\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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. 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-2016-26 on the subject line.
Paper comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-Phlx-2016-26. 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-
[[Page 10698]]
2016-26, and should be submitted on or before March 22, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\36\
Robert W. Errett,
Deputy Secretary.
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\36\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2016-04357 Filed 2-29-16; 8:45 am]
BILLING CODE 8011-01-P
