Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Pricing Schedule Under Section VIII, 39078-39081 [2016-14085]

Download as PDF ehiers on DSK5VPTVN1PROD with NOTICES 39078 Federal Register / Vol. 81, No. 115 / Wednesday, June 15, 2016 / Notices observation data, model output, and derived information products. 4. One important policy goal for Federal agencies has been to improve external users’ ability to find, access, and use Earth observation data and information products. In which of these three areas (finding, accessing, or using) have you witnessed improvements, if any? Please provide specific examples. 5. In the areas listed below, what could the Federal Government do to improve the Earth observations that you rely on? Please provide specific examples. You do not need to provide responses to all listed areas—please focus on those most relevant to your work. a. Maintain current observing systems. b. Incrementally improve or upgrade current observing systems. c. Develop new observing systems with significantly enhanced measurement capabilities. d. Develop new agency practices to improve the discoverability, accessibility, and usability of Earth observation data. 6. On what emerging technologies, techniques, and management practices should the Federal Government focus attention in the next few years to enhance public services, research in the public interest, and fundamental scientific inquiry? 7. What types of partnerships with Federal agencies, such as those listed below, show the most promise to address current gaps in Earth observation coverage and related service provision? Please provide specific examples. You do not need to provide responses to all listed areas—please focus on those most relevant to your work. You are also free to discuss other types of partnerships that are not listed below. a. Cooperative research and development agreements. b. Challenges and prizes. c. Joint ventures for Earth observation system development and operations. d. Citizen science and crowdsourced observations. 8. Is your organization concerned about a potential shortage of workers in the United States who are trained to develop, understand, or use Earth observation data and geospatial information? Please provide specific concerns. 9. What, if any, do you believe were the key accomplishments of the first National Plan and what impact did the National Plan have, if any, on your organization? Please provide specific examples. VerDate Sep<11>2014 15:15 Jun 14, 2016 Jkt 238001 10. The first National Plan identified eight Supporting Actions (pp. 20–27) required to maximize the benefits derived from the Nation’s Earth observations. In priority order, they are: Action 1: Coordinate and Integrate Observations Action 2: Improve Data Access, Management, and Interoperability Action 3: Increase Efficiency and Cost Savings Action 4: Improve Observation Density and Sampling Action 5: Maintain and Support Infrastructure Action 6: Explore Commercial Solutions Action 7: Maintain and Strengthen International Collaboration Action 8: Engage in Stakeholder-Driven Data Innovation Of the actions listed above most relevant to your work, where has the Federal Government been the most, or least, successful, and why? Please provide specific examples. Ted Wackler, Deputy Chief of Staff and Assistant Director. [FR Doc. 2016–14186 Filed 6–14–16; 8:45 am] BILLING CODE 3270–F6–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–78027; File No. SR–Phlx– 2016–64] Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange’s Pricing Schedule Under Section VIII June 9, 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 31, 2016, NASDAQ PHLX LLC (‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III, below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 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 under Section VIII, entitled ‘‘NASDAQ OMX 1 15 2 17 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00058 Fmt 4703 Sfmt 4703 PSX FEES,’’ with respect to execution and routing of orders in securities priced at $1 or more per share. 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 certain charges and credits for the use of the order execution and routing services of the NASDAQ OMX PSX System (‘‘PSX’’) by member organizations for all securities traded at $1 or more per share. The Exchange is proposing to: (1) Add an additional Consolidated Volume 3 requirement to the existing fee tiers assessed a member organization that enters an order that executes in PSX; (2) add an new default fee assessed a member organization that enters an order that executes in PSX in the security of any Tape 4 of $0.0030 per share executed; and (3) delete text from the preamble of paragraph (a)(1) of Section VIII, Order Execution and 3 Consolidated Volume is defined as the total consolidated volume reported to all consolidated transaction reporting plans by all exchanges and trade reporting facilities during a month in equity securities, excluding executed orders with a size of less than one round lot. For purposes of calculating Consolidated Volume and the extent of a member’s trading activity, expressed as a percentage of, or ratio to, Consolidated Volume, the date of the annual reconstitution of the Russell Investments Indexes shall be excluded from both total Consolidated Volume and the member’s trading activity. See of Section VIII, Order Execution and Routing, paragraph (a)(1). 4 There are three Tapes, which are based on the listing venue of the security: Tape C securities are Nasdaq-listed; Tape A securities are New York Stock Exchange-listed securities; and Tape B securities are listed on exchanges other than Nasdaq and NYSE. E:\FR\FM\15JNN1.SGM 15JNN1 Federal Register / Vol. 81, No. 115 / Wednesday, June 15, 2016 / Notices Routing concerning Consolidated Volume. First Change The purpose of the first change is to add a new requirement to qualify for each of the existing fee tiers assessed a member organization that enters an order that executes in PSX. The Exchange currently assesses a member organization a fee of $0.0029 per share executed in Nasdaq-listed securities (‘‘Tape C’’), and fee of $0.0028 per share executed in NYSE-Listed Securities (‘‘Tape A’’) and in securities listed on exchanges other than Nasdaq and NYSE (‘‘Tape B’’). These fees currently do not require a member organization to have met a performance measure in return for the fees, but rather are the ‘‘default’’ fees assessed for removal of liquidity from PSX. In light of the proposed new $0.0030 default removal fee discussed below, the Exchange is proposing to add a Consolidated Volume-based requirement to the existing fee tiers in order to qualify for the now-lower charges assessed member organizations for removing liquidity. Specifically, the Exchange is proposing to require a member organization to access 0.065% or more of Consolidated Volume during the month to be eligible to receive the lower charges assessed under the fee tiers. ehiers on DSK5VPTVN1PROD with NOTICES Second Change The purpose of the second change is to add a new default fee assessed a member organization that enters an order that executes in PSX in the security of any Tape. Currently, a member organization is assessed a fee of $0.0029 per share executed in Tape C securities, and fee of $0.0028 per share executed in Tape A and Tape B securities. The Exchange is proposing to assess a member organization that enters an order that executes in PSX a fee of $0.0030 per share executed in a security of any Tape. Third Change The purpose of the third change is to delete rule text from the preamble of paragraph (a)(1) of Section VIII, Order Execution and Routing, concerning Consolidated Volume. The rule currently defines Consolidated Volume as the total consolidated volume reported to all consolidated transaction reporting plans by all exchanges and trade reporting facilities during a month in equity securities, excluding executed orders with a size of less than one round lot. The Exchange excludes from the calculations of fees and credits that have a Consolidated Volume component all trading that occurs on the date of the VerDate Sep<11>2014 15:15 Jun 14, 2016 Jkt 238001 annual reconstitution of the Russell Investments. The annual reconstitution represents a day of abnormal trading volume, as the Russell Investment indexes adjust holdings to accurately reflect the current state of equity markets and their market segments.5 Consequently, the Exchange excludes the date of the Russell Investment reconstitution in all calculations of fees and credits because it is not reflective of a member organization’s normal trading. The Exchange expresses this under the rule by stating that, ‘‘[f]or purposes of calculating Consolidated Volume and the extent of a member’s trading activity, expressed as a percentage of, or ratio to, Consolidated Volume, the date of the annual reconstitution of the Russell Investments Indexes shall be excluded from both total Consolidated Volume and the member’s trading activity.’’ The Exchange believes that the text stating ‘‘expressed as a percentage of, or ratio to, Consolidated Volume’’ may be confusing to market participants in understanding how the Exchange excludes trading activity on the day of the Russell Investment reconstitution should the Exchange ever adopt a fee or credit tier based on a different measure of Consolidated Volume. Specifically, the Exchange seeks to clarify that all trading activity on the date of the Russell Investment reconstitution (including trading activity not based on a percentage or ratio of Consolidated Volume) is excluded from a member’s trading activity for determining credit and fee tiers. This proposed change has no impact on PSX at this time, as all tiers under the rule are currently expressed as a percentage of Consolidated Volume; however, if the Exchange adopted a new metric, such as a certain nominal level of share volume (e.g., a requirement to add 5 million shares), the Exchange wants to ensure that member organizations understand that all trading activity on the day of the Russell Investment reconstitution would be excluded for purposes of determining what fees and credits a member qualifies for. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 6 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act 7 in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges 5 See https://www.ftserussell.com/researchinsights/russell-reconstitution. 6 15 U.S.C. 78f(b). 7 15 U.S.C. 78f(b)(4) and (5). PO 00000 Frm 00059 Fmt 4703 Sfmt 4703 39079 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 proposed increases to the credits and charges in the fee schedule under the Exchange’s Pricing Schedule under Section VIII are reflective of the Exchange’s ongoing efforts to use pricing incentives to attract order flow to the Exchange and improve market quality, while also providing a profit to the Exchange through the operation of its market. First Change The Exchange believes that the proposed new requirement to qualify for each of the existing fee tiers assessed a member organization that enters an order that executes in PSX is reasonable because the Exchange is providing member organizations the ability to continue to have the ability to qualify for current lower removal fees. The Exchange uses credits and reduced fees to provide incentive to market participants to improve the markets. In the present case, the Exchange is adding to each of the existing fee tiers under the rule a new requirement that a member organization access 0.065% or more of Consolidated Volume during the month. Removal of liquidity adds to the price discovery process and therefore benefits all market participants. Consequently, the Exchange believes that requiring member organizations to improve the market through the removal of liquidity by a certain level of Consolidated Volume in return for lower liquidity removal fees is reasonable. The Exchange believes that the proposed new requirement to qualify for each of the lower fee tiers assessed a member organization that enters an order that executes in PSX is an equitable allocation and is not unfairly discriminatory because the Exchange will apply the same fee to all similarly situated members. The Exchange is not proposing to adjust the fee assessed for removal of the securities of each Tape, but rather is adding a new Consolidated Volume-based requirement in light of the proposed new $0.0030 per share executed fee, which will be the new ‘‘default’’ rate assessed member organizations for removal of liquidity. Thus, to qualify for a reduced fee in any of the amended fee tiers, a member organization must accesses 0.065% or more of Consolidated Volume during the month. E:\FR\FM\15JNN1.SGM 15JNN1 39080 Federal Register / Vol. 81, No. 115 / Wednesday, June 15, 2016 / Notices Second Change The Exchange believes that the new base removal fee is reasonable because although it will increase the fee assessed to access liquidity on the Exchange, it is identical to the fee assessed by The NASDAQ Stock Market LLC (‘‘Nasdaq’’) for removing liquidity in the securities of any Tape from the Nasdaq Market Center.8 As a general principle, the Exchange must, from time to time, adjust the level of fees and credits provided to most efficiently allocate such fees and credits in terms of marketimproving behavior. In this regard, the Exchange is limited in how far it may reduce fees and in the amount of credits that it can provide to market participants. In the present case, the Exchange has observed high levels of liquidity removal on PSX sufficient to allow the Exchange to increase removal fees, which will allow the Exchange to offer credits for market-improving behavior, and to realize a greater profit. The Exchange believes that the increased removal fee is an equitable allocation and is not unfairly discriminatory because the Exchange will apply the same fee to all similarly situated members. In this regard, the Exchange notes that the fee is uniform across the securities of all three Tapes. In addition, the Exchange will offer reduced fees for removal of liquidity, but in return for market improving behavior. Last, the Exchange believes that increasing the fee assessed does not discriminate unfairly because it is a modest increase that is consistent with the fee assessed for removing liquidity at other exchanges. ehiers on DSK5VPTVN1PROD with NOTICES Third Change The Exchange believes that deleting rule text from the preamble of paragraph (a)(1) of Section VIII, Order Execution and Routing, concerning Consolidated Volume is reasonable because it will help clarify how credit and fee tiers that rely on a calculation of Consolidated Volume will be handled by the Exchange during the annual Russell Indexes reconstitution. Currently, the rule text could be interpreted to apply to only a member organization’s trading activity under a fee or credit tier that is expressed as a ratio or percentage of Consolidated Volume. The Exchange believes that, should it ever adopt a credit or fee tier based on another measure of Consolidated Volume, such an interpretation would undermine the Exchange’s intent to exclude the abnormal trading activity that occurs on that day. Accordingly, the Exchange 8 See Nasdaq Rules 7018(a)(1)–(3). VerDate Sep<11>2014 15:15 Jun 14, 2016 Jkt 238001 believes that it is reasonable to remove the potentially confusing rule text. The Exchange believes that deleting rule text from the preamble of paragraph (a)(1) of Section VIII, Order Execution and Routing, concerning Consolidated Volume is an equitable allocation and is not unfairly discriminatory because the proposed change only serves to clarify the application of the rule and does not alter how Consolidated Volume is calculated. Thus, the Exchange will apply the same process to all similarly situated member organizations that seek to qualify under a fee or credit tier under the rule that relies on a calculation of Consolidated Volume. 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 changes to the fees assessed for removing liquidity do not impose a burden on competition because the Exchange membership is optional and is the subject of competition from other exchanges. The increased charges are reflective of the intent to balance the fees that it assesses with the order flow it receives. For these reasons, the Exchange does not believe that any of the proposed changes will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets. Moreover, because there are numerous competitive alternatives to the use of the Exchange, it is likely that the Exchange will lose market share as a result of the changes if they are unattractive to market participants. As noted above, the PO 00000 Frm 00060 Fmt 4703 Sfmt 4703 proposed changes are consistent with similar fees assessed members of other markets. 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.9 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–2016–64 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–Phlx–2016–64. 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 9 15 E:\FR\FM\15JNN1.SGM U.S.C. 78s(b)(3)(A)(ii). 15JNN1 Federal Register / Vol. 81, No. 115 / Wednesday, June 15, 2016 / Notices 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–2016–64 and should be submitted on or before July 6, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.10 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–14085 Filed 6–14–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–78026; File No. SR–FINRA– 2016–018] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change To Amend FINRA Rules 2210 (Communications With the Public), 2213 (Requirements for the Use of Bond Mutual Fund Volatility Ratings), and 2214 (Requirements for the Use of Investment Analysis Tools) ehiers on DSK5VPTVN1PROD with NOTICES June 9, 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 25, 2016, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) 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 substantially prepared by FINRA. The Commission is publishing this notice to CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. solicit comments on the proposed rule change from interested persons. 2214 and the content and disclosure requirements in FINRA Rule 2213. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Proposed Amendments FINRA is proposing amendments that would revise the filing requirements in FINRA Rule 2210 (Communications with the Public) and FINRA Rule 2214 (Requirements for the Use of Investment Analysis Tools) and the content and disclosure requirements in FINRA Rule 2213 (Requirements for the Use of Bond Mutual Fund Volatility Ratings). The text of the proposed rule change is available on FINRA’s Web site at https://www.finra.org, at the principal office of FINRA 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, FINRA 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. FINRA 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 Background In April 2014, FINRA launched a retrospective review of its communications with the public rules to assess their effectiveness and efficiency. In December 2014, FINRA published a report on the assessment phase of the review.3 The report concluded that, while the rules have met their intended investor protection objectives, they could benefit from some updating to better align the investor protection benefits and the economic impacts. To this end, FINRA recommended consideration of a combination of rule proposals, guidance and administrative measures, to enhance the efficiency of the rules with no reduction in investor protection. Pursuant to these recommendations, FINRA initially is proposing amendments to the filing requirements in FINRA Rule 2210 and FINRA Rule 10 17 1 15 VerDate Sep<11>2014 15:15 Jun 14, 2016 3 See Retrospective Rule Report, Communications with the Public, December 2014. Jkt 238001 39081 PO 00000 Frm 00061 Fmt 4703 Sfmt 4703 New Member Communications FINRA Rule 2210(c)(1)(A) currently requires new FINRA members to file with FINRA retail communications used in any electronic or other public media at least 10 business days prior to use. This requirement extends for one year from the effective date of the firm’s membership. This new firm filing requirement only applies to broadly disseminated retail communications, such as generally accessible Web sites, print media communications, and television and radio commercials. While FINRA believes that the requirement for new members to file their broadly disseminated retail communications serves a useful purpose, since new members may not be as familiar with the standards that apply to retail communications as more established members, the requirement to file these communications at least 10 business days prior to use can delay members’ abilities to communicate with the public in a timely manner according to FINRA. For example, if a new member wishes to update its public Web site with new information, the member must first file the proposed update with FINRA and wait at least 10 business days before it can post this update on its Web site. FINRA believes that such a delay may hinder its ability to communicate important information to its existing and prospective customers. FINRA believes it can continue to protect investors from potential harm without imposing this time delay on new members by reviewing new members’ communications on a postuse, rather than a pre-use, basis. FINRA has found a post-use filing requirement to be an effective investor protection approach for retail communications with similar risk profiles as FINRA typically sees from new members. Accordingly, FINRA proposes to revise the new member filing requirement to require new members to file retail communications used in electronic or other public media within 10 business days of first use for a one-year period, rather than requiring these filings at least 10 business days prior to use.4 4 See proposed amendments to FINRA Rule 2210(c)(1)(A). This proposed change also would delete as redundant current rule text that permits a new member to file a retail communication that is a free writing prospectus filed with the SEC pursuant to Securities Act Rule 433(d)(1)(ii), within 10 business days of first use rather than at least 10 business days prior to first use. E:\FR\FM\15JNN1.SGM 15JNN1

Agencies

[Federal Register Volume 81, Number 115 (Wednesday, June 15, 2016)]
[Notices]
[Pages 39078-39081]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-14085]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78027; File No. SR-Phlx-2016-64]


Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Exchange's Pricing Schedule Under Section VIII

June 9, 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 31, 2016, NASDAQ PHLX LLC (``Exchange'') filed with the 
Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change as described in Items I, II, and III, below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's Pricing Schedule 
under Section VIII, entitled ``NASDAQ OMX PSX FEES,'' with respect to 
execution and routing of orders in securities priced at $1 or more per 
share.
    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 certain charges 
and credits for the use of the order execution and routing services of 
the NASDAQ OMX PSX System (``PSX'') by member organizations for all 
securities traded at $1 or more per share. The Exchange is proposing 
to: (1) Add an additional Consolidated Volume \3\ requirement to the 
existing fee tiers assessed a member organization that enters an order 
that executes in PSX; (2) add an new default fee assessed a member 
organization that enters an order that executes in PSX in the security 
of any Tape \4\ of $0.0030 per share executed; and (3) delete text from 
the preamble of paragraph (a)(1) of Section VIII, Order Execution and

[[Page 39079]]

Routing concerning Consolidated Volume.
---------------------------------------------------------------------------

    \3\ Consolidated Volume is defined as the total consolidated 
volume reported to all consolidated transaction reporting plans by 
all exchanges and trade reporting facilities during a month in 
equity securities, excluding executed orders with a size of less 
than one round lot. For purposes of calculating Consolidated Volume 
and the extent of a member's trading activity, expressed as a 
percentage of, or ratio to, Consolidated Volume, the date of the 
annual reconstitution of the Russell Investments Indexes shall be 
excluded from both total Consolidated Volume and the member's 
trading activity. See of Section VIII, Order Execution and Routing, 
paragraph (a)(1).
    \4\ There are three Tapes, which are based on the listing venue 
of the security: Tape C securities are Nasdaq-listed; Tape A 
securities are New York Stock Exchange-listed securities; and Tape B 
securities are listed on exchanges other than Nasdaq and NYSE.
---------------------------------------------------------------------------

First Change
    The purpose of the first change is to add a new requirement to 
qualify for each of the existing fee tiers assessed a member 
organization that enters an order that executes in PSX. The Exchange 
currently assesses a member organization a fee of $0.0029 per share 
executed in Nasdaq-listed securities (``Tape C''), and fee of $0.0028 
per share executed in NYSE-Listed Securities (``Tape A'') and in 
securities listed on exchanges other than Nasdaq and NYSE (``Tape B''). 
These fees currently do not require a member organization to have met a 
performance measure in return for the fees, but rather are the 
``default'' fees assessed for removal of liquidity from PSX. In light 
of the proposed new $0.0030 default removal fee discussed below, the 
Exchange is proposing to add a Consolidated Volume-based requirement to 
the existing fee tiers in order to qualify for the now-lower charges 
assessed member organizations for removing liquidity. Specifically, the 
Exchange is proposing to require a member organization to access 0.065% 
or more of Consolidated Volume during the month to be eligible to 
receive the lower charges assessed under the fee tiers.
Second Change
    The purpose of the second change is to add a new default fee 
assessed a member organization that enters an order that executes in 
PSX in the security of any Tape. Currently, a member organization is 
assessed a fee of $0.0029 per share executed in Tape C securities, and 
fee of $0.0028 per share executed in Tape A and Tape B securities. The 
Exchange is proposing to assess a member organization that enters an 
order that executes in PSX a fee of $0.0030 per share executed in a 
security of any Tape.
Third Change
    The purpose of the third change is to delete rule text from the 
preamble of paragraph (a)(1) of Section VIII, Order Execution and 
Routing, concerning Consolidated Volume. The rule currently defines 
Consolidated Volume as the total consolidated volume reported to all 
consolidated transaction reporting plans by all exchanges and trade 
reporting facilities during a month in equity securities, excluding 
executed orders with a size of less than one round lot. The Exchange 
excludes from the calculations of fees and credits that have a 
Consolidated Volume component all trading that occurs on the date of 
the annual reconstitution of the Russell Investments. The annual 
reconstitution represents a day of abnormal trading volume, as the 
Russell Investment indexes adjust holdings to accurately reflect the 
current state of equity markets and their market segments.\5\ 
Consequently, the Exchange excludes the date of the Russell Investment 
reconstitution in all calculations of fees and credits because it is 
not reflective of a member organization's normal trading. The Exchange 
expresses this under the rule by stating that, ``[f]or purposes of 
calculating Consolidated Volume and the extent of a member's trading 
activity, expressed as a percentage of, or ratio to, Consolidated 
Volume, the date of the annual reconstitution of the Russell 
Investments Indexes shall be excluded from both total Consolidated 
Volume and the member's trading activity.'' The Exchange believes that 
the text stating ``expressed as a percentage of, or ratio to, 
Consolidated Volume'' may be confusing to market participants in 
understanding how the Exchange excludes trading activity on the day of 
the Russell Investment reconstitution should the Exchange ever adopt a 
fee or credit tier based on a different measure of Consolidated Volume. 
Specifically, the Exchange seeks to clarify that all trading activity 
on the date of the Russell Investment reconstitution (including trading 
activity not based on a percentage or ratio of Consolidated Volume) is 
excluded from a member's trading activity for determining credit and 
fee tiers. This proposed change has no impact on PSX at this time, as 
all tiers under the rule are currently expressed as a percentage of 
Consolidated Volume; however, if the Exchange adopted a new metric, 
such as a certain nominal level of share volume (e.g., a requirement to 
add 5 million shares), the Exchange wants to ensure that member 
organizations understand that all trading activity on the day of the 
Russell Investment reconstitution would be excluded for purposes of 
determining what fees and credits a member qualifies for.
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    \5\ See https://www.ftserussell.com/research-insights/russell-reconstitution.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \6\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act \7\ 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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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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    The proposed increases to the credits and charges in the fee 
schedule under the Exchange's Pricing Schedule under Section VIII are 
reflective of the Exchange's ongoing efforts to use pricing incentives 
to attract order flow to the Exchange and improve market quality, while 
also providing a profit to the Exchange through the operation of its 
market.
First Change
    The Exchange believes that the proposed new requirement to qualify 
for each of the existing fee tiers assessed a member organization that 
enters an order that executes in PSX is reasonable because the Exchange 
is providing member organizations the ability to continue to have the 
ability to qualify for current lower removal fees. The Exchange uses 
credits and reduced fees to provide incentive to market participants to 
improve the markets. In the present case, the Exchange is adding to 
each of the existing fee tiers under the rule a new requirement that a 
member organization access 0.065% or more of Consolidated Volume during 
the month. Removal of liquidity adds to the price discovery process and 
therefore benefits all market participants. Consequently, the Exchange 
believes that requiring member organizations to improve the market 
through the removal of liquidity by a certain level of Consolidated 
Volume in return for lower liquidity removal fees is reasonable.
    The Exchange believes that the proposed new requirement to qualify 
for each of the lower fee tiers assessed a member organization that 
enters an order that executes in PSX is an equitable allocation and is 
not unfairly discriminatory because the Exchange will apply the same 
fee to all similarly situated members. The Exchange is not proposing to 
adjust the fee assessed for removal of the securities of each Tape, but 
rather is adding a new Consolidated Volume-based requirement in light 
of the proposed new $0.0030 per share executed fee, which will be the 
new ``default'' rate assessed member organizations for removal of 
liquidity. Thus, to qualify for a reduced fee in any of the amended fee 
tiers, a member organization must accesses 0.065% or more of 
Consolidated Volume during the month.

[[Page 39080]]

Second Change
    The Exchange believes that the new base removal fee is reasonable 
because although it will increase the fee assessed to access liquidity 
on the Exchange, it is identical to the fee assessed by The NASDAQ 
Stock Market LLC (``Nasdaq'') for removing liquidity in the securities 
of any Tape from the Nasdaq Market Center.\8\ As a general principle, 
the Exchange must, from time to time, adjust the level of fees and 
credits provided to most efficiently allocate such fees and credits in 
terms of market-improving behavior. In this regard, the Exchange is 
limited in how far it may reduce fees and in the amount of credits that 
it can provide to market participants. In the present case, the 
Exchange has observed high levels of liquidity removal on PSX 
sufficient to allow the Exchange to increase removal fees, which will 
allow the Exchange to offer credits for market-improving behavior, and 
to realize a greater profit.
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    \8\ See Nasdaq Rules 7018(a)(1)-(3).
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    The Exchange believes that the increased removal fee is an 
equitable allocation and is not unfairly discriminatory because the 
Exchange will apply the same fee to all similarly situated members. In 
this regard, the Exchange notes that the fee is uniform across the 
securities of all three Tapes. In addition, the Exchange will offer 
reduced fees for removal of liquidity, but in return for market 
improving behavior. Last, the Exchange believes that increasing the fee 
assessed does not discriminate unfairly because it is a modest increase 
that is consistent with the fee assessed for removing liquidity at 
other exchanges.
Third Change
    The Exchange believes that deleting rule text from the preamble of 
paragraph (a)(1) of Section VIII, Order Execution and Routing, 
concerning Consolidated Volume is reasonable because it will help 
clarify how credit and fee tiers that rely on a calculation of 
Consolidated Volume will be handled by the Exchange during the annual 
Russell Indexes reconstitution. Currently, the rule text could be 
interpreted to apply to only a member organization's trading activity 
under a fee or credit tier that is expressed as a ratio or percentage 
of Consolidated Volume. The Exchange believes that, should it ever 
adopt a credit or fee tier based on another measure of Consolidated 
Volume, such an interpretation would undermine the Exchange's intent to 
exclude the abnormal trading activity that occurs on that day. 
Accordingly, the Exchange believes that it is reasonable to remove the 
potentially confusing rule text.
    The Exchange believes that deleting rule text from the preamble of 
paragraph (a)(1) of Section VIII, Order Execution and Routing, 
concerning Consolidated Volume is an equitable allocation and is not 
unfairly discriminatory because the proposed change only serves to 
clarify the application of the rule and does not alter how Consolidated 
Volume is calculated. Thus, the Exchange will apply the same process to 
all similarly situated member organizations that seek to qualify under 
a fee or credit tier under the rule that relies on a calculation of 
Consolidated Volume.

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 changes to the fees assessed for removing 
liquidity do not impose a burden on competition because the Exchange 
membership is optional and is the subject of competition from other 
exchanges. The increased charges are reflective of the intent to 
balance the fees that it assesses with the order flow it receives. For 
these reasons, the Exchange does not believe that any of the proposed 
changes will impair the ability of members or competing order execution 
venues to maintain their competitive standing in the financial markets. 
Moreover, because there are numerous competitive alternatives to the 
use of the Exchange, it is likely that the Exchange will lose market 
share as a result of the changes if they are unattractive to market 
participants. As noted above, the proposed changes are consistent with 
similar fees assessed members of other markets.

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.\9\
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    \9\ 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-2016-64 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2016-64. 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

[[Page 39081]]

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-2016-64 and 
should be submitted on or before July 6, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-14085 Filed 6-14-16; 8:45 am]
 BILLING CODE 8011-01-P
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