Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rebates and Fees for Adding and Removing Liquidity in SPY, 15761-15765 [2016-06604]
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Federal Register / Vol. 81, No. 57 / Thursday, March 24, 2016 / Notices
quarterly basis. Id. at 8; see 39 CFR
3035.20.
related financial information remain
under seal. Id. Attachment 1.
5. Statutory Authority
IV. Notice of Commission Action
The Postal Service asserts that the
proposed GeM Merchant market test
satisfies the conditions on market tests
of experimental products. Notice at 3;
see 39 U.S.C. 3641(b). The Postal
Service submits that GeM Merchant is
significantly different from all products
offered within the past 2 years. Notice
at 3; see 39 U.S.C. 3641(b)(1). The Postal
Service states that GeM Merchant would
offer a new feature: the ability for a
consumer to prepay estimated foreign
duties and taxes at the time of purchase.
Notice at 4.
The Postal Service does not expect
GeM Merchant to create an ‘‘unfair or
otherwise inappropriate competitive
advantage for the Postal Service or any
mailer, with regard to any other party
(including small businesses).’’ Id. at 5
(quoting 39 U.S.C. 3641(b)(2)); see 39
U.S.C. 3641(b)(2). The Postal Service
states that at least four companies
presently offer similar services,
including one small business, which the
Postal Service has contracted with.
Notice at 5. Furthermore, the Postal
Service represents that the proposed
GeM Merchant market test would not
directly compete with small businesses
offering niche regional and freightforwarding services because those small
businesses serve a different market than
the end-to-end GeM Merchant product.
Id.
The Postal Service classifies GeM
Merchant as a competitive product,
asserting that GeM Merchant is designed
for international packages and are
unlikely to contain any letters, and thus,
do not fall under the Private Express
Statutes. Id. at 6; see 39 U.S.C.
3641(b)(3). The Postal Service asserts
that it faces significant competition in
the outbound international package
delivery marketplace, including major
competitors with products for
facilitating outbound international
shipments with duties and taxes paid at
the time of purchase. Notice at 6.
The Commission establishes Docket
No. MT2016–1 to consider matters
raised by the Notice. The Commission
invites comments on whether the Postal
Service’s filing is consistent with the
requirements of 39 U.S.C. 3641 and 39
CFR part 3035. Comments are due no
later than April 11, 2016. The public
portions of these filings can be accessed
via the Commission’s Web site (https://
www.prc.gov).
The Commission appoints James
Waclawski to serve as an officer of the
Commission to represent the interests of
the general public in these proceedings
(Public Representative).
asabaliauskas on DSK3SPTVN1PROD with NOTICES
III. Contents of Filing
To support its Notice, the Postal
Service filed its proposed changes to the
Mail Classification Schedule, as well as
redacted versions of the GeM Merchant
model contract, GeM Merchant price
ranges summary, and supporting
financial workpapers. The Postal
Service also submitted an application
for non-public treatment of materials
requesting that unredacted versions of
the GeM Merchant model contract, GeM
Merchant price ranges summary, and
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V. Ordering Paragraphs
It is ordered:
1. The Commission establishes Docket
No. MT2016–1 to consider the matters
raised by the Notice.
2. Pursuant to 39 U.S.C. 505, James
Waclawski is appointed to serve as an
officer of the Commission to represent
the interests of the general public in
these proceedings (Public
Representative).
3. Comments are due no later than
April 11, 2016.
4. The Secretary shall arrange for
publication of this order in the Federal
Register.
By the Commission.
Stacy L. Ruble,
Secretary.
[FR Doc. 2016–06616 Filed 3–23–16; 8:45 am]
BILLING CODE 7710–FW–P
Market Test of Experimental Product:
Global eCommerce Marketplace (GeM)
Merchant Solution
Postal ServiceTM.
ACTION: Notice.
AGENCY:
The Postal Service gives
notice of a market test of an
experimental product in accordance
with statutory requirements.
DATES: March 24, 2016.
FOR FURTHER INFORMATION CONTACT: Kyle
Coppin, 202–268–2368.
SUPPLEMENTARY INFORMATION: The
United States Postal Service® hereby
gives notice pursuant to 39 U.S.C.
3641(c)(1) that it will begin a market test
of its Global eCommerce Marketplace
(GeM) Merchant Solution experimental
product on or after April 30, 2016. The
Postal Service has filed with the Postal
SUMMARY:
Frm 00085
Fmt 4703
Regulatory Commission a notice setting
out the basis for the Postal Service’s
determination that the market test is
covered by 39 U.S.C. 3641 and
describing the nature and scope of the
market test. Documents are available at
www.prc.gov, Docket No. MT2016–1.
Stanley F. Mires,
Attorney, Legal Policy & Legislative Advice.
[FR Doc. 2016–06623 Filed 3–23–16; 8:45 am]
BILLING CODE 7710–12–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77402; File No. SR–Phlx–
2016–21]
Self-Regulatory Organizations;
NASDAQ PHLX LLC; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change To Amend
Rebates and Fees for Adding and
Removing Liquidity in SPY
March 18, 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 March 10,
2016, NASDAQ PHLX LLC
(‘‘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.
DATE:
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
POSTAL SERVICE
PO 00000
15761
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The Exchange proposes to amend the
Phlx Pricing Schedule at Section I,
entitled ‘‘Rebates and Fees for Adding
and Removing Liquidity in SPY,’’
specifically related to PIXL 3 executions
in options overlying SPY.4
The text of the proposed rule change
is available on the Exchange’s Web site
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 PIXLSM is the Exchange’s price improvement
mechanism known as Price Improvement XL or
PIXL. A member may electronically submit for
execution an order it represents as agent on behalf
of a public customer, broker-dealer, or any other
entity (‘‘PIXL Order’’) against principal interest or
against any other order (except as provided in Rule
1080(n)(i)(E)) it represents as agent (‘‘Initiating
Order’’), provided it submits the PIXL order for
electronic execution into the PIXL Auction
pursuant to Rule 1080. See Exchange Rule 1080(n).
4 Options overlying Standard and Poor’s
Depositary Receipts/SPDRs (‘‘SPY’’) are based on
the SPDR exchange-traded fund, which is designed
to track the performance of the S&P 500 Index.
2 17
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at https://
nasdaqomxphlx.cchwallstreet.com/, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
language in the Pricing Schedule at
Section I, entitled ‘‘Rebates and Fees for
Adding and Removing Liquidity in
SPY,’’ related to PIXL executions in
SPY.
Background
SR–Phlx–2013–61
Effective June 3, 2013, the Exchange
filed a rule change 5 to adopt new
pricing specific to options overlying
Standard and Poor’s Depositary
Receipts/SPDRs (‘‘SPY’’).6 The
Exchange adopted ‘‘Make/Take’’ pricing
for SPY in both Simple and Complex
Orders. The Exchange adopted SPY
PIXL Pricing at that time. The Exchange
adopted the following rule text
concerning PIXL Orders:
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‘When the PIXL Order is contra to other
than the Initiating Order, the PIXL Order will
be assessed $0.00 per contract, unless the
order is a Customer, in which case the
Customer will receive a rebate of $0.38 per
contract. All other contra parties to the PIXL
Order, other than the Initiating Order, will be
assessed a Fee for Removing Liquidity of
$0.38 per contract or will receive the Rebate
for Adding Liquidity.’
In that rule change, the Exchange
noted that it was adopting PIXL Pricing
5 See Securities Exchange Act Release No. 69768
(June 14, 2013), 78 FR 37250 (June 20, 2013) (SR–
Phlx–2013–61) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change To Amend
Various Sections of the Exchange’s Pricing
Schedule).
6 SPY options are based on the SPDR exchangetraded fund (‘‘ETF’’), which is designed to track the
performance of the S&P 500 Index.
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to ‘‘. . . assess Initiating Orders in SPY
options $0.05 per contract for all market
participants. In addition, when the PIXL
Order is contra to the Initiating Order,
a Customer PIXL Order will be assessed
$0.00 per contact and all non-Customer
market participants will be assessed a
$0.38 per contract fee when contra to
the Initiating Order. Also, when a PIXL
Order is contra to other than the
Initiating Order, the PIXL Order will be
assessed $0.00 per contract, unless the
order is a Customer, in which case the
Customer will receive a rebate of $0.38
per contract. All other contra parties to
the PIXL Order, other than the Initiating
Order, will be assessed a reduced Fee
for Removing Liquidity of $0.38 per
contract or will receive the Rebate to
Add Liquidity.’’ The Exchange added a
footnote in that filing, footnote 21, to
further describe the phrase ‘‘other than
an Initiating Order,’’ as, for example, a
PIXL Auction Responder or a resting
order or quote that was on the Phlx book
prior to the auction. In that proposal,
the Exchange reasoned, ‘‘The Exchange
believes it is reasonable that all other
contra parties to the PIXL Order, other
than the Initiating Order, will be equally
assessed a reduced Fee for Removing
Liquidity of $0.38 per contract when
removing or they will receive the Rebate
for Adding Liquidity if adding because
the Exchange desires to equally provide
all market participants the same
incentivizes to encourage them to
transact a greater number of SPY PIXL
Orders.’’
The Exchange also reasoned that
‘‘[a]lso, the Exchange proposes to
uniformly assess all market participants
a fee when a Customer rebate would be
paid to enable the Exchange to offer the
rebate. The Exchange believes that
widening the differential as between the
Initiating Order Fee and the contra party
to the PIXL Order ($0.05 vs. $0.38) as
compared to the cost to transact a PIXL
Order today ($0.05 or $0.07 per contract
vs. $0.30) does not misalign the cost of
these transactions depending on the
market participant because the
Exchange would now not assess a fee in
the case that PIXL Order is contra to
other than the Initiating Order, which is
not a Customer, and would pay the
Customer a rebate in the case where the
contra party is a Customer.’’
The Exchange assessed all contraparties to the SPY PIXL Order, other
than the Initiating Order, a fee of $0.38
per contract as a result of this rule
change.
SR–Phlx–2015–25
On March 11, 2015, the Exchange
filed a rule change to amend the SPY
PIXL pricing established by SR-Phlx-
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2013–61.7 In that filing, the Exchange
proposed to amend the following rule
text, ‘‘All other contra parties to the
PIXL Order, other than the Initiating
Order, will be assessed a Fee for
Removing Liquidity of $0.38 per
contract or will receive the Rebate for
Adding Liquidity’’ 8 to add the term
‘‘Non-Customer’’ to the sentence and
increase the Fee for Removing Liquidity
from $0.38 to $0.42 per contract. The
term Non-Customer was being
introduced in this rule change into the
Pricing Schedule.9 The Exchange at that
time stated in the purpose section to
SR–Phlx–2015–25,
‘The Exchange also proposes to amend
PIXL fees in SPY in Section I of the Pricing
Schedule. Today, when a PIXL Order is
contra to other than the Initiating Order, the
PIXL Order will be assessed $0.00 per
contract, unless the order is a Customer, in
which case the Customer will receive a rebate
of $0.38 per contract. All other contra parties
to the PIXL Order, other than the Initiating
Order, will be assessed a Fee for Removing
Liquidity of $0.38 per contract or will receive
the Rebate for Adding Liquidity. The
Exchange is proposing to increase the
amount that all other contra parties to the
PIXL Order, other than the Initiating Order,
will be assessed to remove liquidity from
$0.38 to $0.42 per contract. These contra
parties will continue to be entitled to receive
the Rebate for Adding Liquidity, as is the
case today. Despite, the increase [the
Exchange] believes that its current SPY PIXL
fees remain competitive.’
Footnote 13 in that rule change
indicated that a member may
electronically submit for execution an
order it represents as agent on behalf of
a public customer, broker-dealer, or any
other entity (‘‘PIXL Order’’) against
principal interest or against any other
order (except as provided in Rule
1080(n)(i)(E)) it represents as agent
(‘‘Initiating Order’’) provided it submits
the PIXL order for electronic execution
into the PIXL Auction (‘‘Auction’’)
pursuant to Rule 1080. 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.
As a result of the amendments to SR–
Phlx–2015–25, the Exchange’s current
rule text does not address the amount a
Customer would be assessed if the
7 See Securities Exchange Act Release No. 74531
(March 19, 2015), 80 FR 15850 (March 25, 2015)
(SR–Phlx–2015–25) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change Relating to
the Pricing Schedule’s Preface and Sections I, II and
IV).
8 The quoted text is the original text which was
amended by SR–Phlx–2015–25.
9 The term ‘‘Non-Customer’’ applies to
transactions for the accounts of Specialists, Market
Makers, Firms, Professionals, Broker-Dealers and
JBOs.
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Customer was a contra-party responder
to a SPY PIXL Order, other than the
Initiating Order. Today, no fee is
assessed to the Customer contra party to
a SPY PIXL Order.
proposes to remove extraneous
parentheticals from Section I in the
Simple Order Rebate for Adding
Liquidity in the Specialist and Market
Maker pricing.
Proposal
The Exchange proposes to assess a
Customer contra party to a PIXL Order
a Fee for Removing Liquidity of $0.42
per contract, similar to all other contra
parties to a SPY PIXL Order. The
Exchange’s proposal would increase the
Customer Fee for Removing Liquidity,
when the Customer is a contra party to
the PIXL Order, other than the Initiating
Order, from $0.00 to $0.42 per contract.
The Exchange proposes to (i) add the
word ‘‘PIXL’’ in the first sentence to
clarify the type of order being discussed;
and (ii) remove the reference to ‘‘other
Non-Customer’’ in the second sentence,
to assess the $0.42 per contract Fee for
Removing to Liquidity to all
participants, including a Customer and
make the second sentence its own
paragraph. The proposed rule text
would be as follows, ‘‘When the PIXL
Order is contra to other than the
Initiating Order, the PIXL Order will be
assessed $0.00 per contract, unless the
PIXL Order is a Customer, in which case
the Customer will receive a rebate of
$0.38 per contract.’’ Separately, in
another paragraph, the proposed rule
text would be as follows, ‘‘All contra
parties to the PIXL Order that are not
the Initiating Order will be assessed a
Fee for Removing Liquidity of $0.42 per
contract or will receive the Rebate for
Adding Liquidity.’’ The Exchange is
also adding some clarifying language in
this sentence to make clear that the
contra parties are note [sic] the Initiating
Order.
To further explain this amendment
and the role of the contra party, during
a PIXL Auction, a paired order may be
entered into the auction consisting of a
PIXL Order and an Initiating Order. If
during the auction, non-Initiating Order
interest 10 executes against the PIXL
Order, the Exchange would assess a Fee
for Removing Liquidity of $0.42 per
contract or will receive the Rebate for
Adding Liquidity, regardless of the
capacity of the contra party. The contra
party in this example may be a
Customer order.11
The Exchange proposes to correct a
typographical error in this section to
capitalize ‘‘non-Customer’’ to state
‘‘Non-Customer’’ to properly refer to the
defined term. The Exchange also
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act 12 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act 13 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees and other charges
among members and issuers and other
persons using any facility or system
which the Exchange operates or
controls, and is not designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.
The 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.’’ 14 Likewise, in
NetCoalition v. Securities and Exchange
Commission 15 (‘‘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.16 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.’’ 17
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
10 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.
11 This contra party Customer order would be
different than the original Customer PIXL Order.
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12 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
14 Securities Exchange Act Release No. 51808 at
37499 (June 9, 2005) (‘‘Regulation NMS Adopting
Release’’).
15 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir.
2010).
16 See NetCoalition, at 534.
17 Id. at 537.
15763
monopoly, regulatory or otherwise, in
the execution of order flow from broker
dealers’. . . .’’ 18 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.
The Exchange’s proposal to increase
the amount that Customer contra parties
to a PIXL Order that were not the
Initiating Order will be assessed to
remove liquidity from $0.00 to $0.42 per
contract is reasonable because despite
the increase in the fee, the Exchange
believes this pricing will continue to
incentivize market participants to
transact a greater number of SPY
options. Customers will continue to
receive a rebate of $0.38 per contract
when the PIXL Order is a Customer
order and is contra to other than the
Initiating Order. The Exchange’s
proposal to increase the Fee for
Removing Liquidity for Customer
contra-parties to the PIXL Order in SPY
that are not the Initiating Order from
$0.00 to $0.42 per contract remains
lower than the $0.43 per contract
Simple Order Fee for Removing
Liquidity that is assessed for Simple
Orders in SPY.19 Today, all other market
participants that are not the Initiating
Order, other than a Customer, who
execute against the PIXL Order, are
assessed a Fee for Removing Liquidity
of $0.42 per contract. The Exchange
believes that it should assess the
Customer a fee similar to other market
participants. The Exchange notes that
today, a Customer is assessed a $0.43
per contract Simple Order Fee for
Removing Liquidity in SPY. The
proposed $0.42 per contract Customer
Fee for Removing Liquidity for
Customer contra-parties to the PIXL
Order which are not the Initiating Order
in SPY would continue to be lower than
the Simple Order Fee for Removing
Liquidity.
SPY options are currently the most
actively traded options class and
therefore the Exchange believes that
incentivizing Customers to remove
liquidity in SPY options by continuing
to offer a lower rate as compared to
Simple Order Fees for Removing
Liquidity in SPY will benefit all market
participants by providing incentives for
price improvement, such as this
reduction in the Fee for Removing
Liquidity. Despite the increase, the
Exchange believes the Fee for Removing
13 15
PO 00000
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18 Id. at 539 (quoting ArcaBook Order, 73 FR at
74782–74783).
19 See Section I of the Pricing Schedule.
Customers are assessed a $0.43 per contract Simple
Order Fee for Removing Liquidity in SPY while
Non-Customers are assessed a $0.47 per contract
Simple Order Fee for Removing Liquidity in SPY.
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Liquidity will continue to encourage a
greater number of market participants to
remove Customer liquidity in SPY on
Phlx because the proposed rate of $0.42
per contract is lower the $0.43 per
contract Simple Order Fee for Removing
Liquidity that is assessed for Simple
Orders in SPY. Customer orders bring
valuable liquidity to the market which
liquidity benefits other market
participants.
The Exchange’s proposal to increase
the amount that Customer contra parties
to the PIXL Order that are not the
Initiating Order will be assessed to
remove liquidity from $0.00 to $0.42 per
contract is equitable and not unfairly
discriminatory because the Exchange
will be assessing the same Fees for
Removing Liquidity for SPY PIXL
options to all market participants that
are contra parties to the PIXL Order in
SPY, other than the Initiating Order.
Customer liquidity benefits all market
participants by providing more trading
opportunities, which attracts Specialists
and Market Makers. A higher percentage
of SPY Orders in PIXL leads to
increased auctions and better
opportunities for price improvement.
The Exchange believes that it is
reasonable, equitable and not unfairly
discriminatory to correct the
typographical error to properly refer to
a defined term, remove extraneous
parentheticals from Section I and make
other clarifying language. These rule
changes are non-substantive.
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.
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The proposed increase to the amount
that Customer contra parties to the PIXL
Order that are not the Initiating Order
will be assessed to remove liquidity
does not impose a burden on intermarket competition, because the
Exchange is competing with other
options markets which offer price
improvement mechanisms. A higher
percentage of SPY Orders in PIXL leads
to increased auctions and better
opportunities for price improvement for
all market participants. In sum, 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.
The Exchange’s proposal to amend
the Fee for Removing Liquidity
applicable to Customers that are contra
to a SPY PIXL Order, other than the
Initiating Order, does not impose any
undue burden on intra-market
competition as all market participants
will be assessed the same fee of $0.42
per contract to remove liquidity as other
contra party market participants.
Customer orders bring valuable liquidity
to the market, which liquidity benefits
all market participants. This proposal
also corrects a discrepancy in the rule
text which does not currently address
fees for Customer responders.
The Exchange’s proposal to correct a
typographical error to properly refer to
a defined term, remove extraneous
parentheticals from Section I and make
other clarifying language does not
impose any undue burden on intramarket competition as these rule
changes are non-substantive.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act.20
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) Necessary or appropriate in
20 15
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
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Sfmt 4703
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–2016–21 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–2016–21. 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 the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly.
All submissions should refer to File
Number SR–Phlx–2016–21 and should
E:\FR\FM\24MRN1.SGM
24MRN1
Federal Register / Vol. 81, No. 57 / Thursday, March 24, 2016 / Notices
be submitted on or before April 14,
2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–06604 Filed 3–23–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77406; File No. 10–222]
Investors’ Exchange LLC; Notice of
Filing of Amendment Nos. 2, 3, and 4
to, and Order Instituting Proceedings
To Determine Whether To Grant or
Deny, and Notice of Designation of
Longer Period for Commission Action
on Proceedings To Determine Whether
To Grant or Deny, an Application for
Registration as a National Securities
Exchange Under Section 6 of the
Securities Exchange Act of 1934, as
Modified by Amendment Nos. 1, 2, 3,
and 4 Thereto
March 18, 2016.
I. Introduction
On August 21, 2015, Investors’
Exchange LLC (‘‘IEX’’ or ‘‘IEX
Exchange’’) submitted to the Securities
and Exchange Commission
(‘‘Commission’’) a Form 1 application
(‘‘Form 1’’), seeking registration as a
national securities exchange pursuant to
Section 6 of the Securities Exchange Act
of 1934 (‘‘Act’’).1 IEX amended its Form
1 four times, including its most recent
amendment on March 7, 2016. The
Commission is required to review the
exchange registration application, as
amended, together with all comments
received, and make a determination
whether to grant the registration.2
On September 9, 2015, IEX submitted
Amendment No. 1 to its Form 1.3 Notice
of the application, as amended, was
published for comment in the Federal
Register on September 22, 2015.4 IEX
submitted several responses to
comments.5 On December 18, 2015, IEX
21 17
CFR 200.30–3(a)(12).
U.S.C. 78f.
2 See 15 U.S.C. 78f and 15 U.S.C. 78s.
3 In Amendment No. 1, IEX submitted updated
portions of its Form 1, including revised exhibits,
a revised version of the proposed IEX Rule Book,
and revised Addenda C–2, C–3, C–4, D–1, D–2, F–
1, F–2, F–3, F–4, F–5, F–6, F–7, F–8, F–9, F–10, F–
11, F–12, and F–13.
4 See Securities Exchange Act Release No. 75925
(September 15, 2015), 80 FR 57261 (‘‘Notice’’).
5 See Letter from Sophia Lee, General Counsel,
IEX, to Brent J. Fields, Secretary, Commission,
dated November 13, 2015 (‘‘IEX First Response’’);
Letter from Sophia Lee, General Counsel, IEX, to
asabaliauskas on DSK3SPTVN1PROD with NOTICES
1 15
VerDate Sep<11>2014
17:44 Mar 23, 2016
Jkt 238001
consented to an extension of time to
March 21, 2016 for Commission
consideration of its Form 1.6 IEX
submitted a second amendment to its
Form 1 on February 29, 2016 that
proposes to make functional changes to
its outbound router, which had been the
subject of extensive public comment as
originally proposed.7 IEX submitted a
third amendment to its Form 1 on
March 4, 2016.8 IEX submitted a fourth
amendment to its Form 1 on March 7,
2016.9
Section 19(a)(1) of the Act 10 requires
the Commission, within ninety days of
the date of publication of notice of an
application for registration as a national
securities exchange, or such longer
period as to which the applicant
consents,11 to, by order, grant such
registration12 or institute proceedings to
determine whether such registration
should be denied.13 This order is
providing public notice of the
significant changes in Amendment Nos.
2, 3, and 4 to IEX’s Form 1 and
soliciting comment on the Form 1 as
amended, while simultaneously
instituting proceedings under Section
19(a)(1)(B) of the Act 14 to determine
Brent J. Fields, Secretary, Commission, dated
November 23, 2015 (‘‘IEX Second Response’’);
Letter from Sophia Lee, General Counsel, IEX, to
Brent J. Fields, Secretary, Commission, dated
February 9, 2016 (‘‘IEX Third Response’’); Letter
from Donald Bollerman, Head of Markets and Sales,
IEX Group, Inc., to File No. 10–222, dated February
16, 2016 (‘‘IEX Fourth Response’’); and Letter from
IEX Group, Inc., to File No. 10–222, dated February
19, 2016 (‘‘IEX Fifth Response’’).
6 See Letter from Sophia Lee, General Counsel,
IEX, to Brent J. Fields, Secretary, Commission,
dated December 18, 2015.
7 In Amendment No. 2, IEX proposed changes to
its Form 1 to, among other things, redesign its
outbound routing functionality to direct routable
orders first to the IEX routing logic instead of
directly to the IEX matching engine. See Letter from
Sophia Lee, General Counsel, IEX, to Brent J. Fields,
Secretary, Commission, dated February 29, 2016, at
1. In this manner, the IEX router would ‘‘interact
with the IEX matching system over a 350
microsecond speed-bump in the same way an
independent third party broker would be subject to
a speed bump.’’ Id.
8 In Amendment No. 3, IEX proposed changes to
its Form 1 to clarify and correct revisions to its
rulebook that it made in Amendment No. 2. See
Letter from Sophia Lee, General Counsel, IEX, to
Brent J. Fields, Secretary, Commission, dated March
4, 2016.
9 In Amendment No. 4, IEX proposed changes to
its Form 1 to update Exhibit E to reflect changes it
proposed in Amendment No. 2. See Letter from
Sophia Lee, General Counsel, IEX, to Brent J. Fields,
Secretary, Commission, dated March 7, 2016.
10 15 U.S.C. 78s(a)(1).
11 See supra note 6 and accompanying text
(noting that IEX provided the Commission with an
extension of time until March 21, 2016).
12 15 U.S.C. 78s(a)(1)(A).
13 15 U.S.C. 78s(a)(1)(B).
14 15 U.S.C. 78s(a)(1)(B).
PO 00000
Frm 00089
Fmt 4703
Sfmt 4703
15765
whether to grant or deny IEX’s exchange
registration application, as amended.
Section 19(a)(1)(B) of the Act 15
further provides that such proceedings
shall be concluded within one hundred
eighty days of the date of publication of
notice of the filing of the registration
application. Under Section 19(a)(1)(B),
the Commission may, however, extend
the time for conclusion of such
proceedings for up to ninety days if it
finds good cause for such extension and
publishes its reasons for so finding. As
discussed below, the Commission
believes that there is good cause for a
ninety-day extension of these
proceedings, and is therefore
designating June 18, 2016 as the date by
which the Commission shall determine
whether to grant or deny IEX’s Form 1
for registration as a national securities
exchange.
The Commission received over 430
comment letters on IEX’s Form 1, many
focused on IEX’s proposed trading rules
and system.16 Many commenters
supported IEX’s application.17 Other
commenters either opposed IEX’s
application or questioned whether
certain proposed elements of IEX’s
trading system would be consistent with
the requirements of the Act applicable
to a registered national securities
exchange.18
Among the commenters who
supported IEX’s exchange registration,
several argued that IEX would offer a
market solution to address certain
market inefficiencies and conflicts of
interest in a manner that may protect
15 15
U.S.C. 78s(a)(1)(B).
public comment file for IEX’s Form 1 (File
No. 10–222) is available on the Commission’s Web
site at: https://www.sec.gov/comments/10-222/10222.shtml.
17 See, e.g., Verret Letter; Shatto Letters 1, 2, and
3; Simonelis Letter; Leuchtkafer First Letter;
Leuchtkafer Second Letter; Capital Group Letter;
Southeastern Letter; Navari First Letter; Navari
Second Letter; DV Advisors Letter; Cowen Letter;
Themis First Letter; Themis Second Letter;
Oppenheimer Funds Letter; Murphy Letter; Birch
Bay Letter; Healthy Markets Letter; Keblish Letter;
Bowcott Letter; Secrist Letter; Stevens Letter; Oltean
Letter; Park Letter; Crespo Letter; Hovanec Letter;
Meskill Letter; Brian S. Letter; Glennon Letter;
Shaw Letter; Upson Letter; Goldman Sachs Letter;
Robeson Letter; Lynch Letter; Budish Letter; Chen
& Foley Letter; Liquidnet Letter; T. Rowe Price
Letter.
18 See, e.g., BATS First Letter; BATS Second
Letter; NYSE First Letter; NASDAQ First Letter;
NASDAQ Second Letter; Citadel First Letter;
Citadel Second Letter; Citadel Third Letter; Citadel
Fourth Letter; FIA First Letter; Hudson River
Trading First Letter; Hudson River Trading Second
Letter; Anonymous First Letter; Hunsacker Letter;
Modern Markets Initiative Letter; Tabb Letter;
Weldon Letter; Markit First Letter; Markit Second
Letter; Direct Match Letter; Duffy Letter; Scott
Letter.
16 The
E:\FR\FM\24MRN1.SGM
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]]>Agencies
[Federal Register Volume 81, Number 57 (Thursday, March 24, 2016)]
[Notices]
[Pages 15761-15765]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-06604]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77402; File No. SR-Phlx-2016-21]
Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Rebates
and Fees for Adding and Removing Liquidity in SPY
DATE: March 18, 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 March 10, 2016, NASDAQ PHLX LLC (``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 Phlx Pricing Schedule at Section
I, entitled ``Rebates and Fees for Adding and Removing Liquidity in
SPY,'' specifically related to PIXL \3\ executions in options overlying
SPY.\4\
---------------------------------------------------------------------------
\3\ PIXL\SM\ is the Exchange's price improvement mechanism known
as Price Improvement XL or PIXL. A member may electronically submit
for execution an order it represents as agent on behalf of a public
customer, broker-dealer, or any other entity (``PIXL Order'')
against principal interest or against any other order (except as
provided in Rule 1080(n)(i)(E)) it represents as agent (``Initiating
Order''), provided it submits the PIXL order for electronic
execution into the PIXL Auction pursuant to Rule 1080. See Exchange
Rule 1080(n).
\4\ Options overlying Standard and Poor's Depositary Receipts/
SPDRs (``SPY'') are based on the SPDR exchange-traded fund, which is
designed to track the performance of the S&P 500 Index.
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
Web site
[[Page 15762]]
at https://nasdaqomxphlx.cchwallstreet.com/, at the principal office of
the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend language in the Pricing Schedule at
Section I, entitled ``Rebates and Fees for Adding and Removing
Liquidity in SPY,'' related to PIXL executions in SPY.
Background
SR-Phlx-2013-61
Effective June 3, 2013, the Exchange filed a rule change \5\ to
adopt new pricing specific to options overlying Standard and Poor's
Depositary Receipts/SPDRs (``SPY'').\6\ The Exchange adopted ``Make/
Take'' pricing for SPY in both Simple and Complex Orders. The Exchange
adopted SPY PIXL Pricing at that time. The Exchange adopted the
following rule text concerning PIXL Orders:
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 69768 (June 14,
2013), 78 FR 37250 (June 20, 2013) (SR-Phlx-2013-61) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Various Sections of the Exchange's Pricing Schedule).
\6\ SPY options are based on the SPDR exchange-traded fund
(``ETF''), which is designed to track the performance of the S&P 500
Index.
`When the PIXL Order is contra to other than the Initiating
Order, the PIXL Order will be assessed $0.00 per contract, unless
the order is a Customer, in which case the Customer will receive a
rebate of $0.38 per contract. All other contra parties to the PIXL
Order, other than the Initiating Order, will be assessed a Fee for
Removing Liquidity of $0.38 per contract or will receive the Rebate
---------------------------------------------------------------------------
for Adding Liquidity.'
In that rule change, the Exchange noted that it was adopting PIXL
Pricing to ``. . . assess Initiating Orders in SPY options $0.05 per
contract for all market participants. In addition, when the PIXL Order
is contra to the Initiating Order, a Customer PIXL Order will be
assessed $0.00 per contact and all non-Customer market participants
will be assessed a $0.38 per contract fee when contra to the Initiating
Order. Also, when a PIXL Order is contra to other than the Initiating
Order, the PIXL Order will be assessed $0.00 per contract, unless the
order is a Customer, in which case the Customer will receive a rebate
of $0.38 per contract. All other contra parties to the PIXL Order,
other than the Initiating Order, will be assessed a reduced Fee for
Removing Liquidity of $0.38 per contract or will receive the Rebate to
Add Liquidity.'' The Exchange added a footnote in that filing, footnote
21, to further describe the phrase ``other than an Initiating Order,''
as, for example, a PIXL Auction Responder or a resting order or quote
that was on the Phlx book prior to the auction. In that proposal, the
Exchange reasoned, ``The Exchange believes it is reasonable that all
other contra parties to the PIXL Order, other than the Initiating
Order, will be equally assessed a reduced Fee for Removing Liquidity of
$0.38 per contract when removing or they will receive the Rebate for
Adding Liquidity if adding because the Exchange desires to equally
provide all market participants the same incentivizes to encourage them
to transact a greater number of SPY PIXL Orders.''
The Exchange also reasoned that ``[a]lso, the Exchange proposes to
uniformly assess all market participants a fee when a Customer rebate
would be paid to enable the Exchange to offer the rebate. The Exchange
believes that widening the differential as between the Initiating Order
Fee and the contra party to the PIXL Order ($0.05 vs. $0.38) as
compared to the cost to transact a PIXL Order today ($0.05 or $0.07 per
contract vs. $0.30) does not misalign the cost of these transactions
depending on the market participant because the Exchange would now not
assess a fee in the case that PIXL Order is contra to other than the
Initiating Order, which is not a Customer, and would pay the Customer a
rebate in the case where the contra party is a Customer.''
The Exchange assessed all contra-parties to the SPY PIXL Order,
other than the Initiating Order, a fee of $0.38 per contract as a
result of this rule change.
SR-Phlx-2015-25
On March 11, 2015, the Exchange filed a rule change to amend the
SPY PIXL pricing established by SR-Phlx-2013-61.\7\ In that filing, the
Exchange proposed to amend the following rule text, ``All other contra
parties to the PIXL Order, other than the Initiating Order, will be
assessed a Fee for Removing Liquidity of $0.38 per contract or will
receive the Rebate for Adding Liquidity'' \8\ to add the term ``Non-
Customer'' to the sentence and increase the Fee for Removing Liquidity
from $0.38 to $0.42 per contract. The term Non-Customer was being
introduced in this rule change into the Pricing Schedule.\9\ The
Exchange at that time stated in the purpose section to SR-Phlx-2015-25,
---------------------------------------------------------------------------
\7\ See Securities Exchange Act Release No. 74531 (March 19,
2015), 80 FR 15850 (March 25, 2015) (SR-Phlx-2015-25) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating
to the Pricing Schedule's Preface and Sections I, II and IV).
\8\ The quoted text is the original text which was amended by
SR-Phlx-2015-25.
\9\ The term ``Non-Customer'' applies to transactions for the
accounts of Specialists, Market Makers, Firms, Professionals,
Broker-Dealers and JBOs.
`The Exchange also proposes to amend PIXL fees in SPY in Section
I of the Pricing Schedule. Today, when a PIXL Order is contra to
other than the Initiating Order, the PIXL Order will be assessed
$0.00 per contract, unless the order is a Customer, in which case
the Customer will receive a rebate of $0.38 per contract. All other
contra parties to the PIXL Order, other than the Initiating Order,
will be assessed a Fee for Removing Liquidity of $0.38 per contract
or will receive the Rebate for Adding Liquidity. The Exchange is
proposing to increase the amount that all other contra parties to
the PIXL Order, other than the Initiating Order, will be assessed to
remove liquidity from $0.38 to $0.42 per contract. These contra
parties will continue to be entitled to receive the Rebate for
Adding Liquidity, as is the case today. Despite, the increase [the
Exchange] believes that its current SPY PIXL fees remain
---------------------------------------------------------------------------
competitive.'
Footnote 13 in that rule change indicated that a member may
electronically submit for execution an order it represents as agent on
behalf of a public customer, broker-dealer, or any other entity (``PIXL
Order'') against principal interest or against any other order (except
as provided in Rule 1080(n)(i)(E)) it represents as agent (``Initiating
Order'') provided it submits the PIXL order for electronic execution
into the PIXL Auction (``Auction'') pursuant to Rule 1080. 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.
As a result of the amendments to SR-Phlx-2015-25, the Exchange's
current rule text does not address the amount a Customer would be
assessed if the
[[Page 15763]]
Customer was a contra-party responder to a SPY PIXL Order, other than
the Initiating Order. Today, no fee is assessed to the Customer contra
party to a SPY PIXL Order.
Proposal
The Exchange proposes to assess a Customer contra party to a PIXL
Order a Fee for Removing Liquidity of $0.42 per contract, similar to
all other contra parties to a SPY PIXL Order. The Exchange's proposal
would increase the Customer Fee for Removing Liquidity, when the
Customer is a contra party to the PIXL Order, other than the Initiating
Order, from $0.00 to $0.42 per contract.
The Exchange proposes to (i) add the word ``PIXL'' in the first
sentence to clarify the type of order being discussed; and (ii) remove
the reference to ``other Non-Customer'' in the second sentence, to
assess the $0.42 per contract Fee for Removing to Liquidity to all
participants, including a Customer and make the second sentence its own
paragraph. The proposed rule text would be as follows, ``When the PIXL
Order is contra to other than the Initiating Order, the PIXL Order will
be assessed $0.00 per contract, unless the PIXL Order is a Customer, in
which case the Customer will receive a rebate of $0.38 per contract.''
Separately, in another paragraph, the proposed rule text would be as
follows, ``All contra parties to the PIXL Order that are not the
Initiating Order will be assessed a Fee for Removing Liquidity of $0.42
per contract or will receive the Rebate for Adding Liquidity.'' The
Exchange is also adding some clarifying language in this sentence to
make clear that the contra parties are note [sic] the Initiating Order.
To further explain this amendment and the role of the contra party,
during a PIXL Auction, a paired order may be entered into the auction
consisting of a PIXL Order and an Initiating Order. If during the
auction, non-Initiating Order interest \10\ executes against the PIXL
Order, the Exchange would assess a Fee for Removing Liquidity of $0.42
per contract or will receive the Rebate for Adding Liquidity,
regardless of the capacity of the contra party. The contra party in
this example may be a Customer order.\11\
---------------------------------------------------------------------------
\10\ 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.
\11\ This contra party Customer order would be different than
the original Customer PIXL Order.
---------------------------------------------------------------------------
The Exchange proposes to correct a typographical error in this
section to capitalize ``non-Customer'' to state ``Non-Customer'' to
properly refer to the defined term. The Exchange also proposes to
remove extraneous parentheticals from Section I in the Simple Order
Rebate for Adding Liquidity in the Specialist and Market Maker pricing.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \12\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act \13\ 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.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f(b).
\13\ 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.'' \14\ Likewise, in NetCoalition v.
Securities and Exchange Commission \15\ (``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.\16\ 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.'' \17\
---------------------------------------------------------------------------
\14\ Securities Exchange Act Release No. 51808 at 37499 (June 9,
2005) (``Regulation NMS Adopting Release'').
\15\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\16\ See NetCoalition, at 534.
\17\ 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 percentages for granted' because `no exchange
possesses a monopoly, regulatory or otherwise, in the execution of
order flow from broker dealers'. . . .'' \18\ 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.
---------------------------------------------------------------------------
\18\ Id. at 539 (quoting ArcaBook Order, 73 FR at 74782-74783).
---------------------------------------------------------------------------
The Exchange's proposal to increase the amount that Customer contra
parties to a PIXL Order that were not the Initiating Order will be
assessed to remove liquidity from $0.00 to $0.42 per contract is
reasonable because despite the increase in the fee, the Exchange
believes this pricing will continue to incentivize market participants
to transact a greater number of SPY options. Customers will continue to
receive a rebate of $0.38 per contract when the PIXL Order is a
Customer order and is contra to other than the Initiating Order. The
Exchange's proposal to increase the Fee for Removing Liquidity for
Customer contra-parties to the PIXL Order in SPY that are not the
Initiating Order from $0.00 to $0.42 per contract remains lower than
the $0.43 per contract Simple Order Fee for Removing Liquidity that is
assessed for Simple Orders in SPY.\19\ Today, all other market
participants that are not the Initiating Order, other than a Customer,
who execute against the PIXL Order, are assessed a Fee for Removing
Liquidity of $0.42 per contract. The Exchange believes that it should
assess the Customer a fee similar to other market participants. The
Exchange notes that today, a Customer is assessed a $0.43 per contract
Simple Order Fee for Removing Liquidity in SPY. The proposed $0.42 per
contract Customer Fee for Removing Liquidity for Customer contra-
parties to the PIXL Order which are not the Initiating Order in SPY
would continue to be lower than the Simple Order Fee for Removing
Liquidity.
---------------------------------------------------------------------------
\19\ See Section I of the Pricing Schedule. Customers are
assessed a $0.43 per contract Simple Order Fee for Removing
Liquidity in SPY while Non-Customers are assessed a $0.47 per
contract Simple Order Fee for Removing Liquidity in SPY.
---------------------------------------------------------------------------
SPY options are currently the most actively traded options class
and therefore the Exchange believes that incentivizing Customers to
remove liquidity in SPY options by continuing to offer a lower rate as
compared to Simple Order Fees for Removing Liquidity in SPY will
benefit all market participants by providing incentives for price
improvement, such as this reduction in the Fee for Removing Liquidity.
Despite the increase, the Exchange believes the Fee for Removing
[[Page 15764]]
Liquidity will continue to encourage a greater number of market
participants to remove Customer liquidity in SPY on Phlx because the
proposed rate of $0.42 per contract is lower the $0.43 per contract
Simple Order Fee for Removing Liquidity that is assessed for Simple
Orders in SPY. Customer orders bring valuable liquidity to the market
which liquidity benefits other market participants.
The Exchange's proposal to increase the amount that Customer contra
parties to the PIXL Order that are not the Initiating Order will be
assessed to remove liquidity from $0.00 to $0.42 per contract is
equitable and not unfairly discriminatory because the Exchange will be
assessing the same Fees for Removing Liquidity for SPY PIXL options to
all market participants that are contra parties to the PIXL Order in
SPY, other than the Initiating Order. Customer liquidity benefits all
market participants by providing more trading opportunities, which
attracts Specialists and Market Makers. A higher percentage of SPY
Orders in PIXL leads to increased auctions and better opportunities for
price improvement.
The Exchange believes that it is reasonable, equitable and not
unfairly discriminatory to correct the typographical error to properly
refer to a defined term, remove extraneous parentheticals from Section
I and make other clarifying language. These rule changes are non-
substantive.
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 proposed increase to the amount that Customer contra parties to
the PIXL Order that are not the Initiating Order will be assessed to
remove liquidity does not impose a burden on inter-market competition,
because the Exchange is competing with other options markets which
offer price improvement mechanisms. A higher percentage of SPY Orders
in PIXL leads to increased auctions and better opportunities for price
improvement for all market participants. In sum, 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.
The Exchange's proposal to amend the Fee for Removing Liquidity
applicable to Customers that are contra to a SPY PIXL Order, other than
the Initiating Order, does not impose any undue burden on intra-market
competition as all market participants will be assessed the same fee of
$0.42 per contract to remove liquidity as other contra party market
participants. Customer orders bring valuable liquidity to the market,
which liquidity benefits all market participants. This proposal also
corrects a discrepancy in the rule text which does not currently
address fees for Customer responders.
The Exchange's proposal to correct a typographical error to
properly refer to a defined term, remove extraneous parentheticals from
Section I and make other clarifying language does not impose any undue
burden on intra-market competition as these rule changes are non-
substantive.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\20\
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\20\ 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-2016-21 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-2016-21. 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 the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly.
All submissions should refer to File Number SR-Phlx-2016-21 and
should
[[Page 15765]]
be submitted on or before April 14, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-06604 Filed 3-23-16; 8:45 am]
BILLING CODE 8011-01-P
