Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to Customer Rebates, 30573-30575 [2016-11541]
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30573
Federal Register / Vol. 81, No. 95 / Tuesday, May 17, 2016 / Notices
Institution and settlement of
administrative proceedings;
Resolution of litigation claims;
Formal orders of investigation; and
Other matters relating to enforcement
proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
For further information and to
ascertain what, if any, matters have been
added, deleted or postponed, please
contact Brent J. Fields from the Office of
the Secretary at (202) 551–5400.
Dated: May 12, 2016.
Brent J. Fields,
Secretary.
[FR Doc. 2016–11704 Filed 5–13–16; 4:15 pm]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77811; File No. SR–Phlx–
2016–57]
Self-Regulatory Organizations;
NASDAQ PHLX LLC; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change Related to
Customer Rebates
May 11, 2016.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
Customer rebate tiers
Tier
Tier
Tier
Tier
Tier
1
2
3
4
5
.......................................
.......................................
.......................................
.......................................
.......................................
jstallworth on DSK7TPTVN1PROD with NOTICES
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
B, entitled ‘‘Customer Rebate Program.’’
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.
The purpose of the proposed rule
change is to amend the Exchange’s
Pricing Schedule at Section B, entitled
‘‘Customer Rebate Program.’’
Specifically, the Exchange is proposing
to exclude options overlying NDX 3 and
MNX 4 from receiving a Customer 5
rebate.
Currently, the Exchange has a
Customer Rebate Program consisting of
five tiers that pay Customer rebates on
three Categories, A,6 B 7 and C 8 of
transactions.9 A Phlx member qualifies
for a certain rebate tier based on the
percentage of total national customer
volume in multiply-listed options that it
transacts monthly on Phlx. The
Exchange calculates Customer volume
in Multiply Listed Options by totaling
electronically-delivered and executed
volume, excluding volume associated
with electronic Qualified Contingent
Cross (‘‘QCC’’) Orders,10 as defined in
Exchange Rule 1080(o).11 The Exchange
pays the following rebates: 12
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
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Category A
0.00%–0.60% .........................................................................
Above 0.60%–1.10% ..............................................................
Above 1.10%–1.60% ..............................................................
Above 1.60%–2.50% ..............................................................
Above 2.50% ..........................................................................
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 NDX represents options on the Nasdaq 100
Index traded under the symbol NDX (‘‘NDX’’).
4 MNX represents options on the one-tenth value
of the Nasdaq 100 Index traded under the symbol
MNX (‘‘MNX’’).
5 The term ‘‘Customer’’ applies to any transaction
that is identified by a member or member
organization for clearing in the Customer range at
The Options Clearing Corporation which is not for
the account of a broker or dealer or for the account
of a ‘‘Professional’’ (as that term is defined in Rule
1000(b)(14)).
6 Category A rebates are paid to members
executing electronically-delivered Customer Simple
Orders in Penny Pilot Options and Customer
Simple Orders in Non-Penny Pilot Options in
Section II symbols.
7 Category B rebates are paid on Customer PIXL
Orders in Section II symbols that execute against
non-Initiating Order interest. In the instance where
member organizations qualify for Tier 4 or higher
in the Customer Rebate Program, Customer PIXL
2 17
15:32 May 16, 2016
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.
Percentage thresholds of national customer volume in
multiply-listed equity and ETF options classes,
excluding spy options
(monthly)
1 15
VerDate Sep<11>2014
notice is hereby given that, on May 2,
2016, NASDAQ PHLX LLC (‘‘Phlx’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘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.
Jkt 238001
Orders that execute against a PIXL Initiating Order
are paid a rebate of $0.14 per contract. Rebates on
Customer PIXL Orders are capped at 4,000 contracts
per order for Simple PIXL Orders.
8 Category C rebates are paid to members
executing electronically-delivered Customer
Complex Orders in Penny Pilot Options and NonPenny Pilot Options in Section II symbols. Rebates
are paid on Customer PIXL Complex Orders in
Section II symbols that execute against nonInitiating Order interest. Customer Complex PIXL
Orders that execute against a Complex PIXL
Initiating Order are not paid a rebate under any
circumstances. The Category C Rebate is paid [sic]
when an electronically-delivered Customer
Complex Order, including Customer Complex PIXL
Order, executes against another electronicallydelivered Customer Complex Order. Rebates on
Customer PIXL Orders are capped at 4,000 contracts
per order leg for Complex PIXL Orders.
9 See Section B of the Pricing Schedule.
10 A QCC Order is comprised of an originating
order to buy or sell at least 1,000 contracts, or
10,000 contracts in the case of Mini Options, that
is identified as being part of a qualified contingent
PO 00000
Frm 00059
Fmt 4703
Sfmt 4703
$0.00
0.10
0.15
0.20
0.21
Category B
$0.00
0.10
0.12
0.16
0.17
Category C
$0.00
0.17
0.17
0.22
0.22
trade, as that term is defined in Rule 1080(o)(3),
coupled with a contra-side order or orders totaling
an equal number of contracts. See Rule 1080(o).
11 Members and member organizations under
common ownership may aggregate their Customer
volume for purposes of calculating the Customer
Rebate Tiers and receiving rebates. Common
ownership means members or member
organizations under 75% common ownership or
control. See the Preface of the Pricing Schedule.
12 SPY is included in the calculation of Customer
volume in Multiply Listed Options that are
electronically-delivered and executed for purposes
of the Customer Rebate Program, however, the
rebates do not apply to electronic executions in
SPY. Additionally, the Exchange pays a $0.02 per
contract Category A and B rebate and a $0.03 per
contract Category C rebate in addition to the
applicable Tier 2 and 3 rebate to a Specialist or
Market Maker or its member or member
organization affiliate under Common Ownership
provided the Specialist or Market Maker has
reached the Monthly Market Maker Cap, as defined
in Section II. See Section B of the Pricing Schedule.
E:\FR\FM\17MYN1.SGM
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30574
Federal Register / Vol. 81, No. 95 / Tuesday, May 17, 2016 / Notices
jstallworth on DSK7TPTVN1PROD with NOTICES
Today, options overlying NDX and
MNX are included in the total volume
to qualify a market participant for a
Customer Rebate. The Exchange is
proposing to continue to permit the
electronically-delivered and executed
volume associated with options
overlying NDX and MNX to be included
in the calculation of total market
volume. The Exchange proposes to
exclude options overlying NDX and
MNX as eligible to receive a Customer
Rebate in any Category.
In calculating electronically-delivered
and executed Customer volume in
Multiply Listed Options, the numerator
of the equation will remain unchanged
and will continue to include all
electronically-delivered and executed
Customer volume in Multiply Listed
Options, including NDX and MNX. The
denominator of that equation will also
remain unchanged and will continue to
include national customer volume in
multiply-listed equity and ETF options
volume. By including options overlying
NDX and MNX in the computation for
Customer Rebates, members will
continue to receive the benefit of those
transactions toward calculating their
eligible rebate tiers and earning a rebate
on all qualifying transactions.
At this time, the Exchange proposes to
not pay Customer Rebates on options
overlying NDX and MNX because of the
exclusivity of these options. NDX and
MNX are Phlx proprietary index options
which currently trade on Phlx and one
other options exchange. Therefore, the
Exchange would not pay rebates on
options overlying NDX and MNX as part
of the Customer Rebate Program. The
Exchange believes members will
continue to be afforded an opportunity
to achieve new Customer Rebate
Program tiers or maintain their current
level of Customer Rebate Program tiers.
2. Statutory Basis
The proposal is consistent with
Section 6(b) of the Act,13 in general, and
furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,14 in
particular, in that it provides for the
equitable allocation of reasonable dues,
fees and other charges among members
and issuers and other persons using any
facility or system which the Exchange
operates or controls, and is not designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
The Commission and the courts have
repeatedly expressed their preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
13 15
14 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
VerDate Sep<11>2014
15:32 May 16, 2016
Jkt 238001
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.’’ 15
Likewise, in NetCoalition v. Securities
and Exchange Commission 16 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.17 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.’’ 18
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’ . . . .’’ 19 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.
It is reasonable to no longer pay
Customer Rebates on options overlying
NDX and MNX in any Category (A, B or
C) because these proprietary index
options only trade on two options
markets at this time. The original intent
of the Customer Rebate Program was to
pay rebates on electronically-delivered
Multiply-Listed Options. By definition,
these indices qualify as Multiply-Listed
Options because they trade on more
than one options exchange. These
proprietary index options trade on Phlx
15 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37497 [sic], 37499 (June 29,
2005) (‘‘Regulation NMS Adopting Release’’).
16 See Securities Exchange Act Release No. 51808
(June 9, 2005) [sic] at 534–535.
17 See Securities Exchange Act Release No. 51808
(June 9, 2005) [sic] at 534.
18 See Securities Exchange Act Release No. 51808
(June 9, 2005) [sic] at 537.
19 See Securities Exchange Act Release No. 51808
(June 9, 2005) [sic] at 539 (quoting Securities
Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782–83 (December 9, 2008)
(SR–NYSEArca–2006–21) [sic].
PO 00000
Frm 00060
Fmt 4703
Sfmt 4703
and one other options exchange. The
Exchange does not desire to pay rebates
on options overlying NDX and MNX
because of their exclusivity. Despite the
fact that technically these options trade
on more than one venue, other
exchanges cannot list these options. The
Exchange believes it is reasonable to
continue to count options overlying
NDX and MNX in the total volume to
qualify a market participant for a
Customer Rebate, however, options
overlying NDX and MNX will no longer
be paid the Customer rebates in any
Category because of the exclusivity of
this option. Market participants would
continue to benefit from NDX and MNX
options volume in terms of qualifying
for Customer Rebate Tiers. The
Exchange believes that not paying
Customer Rebates on options overlying
NDX and MNX further aligns these
products with other Singly Listed
Options as compared to Multiply-Listed
Options.
It is equitable and not unfairly
discriminatory to no longer pay
Customer Rebates on options overlying
NDX and MNX in any Category because
the Exchange would apply its
calculation to determine the eligibility
and payment of Customer rebates in a
uniform manner. The Exchange’s
proposal to no longer pay Customer
Rebates on options overlying NDX and
MNX in any Category is equitable and
not unfairly discriminatory because the
Exchange would no longer pay
Customer Rebates on any transaction
with options overlying either NDX or
MNX to any market participant. Also,
any market participant is eligible to earn
a Customer Rebate.
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
E:\FR\FM\17MYN1.SGM
17MYN1
Federal Register / Vol. 81, No. 95 / Tuesday, May 17, 2016 / Notices
order routing practices, that the degree
to which fee changes in this market may
impose any burden on competition is
extremely limited.
The Exchange’s proposal to no longer
pay Customer Rebates on options
overlying NDX and MNX in any
Category does not impose an undue
burden on intra-market competition
because the Exchange would apply the
calculation of Customer rebates and
would pay rebates on qualifying orders
in a uniform manner. No market
participant would be paid a Customer
Rebate in options overlying NDX or
MNX. All market participants may
participate in the Customer Rebate
Program. Members would continue to
benefit from the inclusion of options
overlying NDX and MNX in the total
volume to qualify a market participant
for a Customer Rebate.
Also, the Exchange’s proposal to no
longer pay Customer Rebates on options
overlying NDX and MNX in any
Category does not impose an undue
burden on inter-market competition
because there is only one other
exchange that transacts options
overlying NDX and MNX through a
contractual agreement with the
Exchange. That venue may choose to
also not pay rebates on options
overlying NDX or MNX. Other venues
may not list these proprietary indices.
jstallworth on DSK7TPTVN1PROD with NOTICES
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
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,
20 15
U.S.C. 78s(b)(3)(A)(ii).
VerDate Sep<11>2014
15:32 May 16, 2016
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
[Release No. 34–77809; File No. SR–ICEEU–
2016–006]
• 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–2016–57 on the subject line.
Self-Regulatory Organizations; ICE
Clear Europe Limited; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change Relating to
Accounts Categories for Positions of
Clearing Member Affiliates
Paper Comments
May 11, 2016.
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
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 April 28
2016, ICE Clear Europe Limited (‘‘ICE
Clear Europe’’ or ‘‘Clearing House’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule changes described in
Items I, II and III below, which Items
have been prepared by ICE Clear
Europe. ICE Clear Europe filed the
proposal pursuant to Section 19(b)(3)(A)
of the Act,3 and Rule 19b–4(f)(i) 4
thereunder, so that the proposal was
effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
All submissions should refer to File
Number SR–Phlx–2016–57. 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–
2016–57 and should be submitted on or
before June 7, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–11541 Filed 5–16–16; 8:45 am]
BILLING CODE 8011–01–P
21 17
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30575
PO 00000
Fmt 4703
The principal purpose of the
proposed changes is to clarify the
account categories to be used for
positions of affiliates of Clearing
Members.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, ICE
Clear Europe included statements
concerning the purpose of and basis for
the proposed rule change. The text of
these statements may be examined at
the places specified in Item IV below.
ICE Clear Europe has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(4)(i).
2 17
CFR 200.30–3(a)(12).
Frm 00061
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Sfmt 4703
E:\FR\FM\17MYN1.SGM
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]]>Agencies
[Federal Register Volume 81, Number 95 (Tuesday, May 17, 2016)]
[Notices]
[Pages 30573-30575]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-11541]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77811; File No. SR-Phlx-2016-57]
Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Related to Customer
Rebates
May 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 May 2, 2016, NASDAQ PHLX LLC (``Phlx'' or ``Exchange'') filed
with the Securities and Exchange Commission (``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 B, entitled ``Customer Rebate Program.''
The text of the proposed rule change is available on the Exchange's
Web site at https://nasdaqomxphlx.cchwallstreet.com/, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the Exchange's
Pricing Schedule at Section B, entitled ``Customer Rebate Program.''
Specifically, the Exchange is proposing to exclude options overlying
NDX \3\ and MNX \4\ from receiving a Customer \5\ rebate.
---------------------------------------------------------------------------
\3\ NDX represents options on the Nasdaq 100 Index traded under
the symbol NDX (``NDX'').
\4\ MNX represents options on the one-tenth value of the Nasdaq
100 Index traded under the symbol MNX (``MNX'').
\5\ The term ``Customer'' applies to any transaction that is
identified by a member or member organization for clearing in the
Customer range at The Options Clearing Corporation which is not for
the account of a broker or dealer or for the account of a
``Professional'' (as that term is defined in Rule 1000(b)(14)).
---------------------------------------------------------------------------
Currently, the Exchange has a Customer Rebate Program consisting of
five tiers that pay Customer rebates on three Categories, A,\6\ B \7\
and C \8\ of transactions.\9\ A Phlx member qualifies for a certain
rebate tier based on the percentage of total national customer volume
in multiply-listed options that it transacts monthly on Phlx. The
Exchange calculates Customer volume in Multiply Listed Options by
totaling electronically-delivered and executed volume, excluding volume
associated with electronic Qualified Contingent Cross (``QCC'')
Orders,\10\ as defined in Exchange Rule 1080(o).\11\ The Exchange pays
the following rebates: \12\
---------------------------------------------------------------------------
\6\ Category A rebates are paid to members executing
electronically-delivered Customer Simple Orders in Penny Pilot
Options and Customer Simple Orders in Non-Penny Pilot Options in
Section II symbols.
\7\ Category B rebates are paid on Customer PIXL Orders in
Section II symbols that execute against non-Initiating Order
interest. In the instance where member organizations qualify for
Tier 4 or higher in the Customer Rebate Program, Customer PIXL
Orders that execute against a PIXL Initiating Order are paid a
rebate of $0.14 per contract. Rebates on Customer PIXL Orders are
capped at 4,000 contracts per order for Simple PIXL Orders.
\8\ Category C rebates are paid to members executing
electronically-delivered Customer Complex Orders in Penny Pilot
Options and Non-Penny Pilot Options in Section II symbols. Rebates
are paid on Customer PIXL Complex Orders in Section II symbols that
execute against non-Initiating Order interest. Customer Complex PIXL
Orders that execute against a Complex PIXL Initiating Order are not
paid a rebate under any circumstances. The Category C Rebate is paid
[sic] when an electronically-delivered Customer Complex Order,
including Customer Complex PIXL Order, executes against another
electronically-delivered Customer Complex Order. Rebates on Customer
PIXL Orders are capped at 4,000 contracts per order leg for Complex
PIXL Orders.
\9\ See Section B of the Pricing Schedule.
\10\ A QCC Order is comprised of an originating order to buy or
sell at least 1,000 contracts, or 10,000 contracts in the case of
Mini Options, 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 or orders totaling an equal number
of contracts. See Rule 1080(o).
\11\ Members and member organizations under common ownership may
aggregate their Customer volume for purposes of calculating the
Customer Rebate Tiers and receiving rebates. Common ownership means
members or member organizations under 75% common ownership or
control. See the Preface of the Pricing Schedule.
\12\ SPY is included in the calculation of Customer volume in
Multiply Listed Options that are electronically-delivered and
executed for purposes of the Customer Rebate Program, however, the
rebates do not apply to electronic executions in SPY. Additionally,
the Exchange pays a $0.02 per contract Category A and B rebate and a
$0.03 per contract Category C rebate in addition to the applicable
Tier 2 and 3 rebate to a Specialist or Market Maker or its member or
member organization affiliate under Common Ownership provided the
Specialist or Market Maker has reached the Monthly Market Maker Cap,
as defined in Section II. See Section B of the Pricing Schedule.
----------------------------------------------------------------------------------------------------------------
Percentage thresholds of
national customer volume in
multiply-listed equity and
Customer rebate tiers ETF options classes, Category A Category B Category C
excluding spy options
(monthly)
----------------------------------------------------------------------------------------------------------------
Tier 1............................. 0.00%-0.60%................ $0.00 $0.00 $0.00
Tier 2............................. Above 0.60%-1.10%.......... 0.10 0.10 0.17
Tier 3............................. Above 1.10%-1.60%.......... 0.15 0.12 0.17
Tier 4............................. Above 1.60%-2.50%.......... 0.20 0.16 0.22
Tier 5............................. Above 2.50%................ 0.21 0.17 0.22
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[[Page 30574]]
Today, options overlying NDX and MNX are included in the total
volume to qualify a market participant for a Customer Rebate. The
Exchange is proposing to continue to permit the electronically-
delivered and executed volume associated with options overlying NDX and
MNX to be included in the calculation of total market volume. The
Exchange proposes to exclude options overlying NDX and MNX as eligible
to receive a Customer Rebate in any Category.
In calculating electronically-delivered and executed Customer
volume in Multiply Listed Options, the numerator of the equation will
remain unchanged and will continue to include all electronically-
delivered and executed Customer volume in Multiply Listed Options,
including NDX and MNX. The denominator of that equation will also
remain unchanged and will continue to include national customer volume
in multiply-listed equity and ETF options volume. By including options
overlying NDX and MNX in the computation for Customer Rebates, members
will continue to receive the benefit of those transactions toward
calculating their eligible rebate tiers and earning a rebate on all
qualifying transactions.
At this time, the Exchange proposes to not pay Customer Rebates on
options overlying NDX and MNX because of the exclusivity of these
options. NDX and MNX are Phlx proprietary index options which currently
trade on Phlx and one other options exchange. Therefore, the Exchange
would not pay rebates on options overlying NDX and MNX as part of the
Customer Rebate Program. The Exchange believes members will continue to
be afforded an opportunity to achieve new Customer Rebate Program tiers
or maintain their current level of Customer Rebate Program tiers.
2. Statutory Basis
The proposal is consistent with Section 6(b) of the Act,\13\ in
general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of
the Act,\14\ in particular, in that it provides for the equitable
allocation of reasonable dues, fees and other charges among members and
issuers and other persons using any facility or system which the
Exchange operates or controls, and is not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(4) and (5).
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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.'' \15\
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\15\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37497 [sic], 37499 (June 29, 2005) (``Regulation NMS
Adopting Release'').
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Likewise, in NetCoalition v. Securities and Exchange Commission
\16\ 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.\17\ 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.'' \18\
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\16\ See Securities Exchange Act Release No. 51808 (June 9,
2005) [sic] at 534-535.
\17\ See Securities Exchange Act Release No. 51808 (June 9,
2005) [sic] at 534.
\18\ See Securities Exchange Act Release No. 51808 (June 9,
2005) [sic] at 537.
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Further, ``[n]o one disputes that competition for order flow is
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market
system, buyers and sellers of securities, and the broker-dealers that
act as their order-routing agents, have a wide range of choices of
where to route orders for execution'; [and] `no exchange can afford to
take its market share percentages for granted' because `no exchange
possesses a monopoly, regulatory or otherwise, in the execution of
order flow from broker dealers' . . . .'' \19\ Although the court and
the SEC were discussing the cash equities markets, the Exchange
believes that these views apply with equal force to the options
markets.
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\19\ See Securities Exchange Act Release No. 51808 (June 9,
2005) [sic] at 539 (quoting Securities Exchange Act Release No.
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008)
(SR-NYSEArca-2006-21) [sic].
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It is reasonable to no longer pay Customer Rebates on options
overlying NDX and MNX in any Category (A, B or C) because these
proprietary index options only trade on two options markets at this
time. The original intent of the Customer Rebate Program was to pay
rebates on electronically-delivered Multiply-Listed Options. By
definition, these indices qualify as Multiply-Listed Options because
they trade on more than one options exchange. These proprietary index
options trade on Phlx and one other options exchange. The Exchange does
not desire to pay rebates on options overlying NDX and MNX because of
their exclusivity. Despite the fact that technically these options
trade on more than one venue, other exchanges cannot list these
options. The Exchange believes it is reasonable to continue to count
options overlying NDX and MNX in the total volume to qualify a market
participant for a Customer Rebate, however, options overlying NDX and
MNX will no longer be paid the Customer rebates in any Category because
of the exclusivity of this option. Market participants would continue
to benefit from NDX and MNX options volume in terms of qualifying for
Customer Rebate Tiers. The Exchange believes that not paying Customer
Rebates on options overlying NDX and MNX further aligns these products
with other Singly Listed Options as compared to Multiply-Listed
Options.
It is equitable and not unfairly discriminatory to no longer pay
Customer Rebates on options overlying NDX and MNX in any Category
because the Exchange would apply its calculation to determine the
eligibility and payment of Customer rebates in a uniform manner. The
Exchange's proposal to no longer pay Customer Rebates on options
overlying NDX and MNX in any Category is equitable and not unfairly
discriminatory because the Exchange would no longer pay Customer
Rebates on any transaction with options overlying either NDX or MNX to
any market participant. Also, any market participant is eligible to
earn a Customer Rebate.
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
[[Page 30575]]
order routing practices, that the degree to which fee changes in this
market may impose any burden on competition is extremely limited.
The Exchange's proposal to no longer pay Customer Rebates on
options overlying NDX and MNX in any Category does not impose an undue
burden on intra-market competition because the Exchange would apply the
calculation of Customer rebates and would pay rebates on qualifying
orders in a uniform manner. No market participant would be paid a
Customer Rebate in options overlying NDX or MNX. All market
participants may participate in the Customer Rebate Program. Members
would continue to benefit from the inclusion of options overlying NDX
and MNX in the total volume to qualify a market participant for a
Customer Rebate.
Also, the Exchange's proposal to no longer pay Customer Rebates on
options overlying NDX and MNX in any Category does not impose an undue
burden on inter-market competition because there is only one other
exchange that transacts options overlying NDX and MNX through a
contractual agreement with the Exchange. That venue may choose to also
not pay rebates on options overlying NDX or MNX. Other venues may not
list these proprietary indices.
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-2016-57 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-2016-57. 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-2016-57 and should be
submitted on or before June 7, 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. 2016-11541 Filed 5-16-16; 8:45 am]
BILLING CODE 8011-01-P
