Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Qualified Contingent Cross Rebates and Certain Floor Options Transaction Charges, 22324-22328 [2016-08642]
Download as PDF
<![CDATA[
22324
Federal Register / Vol. 81, No. 73 / Friday, April 15, 2016 / Notices
(C) Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change
does not (i) significantly affect the
protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 9 and Rule 19b–
4(f)(6) thereunder.10
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 11 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 12
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange has asked
the Commission to waive the 30-day
operative delay. The Exchange has
stated that the proposed rule change is
intended to ensure consecutively
numbered rules within Chapter XI of the
Exchange’s rulebook and does not
amend any of the provisions of current
Rule 11.27. The Commission believes
that waiver of the operative delay is
consistent with the protection of
investors and the public interest
because it may benefit investors by
clarifying the Exchange’s rulebook and
avoiding potential investor confusion.
Accordingly, the Commission hereby
waives the operative delay and
designates the proposed rule change
operative upon filing.13
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
9 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). As required under Rule
19b–4(f)(6)(iii), the Exchange provided the
Commission with written notice of its intent to file
the proposed rule change, along with a brief
description and the text of the proposed rule
change, at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission.
11 17 CFR 240.19b–4(f)(6).
12 17 CFR 240.19b–4(f)(6)(iii).
13 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
asabaliauskas on DSK3SPTVN1PROD with NOTICES
10 17
VerDate Sep<11>2014
17:27 Apr 14, 2016
Jkt 238001
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
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–
BatsEDGA–2016–04 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–BatsEDGA–2016–04. 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–
Frm 00117
Fmt 4703
Sfmt 4703
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–08648 Filed 4–14–16; 8:45 am]
BILLING CODE 8011–01–P
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:
PO 00000
BatsEDGA–2016–04, and should be
submitted on or before May 6, 2016.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77577; File No. SR–Phlx–
2016–42]
Self-Regulatory Organizations;
NASDAQ PHLX LLC; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change To Amend
Qualified Contingent Cross Rebates
and Certain Floor Options Transaction
Charges
April 11, 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 28,
2016, NASDAQ PHLX LLC (‘‘Phlx’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Exchange’s Pricing Schedule at Section
II, entitled ‘‘Multiply Listed Options
Fees.’’ Specifically, the Exchange is
proposing to amend the Qualified
Contingent Cross (‘‘QCC’’) rebates and
certain floor Options Transaction
Charges.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaqomxphlx.cchwall
street.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
14 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\15APN1.SGM
15APN1
Federal Register / Vol. 81, No. 73 / Friday, April 15, 2016 / Notices
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.
22325
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
Options Transaction Charges. Each
change will be described below in more
detail.
1. Purpose
Today, the Exchange assesses a QCC
Transaction Fee of $0.20 per contract to
a Specialist,3 Market Maker,4
Professional,5 Firm 6 and BrokerDealer.7 The Exchange also pays rebates
on QCC Orders based on the following
five tier rebate schedule:
The purpose of the proposed rule
change is to amend the Exchange’s
Pricing Schedule at Section II, entitled
‘‘Multiply Listed Options Fees.’’
Specifically, the Exchange is proposing
to amend QCC rebates and certain floor
Section II—QCC Rebates
QCC REBATE SCHEDULE
Tier
Tier
Tier
Tier
Tier
Tier
1
2
3
4
5
Rebate per
contract
Threshold
..............................
..............................
..............................
..............................
..............................
0 to 299,999 contracts in a month ..........................................................................................................
300,000 to 499,999 contracts in a month ...............................................................................................
500,000 to 699,999 contracts in a month ...............................................................................................
700,000 to 999,999 contracts in a month ...............................................................................................
Over 1,000,000 contracts in a month .....................................................................................................
Rebates are paid for all qualifying
executed QCC Orders, as defined in
Rule 1080(o) 8 and Floor QCC Orders, as
defined in Rule 1064(e),9 except where
the transaction is either: (i) Customer-toCustomer; or (ii) a dividend, merger,
short stock interest or reversal or
conversion strategy execution.10 The
maximum QCC Rebate to be paid in a
given month will not exceed
$450,000.11
$0.00
0.07
0.08
0.09
0.11
The Exchange proposes to amend the
QCC rebate schedule to add a new tier
to create a six tier rebate schedule and
amend the existing tiers. The proposed
QCC rebate schedule would be as
follows:
QCC REBATE SCHEDULE
Tier
Tier
Tier
Tier
Tier
Tier
Tier
1
2
3
4
5
6
Rebate per
contract
Threshold
..............................
..............................
..............................
..............................
..............................
..............................
0 to 99,999 contracts in a month ............................................................................................................
100,000 to 299,999 contracts in a month ...............................................................................................
300,000 to 499,999 contracts in a month ...............................................................................................
500,000 to 699,999 contracts in a month ...............................................................................................
700,000 to 999,999 contracts in a month ...............................................................................................
Over 1,000,000 contracts in a month .....................................................................................................
$0.00
0.05
0.07
0.08
0.09
0.11
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Tier 1 does not currently pay a QCC
rebate between 0 and 299,999 contracts
in a month. The Exchange will continue
to pay no rebate for Tier 1, however the
Exchange proposes to lower the volume
threshold to between 0 and 99,999
contracts in month. The Exchange
proposes a new Tier 2 QCC rebate
which would pay a QCC rebate of $0.05
3 A ‘‘Specialist’’ is an Exchange member who is
registered as an options specialist pursuant to Rule
1020(a).
4 The term ‘‘Market Maker’’ includes Registered
Options Traders (‘‘ROT’’). See Exchange Rule 1014
(b)(i) and (ii). A ROT includes a Streaming Quote
Trader or ‘‘SQT,’’ a Remote Streaming Quote Trader
or ‘‘RSQT’’ and a Non-SQT, which by definition is
neither a SQT nor a RSQT. A ROT is defined in
Exchange Rule 1014(b) as a regular member [sic] of
the Exchange located on the trading floor who has
received permission from the Exchange to trade in
options for his own account. An SQT is a ROT who
has received permission from the Exchange to
generate and submit option quotations
electronically in options to which such SQT is
assigned. An SQT may only submit such quotations
while such SQT is physically present on the floor
of the Exchange. An SQT may only trade in a
market making capacity in classes of options in
which the SQT is assigned. See Rule 1014(b)(11)(A)
[sic]. An RSQT is an ROT that is a member affiliated
with and [sic] Remote Streaming Quote
Organization with no physical trading floor
presence who has received permission from the
Exchange to generate and submit option quotations
electronically in options to which such RSQT has
been assigned. A qualified RSQT may function as
a Remote Specialist upon Exchange approval. See
Rule 1014(ii)(B) [sic].
5 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).
6 The term ‘‘Firm’’ applies to any transaction that
is identified by a member or member organization
for clearing in the Firm range at The Options
Clearing Corporation.
7 The term ‘‘Broker-Dealer’’ applies to any
transaction which is not subject to any of the other
transaction fees applicable within a particular
category.
8 A QCC Order is comprised of an order to buy
or sell at least 1000 contracts [sic] that is identified
as being part of a qualified contingent trade, as that
term is defined in Rule 1080(o)(3), coupled with a
contra-side order to buy or sell an equal number of
contracts. The QCC Order must be executed at a
price at or between the National Best Bid and Offer
and be rejected if a Customer order is resting on the
Exchange book at the same price. A QCC Order
shall only be submitted electronically from off the
floor to the PHLX XL II System. See Rule 1080(o).
See also Securities Exchange Act Release No. 64249
(April 7, 2011), 76 FR 20773 (April 13, 2011) (SR–
Phlx–2011–47) (a rule change to establish a QCC
Order to facilitate the execution of stock/option
Qualified Contingent Trades (‘‘QCTs’’) that satisfy
the requirements of the trade through exemption in
connection with Rule 611(d) of Regulation NMS).
9 A Floor QCC Order must: (i) Be for at least 1,000
contracts [sic]; (ii) meet the six requirements of Rule
1080(o)(3) which are modeled on the 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. In order to satisfy
the 1,000-contract requirement [sic], a Floor QCC
Order must be for 1,000 contracts and could not be,
for example, two 500-contract orders or two 500contract legs. 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).
10 See Section II of the Pricing Schedule.
11 Id.
VerDate Sep<11>2014
17:27 Apr 14, 2016
Jkt 238001
PO 00000
Frm 00118
Fmt 4703
Sfmt 4703
E:\FR\FM\15APN1.SGM
15APN1
22326
Federal Register / Vol. 81, No. 73 / Friday, April 15, 2016 / Notices
per contract for volume between
100,000 and 299,999 contracts in a
month. The remainder of the QCC rebate
tiers would be renumbered. Current Tier
2 would be renumbered as Tier 3 and
would continue to pay a rebate of $0.07
per contract for volume between
300,000 and 499,999 contracts in a
month. Current Tier 3 would be
renumbered to Tier 4 and would
continue to pay a QCC rebate of $0.08
per contract for volume between
500,000 and 699,999. Current Tier 4
would be renumbered as Tier 5 and
would continue to pay a $0.09 per
contract rebate for volume between
700,000 and 999,999 contracts in a
month. Finally, current Tier 5 would be
renumbered as Tier 6 and would
continue to pay a QCC rebate of $0.11
per contract for volume over 1,000,000
contracts in a month.
The Exchange believes that its
proposed amendments to the QCC
rebates will provide an opportunity for
additional members to receive the
rebate. The Exchange’s proposal permits
volume over 99,999 to receive a rebate.
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Section II—Multiply Listed Options
Fees
The Exchange proposes to amend the
current Floor Options Transaction
Charges in Section II of the Exchange’s
Pricing Schedule in both Penny Pilot
and non-Penny Pilot Options from $0.30
to $0.35 per contract for Specialists and
Market Makers. The Exchange believes
that these fees remain competitive with
fees currently assessed today on Phlx.
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, 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
12 15
13 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
VerDate Sep<11>2014
17:27 Apr 14, 2016
Jkt 238001
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.’’ 14
Likewise, in NetCoalition v. Securities
and Exchange Commission
(‘‘NetCoalition’’) 15 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.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
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.
Section II—QCC Rebates
The Exchange believes that it is
reasonable to add a new QCC rebate tier
and amend the current rebate tiers to
lower the Tier 1 volume threshold and
start paying a rebate of $0.05 per
contract for volume between 100,000 to
299,999 contracts per month. The
Exchange believes that paying a QCC
rebate starting at 100,000 contracts per
month will attract additional QCC
volume on the Exchange. While the
other rebate tiers are not being amended
and simply renumbered (current Tiers
2–6), the Exchange believes these rebate
tiers will continue to attract QCC
volume on the Exchange.
The Exchange believes that adding a
new QCC rebate tier and amending the
current rebate tiers to lower the Tier 1
volume threshold and start paying a
14 Securities Exchange Act Release No. 51808 at
37499 (June 9, 2005) [sic] (‘‘Regulation NMS
Adopting Release’’).
15 NetCoalition v. SEC, 615 F.3d 525 (D.C. Circuit
2010).
16 See NetCoalition, at 534.
17 Id. at 537.
18 Id. at 539 (quoting ArcaBook Order, 73 FR at
74782–74783 [sic]).
PO 00000
Frm 00119
Fmt 4703
Sfmt 4703
rebate of $0.05 per contract for volume
between 100,000 to 299,999 contracts
per month is equitable and not unfairly
discriminatory because all market
participants are eligible to transact QCC
Orders and receive the rebates.
Section II—Multiply Listed Options
Fees
The Exchange’s proposal to amend its
Floor Options Transaction Charges to
increase Penny and non-Penny Pilot
Options Transaction Charges for
Specialists and Market Makers is
reasonable because the proposed fees
are within the range of other fees in
Section II of the Pricing Schedule.19
Also, Specialists and Market Makers pay
a Marketing Fee 20 on electronic orders
but do not pay a Marketing Fee when
transacting non-electronic orders, which
is why the floor transaction charges are
higher as compared to electronic
options transaction charges for
Specialists and Market Makers.
The Exchange’s proposal to amend its
Floor Options Transaction Charges to
increase Penny Options and non-Penny
Pilot Options Transaction Charges for
Specialists and Market Makers is
equitable and not unfairly
discriminatory because Specialists and
Market Makers have a time and place
advantage on the trading floor with
respect to orders, unlike other market
participants. A Professional, BrokerDealer, or a Firm would necessarily
require a floor broker to represent their
trading interest on the trading floor as
compared to a Specialist or Market
Maker that could directly transact such
orders on the trading floor. Further, the
Exchange believes that to attract orders
from a Professional, Broker-Dealer or a
Firm, via a floor broker, the rates must
be competitive with rates at other
trading floors.
Therefore, the Exchange would
continue to assess a Professional,
19 Section II Options Transaction Charges for
Penny Pilot and non-Penny Pilot Options range
from $0.22 to $0.75 per contract for Non-Customers.
20 The Marketing Fee is assessed on Specialists
and Market Makers when they elect to participate
in the Marketing program. The fees are assessed on
electronically-delivered Customer orders. The fees
are available to be disbursed by the Exchange
according to the instructions of the Specialist or
Market Maker to order flow providers who are
members or member organizations who submit, as
agent, Customer orders to the Exchange through a
member or member organization who is acting as
agent for those customer orders. Any excess funds
billed but not utilized by the Specialist or Market
Maker are carried forward unless the Specialist or
Market Maker elects to have those funds rebated on
a pro rata basis, reflected as a credit on the monthly
invoices. At the end of each calendar quarter, the
Exchange calculates the amount of excess funds
from the previous quarter and subsequently rebates
excess funds on a pro-rata basis to the applicable
Specialist or Market Maker who paid into that pool
of funds. See Section II of the Pricing Schedule.
E:\FR\FM\15APN1.SGM
15APN1
Federal Register / Vol. 81, No. 73 / Friday, April 15, 2016 / Notices
Broker-Dealer and a Firm a Floor
Options Transaction Charge for Penny
Pilot Options and Non-Penny Pilot
Options of $0.25 per contract.
Customers are not assessed an Options
Transaction Charge because Customer
order flow is unique. Customer 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.
asabaliauskas on DSK3SPTVN1PROD with NOTICES
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.
In this instance, the proposed changes
to the charges assessed and credits
available to member firms for execution
of securities in securities of all three
Tapes do not impose a burden on
competition because the Exchange’s
execution services are completely
voluntary and subject to extensive
competition both from other exchanges
and from off-exchange venues.
The Exchange believes that its
proposed amendments to the QCC
rebate tiers and increase to the
Specialist and Market Maker floor
options transaction charges do not
impose an undue burden on intermarket competition because the QCC
rebates and Specialist and Market Maker
fees remain competitive with rebates
and fees offered on other options
VerDate Sep<11>2014
17:27 Apr 14, 2016
Jkt 238001
markets.21 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 believes that adding a
new QCC rebate tier and amending the
current rebate tiers to lower the Tier 1
volume threshold and start paying a
rebate of $0.05 per contract for volume
between 100,000 to 299,999 contracts
per month does not impose an undue
burden on intra-market competition
because all market participants are
eligible to transact QCC Orders and
receive a rebate.
The Exchange’s proposal to amend its
Floor Options Transaction Charges to
increase Penny Options and non-Penny
Pilot Options Transaction Charges for
Specialists and Market Makers does not
impose an undue burden on intramarket competition because Specialists
and Market Makers have a time and
place advantage on the trading floor
with respect to orders, unlike other
market participants. Unlike other
market participants, a Specialist or
Market Maker may directly transact
orders on the trading floor. Further,
unlike Specialist or Market Maker
electronic orders, which are subject to a
Marketing Fee, Specialist or Market
Maker floor orders are not subject to a
Marketing Fee.
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.22
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
21 The International Securities Exchange LLC
(‘‘ISE’’) pays QCC rebates ranging from $0.00 to
$0.011 per contract. See ISE’s Schedule of Fees.
Also, the Chicago Board Options Exchange,
Incorporated (‘‘CBOE’’) assess market-makers,
DPMs and LLMs manual fees based on a sliding
scale which range from $0.03 to $0.23 per contract
depending on certain volume thresholds. See
CBOE’s Fees Schedule.
22 15 U.S.C. 78s(b)(3)(A)(ii).
PO 00000
Frm 00120
Fmt 4703
Sfmt 4703
22327
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–2016–42 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–2016–42.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–
2016–42 and should be submitted on or
before May 6, 2016.
E:\FR\FM\15APN1.SGM
15APN1
22328
Federal Register / Vol. 81, No. 73 / Friday, April 15, 2016 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–08642 Filed 4–14–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77580; File No. SR–BOX–
2016–13]
Self-Regulatory Organizations; BOX
Options Exchange LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Amend
BOX Rule 100 (Definitions) Relating to
Professionals
April 11, 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 29,
2016, BOX Options Exchange LLC (the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange proposes to amend
BOX Rule 100 (Definitions) relating to
Professionals. The text of the proposed
rule change is available from the
principal office of the Exchange, at the
Commission’s Public Reference Room
and also on the Exchange’s Internet Web
site at https://boxexchange.com.
asabaliauskas on DSK3SPTVN1PROD with NOTICES
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
self-regulatory organization 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 self-regulatory organization has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
23 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
17:27 Apr 14, 2016
Jkt 238001
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
BOX Rule 100 (Definitions) to amend
the definition of Professional. This filing
that is based on a proposal recently
submitted by Chicago Board Options
Exchange, Incorporated (‘‘CBOE’’) and
approved by the Commission.3
The Exchange proposes to amend
BOX Rule 100(a)(50) relating to
Professionals. Specifically, the
Exchange proposes to adopt new
language to the rule setting forth
amended standards for calculating
average daily order submissions for
Professional order counting purposes.
The Exchange believes that the
proposed rule change would provide
additional clarity in the BOX Rules.
Background
In general, ‘‘public customers’’ are
granted certain marketplace advantages
over other market participants,
including Market Makers, brokers and
dealers of securities, and industry
‘‘Professionals’’ on most U.S. options
exchanges. The U.S. options exchanges,
including BOX, have adopted similar
definitions of the term ‘‘Professional,’’ 4
which commonly refers to persons or
entities that are not a brokers or dealers
in securities and who or which place
more than 390 orders in listed options
per day on average during a calendar
month for their own beneficial
account(s).5 Various exchanges adopted
similar Professional rules for many of
the same reasons, including, but not
3 See Securities Exchange Act Release No. 77450
(March 25, 2016) (Order Approving SR–CBOE–
2016–005).
4 Some U.S. options exchanges refer to
‘‘Professionals’’ as ‘‘Professional Customers’’ or
non-‘‘Priority Customers.’’ Compare BATS
Exchange, Inc. (‘‘BZX’’) Rule 16.1(a)(45)
(Professional); BOX Options Exchange LLC (‘‘BOX’’)
Rule 100(a)(50) (Professional); CBOE Rule 1.1(ggg)
(Professional); C2 Rule 1.1; BX Chapter I, Sec. 1(49)
(Professional); NASDAQ OMX PHLX LLC (‘‘PHLX’’)
Rule 1000(b)(14) (Professional); Nasdaq Options
Market (‘‘NOM’’) Chapter I, Sec. 1(a)(48)
(Professional); with ISE Rule 100(a)(37A) (Priority
Customer); Gemini Rule 100(a)(37A) (Priority
Customer); Miami International Securities Exchange
LLC (‘‘MIAX’’) Rule 100 (Priority Customer); NYSE
MKT LLC (‘‘NYSE MKT’’) Rule 900.2NY(18A)
(Professional Customer); NYSE Arca, Inc. (‘‘Arca’’)
Rule 6.1A(4A) (Professional Customer).
5 See, e.g., BZX Rule 16.1(a)(45); BOX Rule
100(a)(50); CBOE Rule 1.1(ggg); C2 Rule 1.1; BX
Chapter I, Sec. 1(49); PHLX Rule 1000(b)(14); NOM
Chapter I, Sec. 1(a)(48); see also ISE Rule
100(a)(37A) (Priority Customer); Gemini Rule
100(a)(37A) (Priority Customer); MIAX Rule 100
(Priority Customer); NYSE MKT Rule 900.2NY(18A)
(Professional Customer); Arca Rule 6.1A(4A)
(Professional Customer).
PO 00000
Frm 00121
Fmt 4703
Sfmt 4703
limited to the desire to create more
competitive marketplaces and attract
retail order flow.6 In addition, as several
of the exchanges noted in their original
Professional rule filings, their beliefs
that disparate Professional rules and a
lack of uniformity in the application of
such rules across the options markets
would not promote the best regulation
and could, in fact, encourage regulatory
arbitrage.7
Similar to other U.S. options
exchanges, the Exchange grants ‘‘Public
Customers’’ certain marketplace
advantages over other market
participants pursuant to the Exchange’s
Fee Schedule 8 and the BOX Rules.9
Specifically, Public Customer orders are
6 See, e.g., Securities Exchange Act Release No.
60931 (November 4, 2009), 74 FR 58355, 58356
(November 12, 2009) (Notice of Filing of Proposed
Rule Change, as Modified by Amendment No. 1,
Related to Professional Orders) (SR–CBOE–2009–
078); Securities Exchange Act Release No. 59287
(January 23, 2009), 74 FR 5694, 5694 (January 30,
2009) (Notice of Filing of Amendment No. 2 and
Order Granting Accelerated Approval of the
Proposed Rule Change, as Modified by Amendment
Nos. 1 and 2 Thereto, Relating to Professional
Account Holders) (SR–ISE–2006–026); Securities
Exchange Act Release No. 61802 (March 30, 2010),
75 FR 17193, 17194 (April 5, 2010) (Notice of Filing
of Amendment No. 2 and Order Granting
Accelerated Approval of the Proposed Rule Change,
as Modified by Amendment No. 2 Thereto, Relating
to Professional Orders) (SR–PHLX–2010–005);
Securities Exchange Act Release No. 61629 (March
2, 2010), 75 FR 10851, 10851 (March 9, 2010)
(Notice of Filing of Proposed Rule Change Relating
to the Designation of a ‘‘Professional Customer’’)
(SR–NYSEMKT–2010–018).
7 See, e.g., Securities and Exchange Act Release
No. 62724 (August 16, 2010), 75 FR 51509 (August
20, 2010) (Notice of Filing of a Proposed Rule
Change by the NASDAQ Stock Market LLC To
Adopt a Definition of Professional and Require That
All Professional Orders Be Appropriately Marked)
(SR NASDAQ–2010–099); Securities and Exchange
Act Release No. 65500 (October 6, 2011), 76 FR
63686 (October 13, 2011) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change
To Adopt a Definition of Professional and Require
That All Professional Orders Be Appropriately
Marked) (SR–BATS–2011–041); Securities
Exchange Act Release No. 65036 (August 4, 2011),
76 FR 49517, 49518 (August 10, 2011) (Notice of
Filing and Immediate Effectiveness of Proposed
Rule Change To Adopt a Definition of
‘‘Professional’’ and Require That Professional
Orders Be Appropriately Marked by BOX Options
Participants) (SR–BX–2011–049); Securities
Exchange Act Release No. 60931 (November 4,
2009), 74 FR 58355, 58357 (November 12, 2009)
(Notice of Filing of Proposed Rule Change, as
Modified by Amendment No. 1, Related to
Professional Orders) (SR–CBOE–2009–078); see also
Securities Exchange Act Release 73628 (November
18, 2014), 79 FR 69958, 69960 (November 24, 2014)
(Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating to Professional
Orders) (SR–CBOE–2014–085).
8 See, e.g., BOX Fee Schedule (Exchange Fees).
9 Public Customers receive allocation priority
above equally priced competing interests of Market
Makers, broker-dealers, and other market
participants in the PIP and COPIP. See, e.g., BOX
Rule 7150(g)(1) (Public Customer Allocation in PIP),
BOX Rule 7245(g)(2) (Public Customer Allocation in
COPIP).
E:\FR\FM\15APN1.SGM
15APN1
]]>Agencies
[Federal Register Volume 81, Number 73 (Friday, April 15, 2016)]
[Notices]
[Pages 22324-22328]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-08642]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77577; File No. SR-Phlx-2016-42]
Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Qualified
Contingent Cross Rebates and Certain Floor Options Transaction Charges
April 11, 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 28, 2016, NASDAQ PHLX LLC (``Phlx'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I, II, and III, below,
which Items have been prepared by the Exchange. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Exchange's Pricing Schedule at
Section II, entitled ``Multiply Listed Options Fees.'' Specifically,
the Exchange is proposing to amend the Qualified Contingent Cross
(``QCC'') rebates and certain floor Options Transaction Charges.
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
[[Page 22325]]
the proposed rule change and discussed any comments it received on the
proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the Exchange's
Pricing Schedule at Section II, entitled ``Multiply Listed Options
Fees.'' Specifically, the Exchange is proposing to amend QCC rebates
and certain floor Options Transaction Charges. Each change will be
described below in more detail.
Section II--QCC Rebates
Today, the Exchange assesses a QCC Transaction Fee of $0.20 per
contract to a Specialist,\3\ Market Maker,\4\ Professional,\5\ Firm \6\
and Broker-Dealer.\7\ The Exchange also pays rebates on QCC Orders
based on the following five tier rebate schedule:
---------------------------------------------------------------------------
\3\ A ``Specialist'' is an Exchange member who is registered as
an options specialist pursuant to Rule 1020(a).
\4\ The term ``Market Maker'' includes Registered Options
Traders (``ROT''). See Exchange Rule 1014 (b)(i) and (ii). A ROT
includes a Streaming Quote Trader or ``SQT,'' a Remote Streaming
Quote Trader or ``RSQT'' and a Non-SQT, which by definition is
neither a SQT nor a RSQT. A ROT is defined in Exchange Rule 1014(b)
as a regular member [sic] of the Exchange located on the trading
floor who has received permission from the Exchange to trade in
options for his own account. An SQT is a ROT who has received
permission from the Exchange to generate and submit option
quotations electronically in options to which such SQT is assigned.
An SQT may only submit such quotations while such SQT is physically
present on the floor of the Exchange. An SQT may only trade in a
market making capacity in classes of options in which the SQT is
assigned. See Rule 1014(b)(11)(A) [sic]. An RSQT is an ROT that is a
member affiliated with and [sic] Remote Streaming Quote Organization
with no physical trading floor presence who has received permission
from the Exchange to generate and submit option quotations
electronically in options to which such RSQT has been assigned. A
qualified RSQT may function as a Remote Specialist upon Exchange
approval. See Rule 1014(ii)(B) [sic].
\5\ 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).
\6\ The term ``Firm'' applies to any transaction that is
identified by a member or member organization for clearing in the
Firm range at The Options Clearing Corporation.
\7\ The term ``Broker-Dealer'' applies to any transaction which
is not subject to any of the other transaction fees applicable
within a particular category.
QCC Rebate Schedule
------------------------------------------------------------------------
Rebate per
Tier Threshold contract
------------------------------------------------------------------------
Tier 1......................... 0 to 299,999 contracts $0.00
in a month.
Tier 2......................... 300,000 to 499,999 0.07
contracts in a month.
Tier 3......................... 500,000 to 699,999 0.08
contracts in a month.
Tier 4......................... 700,000 to 999,999 0.09
contracts in a month.
Tier 5......................... Over 1,000,000 0.11
contracts in a month.
------------------------------------------------------------------------
Rebates are paid for all qualifying executed QCC Orders, as defined
in Rule 1080(o) \8\ and Floor QCC Orders, as defined in Rule
1064(e),\9\ except where the transaction is either: (i) Customer-to-
Customer; or (ii) a dividend, merger, short stock interest or reversal
or conversion strategy execution.\10\ The maximum QCC Rebate to be paid
in a given month will not exceed $450,000.\11\
---------------------------------------------------------------------------
\8\ A QCC Order is comprised of an order to buy or sell at least
1000 contracts [sic] that is identified as being part of a qualified
contingent trade, as that term is defined in Rule 1080(o)(3),
coupled with a contra-side order to buy or sell an equal number of
contracts. The QCC Order must be executed at a price at or between
the National Best Bid and Offer and be rejected if a Customer order
is resting on the Exchange book at the same price. A QCC Order shall
only be submitted electronically from off the floor to the PHLX XL
II System. See Rule 1080(o). See also Securities Exchange Act
Release No. 64249 (April 7, 2011), 76 FR 20773 (April 13, 2011) (SR-
Phlx-2011-47) (a rule change to establish a QCC Order to facilitate
the execution of stock/option Qualified Contingent Trades (``QCTs'')
that satisfy the requirements of the trade through exemption in
connection with Rule 611(d) of Regulation NMS).
\9\ A Floor QCC Order must: (i) Be for at least 1,000 contracts
[sic]; (ii) meet the six requirements of Rule 1080(o)(3) which are
modeled on the 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. In order to satisfy the 1,000-contract requirement
[sic], a Floor QCC Order must be for 1,000 contracts and could not
be, for example, two 500-contract orders or two 500-contract legs.
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).
\10\ See Section II of the Pricing Schedule.
\11\ Id.
---------------------------------------------------------------------------
The Exchange proposes to amend the QCC rebate schedule to add a new
tier to create a six tier rebate schedule and amend the existing tiers.
The proposed QCC rebate schedule would be as follows:
QCC Rebate Schedule
------------------------------------------------------------------------
Rebate per
Tier Threshold contract
------------------------------------------------------------------------
Tier 1......................... 0 to 99,999 contracts $0.00
in a month.
Tier 2......................... 100,000 to 299,999 0.05
contracts in a month.
Tier 3......................... 300,000 to 499,999 0.07
contracts in a month.
Tier 4......................... 500,000 to 699,999 0.08
contracts in a month.
Tier 5......................... 700,000 to 999,999 0.09
contracts in a month.
Tier 6......................... Over 1,000,000 0.11
contracts in a month.
------------------------------------------------------------------------
Tier 1 does not currently pay a QCC rebate between 0 and 299,999
contracts in a month. The Exchange will continue to pay no rebate for
Tier 1, however the Exchange proposes to lower the volume threshold to
between 0 and 99,999 contracts in month. The Exchange proposes a new
Tier 2 QCC rebate which would pay a QCC rebate of $0.05
[[Page 22326]]
per contract for volume between 100,000 and 299,999 contracts in a
month. The remainder of the QCC rebate tiers would be renumbered.
Current Tier 2 would be renumbered as Tier 3 and would continue to pay
a rebate of $0.07 per contract for volume between 300,000 and 499,999
contracts in a month. Current Tier 3 would be renumbered to Tier 4 and
would continue to pay a QCC rebate of $0.08 per contract for volume
between 500,000 and 699,999. Current Tier 4 would be renumbered as Tier
5 and would continue to pay a $0.09 per contract rebate for volume
between 700,000 and 999,999 contracts in a month. Finally, current Tier
5 would be renumbered as Tier 6 and would continue to pay a QCC rebate
of $0.11 per contract for volume over 1,000,000 contracts in a month.
The Exchange believes that its proposed amendments to the QCC
rebates will provide an opportunity for additional members to receive
the rebate. The Exchange's proposal permits volume over 99,999 to
receive a rebate.
Section II--Multiply Listed Options Fees
The Exchange proposes to amend the current Floor Options
Transaction Charges in Section II of the Exchange's Pricing Schedule in
both Penny Pilot and non-Penny Pilot Options from $0.30 to $0.35 per
contract for Specialists and Market Makers. The Exchange believes that
these fees remain competitive with fees currently assessed today on
Phlx.
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, 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.'' \14\
---------------------------------------------------------------------------
\14\ Securities Exchange Act Release No. 51808 at 37499 (June 9,
2005) [sic] (``Regulation NMS Adopting Release'').
---------------------------------------------------------------------------
Likewise, in NetCoalition v. Securities and Exchange Commission
(``NetCoalition'') \15\ 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.\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\
---------------------------------------------------------------------------
\15\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Circuit 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
[sic]).
---------------------------------------------------------------------------
Section II--QCC Rebates
The Exchange believes that it is reasonable to add a new QCC rebate
tier and amend the current rebate tiers to lower the Tier 1 volume
threshold and start paying a rebate of $0.05 per contract for volume
between 100,000 to 299,999 contracts per month. The Exchange believes
that paying a QCC rebate starting at 100,000 contracts per month will
attract additional QCC volume on the Exchange. While the other rebate
tiers are not being amended and simply renumbered (current Tiers 2-6),
the Exchange believes these rebate tiers will continue to attract QCC
volume on the Exchange.
The Exchange believes that adding a new QCC rebate tier and
amending the current rebate tiers to lower the Tier 1 volume threshold
and start paying a rebate of $0.05 per contract for volume between
100,000 to 299,999 contracts per month is equitable and not unfairly
discriminatory because all market participants are eligible to transact
QCC Orders and receive the rebates.
Section II--Multiply Listed Options Fees
The Exchange's proposal to amend its Floor Options Transaction
Charges to increase Penny and non-Penny Pilot Options Transaction
Charges for Specialists and Market Makers is reasonable because the
proposed fees are within the range of other fees in Section II of the
Pricing Schedule.\19\ Also, Specialists and Market Makers pay a
Marketing Fee \20\ on electronic orders but do not pay a Marketing Fee
when transacting non-electronic orders, which is why the floor
transaction charges are higher as compared to electronic options
transaction charges for Specialists and Market Makers.
---------------------------------------------------------------------------
\19\ Section II Options Transaction Charges for Penny Pilot and
non-Penny Pilot Options range from $0.22 to $0.75 per contract for
Non-Customers.
\20\ The Marketing Fee is assessed on Specialists and Market
Makers when they elect to participate in the Marketing program. The
fees are assessed on electronically-delivered Customer orders. The
fees are available to be disbursed by the Exchange according to the
instructions of the Specialist or Market Maker to order flow
providers who are members or member organizations who submit, as
agent, Customer orders to the Exchange through a member or member
organization who is acting as agent for those customer orders. Any
excess funds billed but not utilized by the Specialist or Market
Maker are carried forward unless the Specialist or Market Maker
elects to have those funds rebated on a pro rata basis, reflected as
a credit on the monthly invoices. At the end of each calendar
quarter, the Exchange calculates the amount of excess funds from the
previous quarter and subsequently rebates excess funds on a pro-rata
basis to the applicable Specialist or Market Maker who paid into
that pool of funds. See Section II of the Pricing Schedule.
---------------------------------------------------------------------------
The Exchange's proposal to amend its Floor Options Transaction
Charges to increase Penny Options and non-Penny Pilot Options
Transaction Charges for Specialists and Market Makers is equitable and
not unfairly discriminatory because Specialists and Market Makers have
a time and place advantage on the trading floor with respect to orders,
unlike other market participants. A Professional, Broker-Dealer, or a
Firm would necessarily require a floor broker to represent their
trading interest on the trading floor as compared to a Specialist or
Market Maker that could directly transact such orders on the trading
floor. Further, the Exchange believes that to attract orders from a
Professional, Broker-Dealer or a Firm, via a floor broker, the rates
must be competitive with rates at other trading floors.
Therefore, the Exchange would continue to assess a Professional,
[[Page 22327]]
Broker-Dealer and a Firm a Floor Options Transaction Charge for Penny
Pilot Options and Non-Penny Pilot Options of $0.25 per contract.
Customers are not assessed an Options Transaction Charge because
Customer order flow is unique. Customer 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.
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.
In this instance, the proposed changes to the charges assessed and
credits available to member firms for execution of securities in
securities of all three Tapes do not impose a burden on competition
because the Exchange's execution services are completely voluntary and
subject to extensive competition both from other exchanges and from
off-exchange venues.
The Exchange believes that its proposed amendments to the QCC
rebate tiers and increase to the Specialist and Market Maker floor
options transaction charges do not impose an undue burden on inter-
market competition because the QCC rebates and Specialist and Market
Maker fees remain competitive with rebates and fees offered on other
options markets.\21\ 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.
---------------------------------------------------------------------------
\21\ The International Securities Exchange LLC (``ISE'') pays
QCC rebates ranging from $0.00 to $0.011 per contract. See ISE's
Schedule of Fees. Also, the Chicago Board Options Exchange,
Incorporated (``CBOE'') assess market-makers, DPMs and LLMs manual
fees based on a sliding scale which range from $0.03 to $0.23 per
contract depending on certain volume thresholds. See CBOE's Fees
Schedule.
---------------------------------------------------------------------------
The Exchange believes that adding a new QCC rebate tier and
amending the current rebate tiers to lower the Tier 1 volume threshold
and start paying a rebate of $0.05 per contract for volume between
100,000 to 299,999 contracts per month does not impose an undue burden
on intra-market competition because all market participants are
eligible to transact QCC Orders and receive a rebate.
The Exchange's proposal to amend its Floor Options Transaction
Charges to increase Penny Options and non-Penny Pilot Options
Transaction Charges for Specialists and Market Makers does not impose
an undue burden on intra-market competition because Specialists and
Market Makers have a time and place advantage on the trading floor with
respect to orders, unlike other market participants. Unlike other
market participants, a Specialist or Market Maker may directly transact
orders on the trading floor. Further, unlike Specialist or Market Maker
electronic orders, which are subject to a Marketing Fee, Specialist or
Market Maker floor orders are not subject to a Marketing Fee.
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.\22\
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. 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-2016-42 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-2016-42.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-2016-42 and should be
submitted on or before May 6, 2016.
[[Page 22328]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
---------------------------------------------------------------------------
\23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-08642 Filed 4-14-16; 8:45 am]
BILLING CODE 8011-01-P
