Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend PIXL pricing, 11666-11670 [2017-03576]

Download as PDF 11666 Federal Register / Vol. 82, No. 36 / Friday, February 24, 2017 / Notices II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change address: OIRA_Submission@ omb.eop.gov. Brian D. Foster, Clearance Officer. [FR Doc. 2017–03578 Filed 2–23–17; 8:45 am] BILLING CODE 7905–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–80064; File No. SR–Phlx– 2017–15] Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend PIXL pricing 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 February 17, 2017. 1. Purpose Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on February 8, 2017, 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. The purpose of the proposed rule change is to amend the Exchange’s Pricing Schedule at Section I, entitled ‘‘Rebates and Fees for Adding and Removing Liquidity in SPY,’’ to amend PIXL Executions in Standard and Poor’s Depositary Receipts/SPDRs (‘‘SPY’’).4 The Exchange also proposes to amend PIXL Pricing in Section IV, Part A, entitled ‘‘PIXL Pricing’’ for all other Multiply-Listed options symbols.5 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 I, entitled ‘‘Rebates and Fees for Adding and Removing Liquidity in SPY,’’ and Section IV, Part A entitled ‘‘PIXL Pricing’’ to amend pricing related to PIXL 3 executions. The text of the proposed rule change is available on the Exchange’s Web site at http://nasdaqphlx.cchwallstreet.com/ , at the principal office of the Exchange, and at the Commission’s Public Reference Room. 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 PIXLSM is the Exchange’s price improvement mechanism known as Price Improvement XL or PIXL. A member or member organization may electronically submit for execution an order it represents as agent on behalf of a public customer, broker-dealer, or any other entity (‘‘PIXL Order’’) against principal interest or against any other order (except as provided in Rule 1080(n)(i)(E)) it represents as agent (‘‘Initiating Order’’), provided it submits the PIXL order for electronic execution into the PIXL Auction pursuant to Rule 1080. See Exchange Rule 1080(n). asabaliauskas on DSK3SPTVN1PROD with NOTICES 2 17 VerDate Sep<11>2014 17:20 Feb 23, 2017 Jkt 241001 Proposed Amendments to Section I: Rebates and Fees for Adding and Removing Liquidity in SPY Section I of the Pricing Schedule contains pricing for PIXL Executions in SPY. Today, with respect to PIXL executions in SPY, the Exchange assesses an Initiating Order fee of $0.05 per contract. Today, the Initiating Order Fee for Professional,6 Firm,7 BrokerDealer,8 Specialist 9 and Market 4 Options overlying Standard and Poor’s Depositary Receipts/SPDRs (‘‘SPY’’) are based on the SPDR exchange-traded fund (‘‘ETF’’), which is designed to track the performance of the S&P 500 Index. 5 The Exchange initially filed the proposed pricing changes on February 2 [sic], 2017 (SR–Phlx– 2017–10). On February 8, 2017, the Exchange withdrew that filing and submitted this filing. The Commission notes that the Exchange filed SR– PHXL–2017–10 on February 1, 2017. 6 The term ‘‘Professional’’ applies to transactions for the accounts of Professionals, as defined in Exchange Rule 1000(b)(14). 7 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. 8 The term ‘‘Broker-Dealer’’ applies to any transaction which is not subject to any of the other transaction fees applicable within a particular category. 9 The term ‘‘Specialist’’ applies to transactions for the account of a Specialist (as defined in Exchange Rule 1020(a)). PO 00000 Frm 00144 Fmt 4703 Sfmt 4703 Maker 10 orders that are contra to a Customer 11 PIXL Order are reduced to $0.00 if the Customer PIXL Order is greater than 399 contracts. Further, when the PIXL Order is contra to the Initiating Order, a Customer PIXL Order is assessed $0.00 per contract and all other non-Customer market participants are assessed a $0.38 per contract fee when contra to an Initiating Order. When the PIXL Order is contra to other than the Initiating Order, the PIXL Order is assessed $0.00 per contract, unless the order is a Customer, in which case the Customer will receive a rebate of $0.38 per contract. All other NonCustomer contra parties to the PIXL Order, other than the Initiating Order, are assessed a Fee for Removing Liquidity of $0.42 per contract or will receive the Rebate for Adding Liquidity. The aforementioned applies to pricing in SPY. The Exchange proposes to continue to assess an Initiating Order fee of $0.05 per contract for SPY Orders within PIXL. The Exchange proposes to no longer offer the ability to not be assessed an Initiating Order Fee for Professional, Firm, Broker-Dealer, Specialist and Market Maker orders that are contra to a Customer PIXL Order, which are currently reduced to $0.00 if the Customer PIXL Order is greater than 399 contracts. The Exchange is replacing the incentive which reduces the Initiating Order Fee for Professional, Firm, Broker-Dealer, Specialist and Market Maker orders that are contra to a Customer PIXL Order, provided the 10 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 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 defined in Exchange Rule 1014(b)(ii)(A) as an ROT who has received permission from the Exchange to generate and submit option quotations electronically in options to which such SQT is assigned. An RSQT is defined in Exchange Rule in 1014(b)(ii)(B) as an ROT that is a member affiliated with an RSQTO 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 Remote Streaming Quote Trader Organization or ‘‘RSQTO,’’ which may also be referred to as a Remote Market Making Organization (‘‘RMO’’), is a member organization in good standing that satisfies the RSQTO readiness requirements in Rule 507(a). RSQTs may also be referred to as Remote Market Markers (‘‘RMMs’’). 11 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)). E:\FR\FM\24FEN1.SGM 24FEN1 Federal Register / Vol. 82, No. 36 / Friday, February 24, 2017 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES Customer PIXL Order is greater than 399 contracts, with another incentive to attract more liquidity for SPY PIXL Orders. The Exchange proposes to offer Phlx members or member organizations that qualify for Section B, Customer Rebate Tiers 12 2 through 6 or qualify for the Monthly Firm Fee Cap 13 a rebate of $0.10 per contract for all SPY Complex PIXL Orders greater than 499 contracts, provided the member or member organization executes an average of 2,500 contracts per day of SPY Complex PIXL Orders in a month. The Exchange desires to incentivize members or member organizations to transact a greater number of SPY Complex PIXL Orders while also incentivizing members or member organizations to submit Customer order flow on Phlx. The Exchange also proposes to amend its SPY PIXL pricing so that when the PIXL Order is contra to other than the Initiating Order, the PIXL Order will continue to be assessed $0.00 per contract, unless the order is a Customer, in which case the Customer will receive an increased rebate of $0.40 per contract (an increase from $0.38 per contract). The Exchange also proposes to amend the SPY PIXL pricing so that all other Non-Customer contra parties to the PIXL Order, other than the Initiating Order, will be assessed an increased Fee for Removing Liquidity of $0.50 per contract (an increase from $0.42 per contract) or will receive the Rebate for 12 Section B of the Pricing Schedule contains Customer Rebate Tiers which are calculated by totaling Customer volume in Multiply Listed Options (including SPY) that are electronicallydelivered and executed, except volume associated with electronic QCC Orders, as defined in Exchange Rule 1080(o). Rebates are paid on Customer Rebate Tiers according to certain categories. Members and member organizations under Common Ownership may aggregate their Customer volume for purposes of calculating the Customer Rebate Tiers and receiving rebates. Affiliated Entities may aggregate their Customer volume for purposes of calculating the Customer Rebate Tiers and receiving rebates. See Section B of the Pricing Schedule. 13 Firms are subject to a maximum fee of $75,000 (‘‘Monthly Firm Fee Cap’’). Firm Floor Option Transaction Charges and QCC Transaction Fees in Section II of the Pricing Schedule, in the aggregate, for one billing month may not exceed the Monthly Firm Fee Cap per member organization when such members are trading in their own proprietary account. All dividend, merger, and short stock interest strategy executions, as defined in Section II, will be excluded from the Monthly Firm Fee Cap. Reversal and conversion, jelly roll and box spread strategy executions, as defined in Section II, will be included in the Monthly Firm Fee Cap. QCC Transaction Fees are included in the calculation of the Monthly Firm Fee Cap. Member organizations must notify the Exchange in writing of all accounts in which the member is not trading in its own proprietary account. The Exchange will not make adjustments to billing invoices where transactions are commingled in accounts which are not subject to the Monthly Firm Fee Cap. VerDate Sep<11>2014 17:20 Feb 23, 2017 Jkt 241001 Adding Liquidity.14 The Exchange is increasing the Fee for Removing Liquidity because it seeks to offer an increase rebate to attract additional SPY PIXL Orders. The Exchange proposes that when the PIXL Order is contra to a Specialist or Market Maker quote, which was established at the initiation of a PIXL auction, the Customer PIXL Order will not be eligible for a rebate. The Exchange believes that this proposal will encourage Specialists and Market Makers to quote their best price at the initiation of a PIXL auction to obtain the rebate. Proposed Amendments to Section IV, Part A: PIXL Pricing Today, the PIXL pricing in all Multiply-Listed symbols except SPY is as described below. The Exchange assesses an Initiating Order Fee of $0.07 per contract. If the member or member organization qualifies for the Tier 4 or 5 Customer Rebate in Section B the member or member organization will be assessed $0.05 per contract. Today, if the member or member organization executes equal to or greater than 3.00% of National Customer Volume in Multiply-Listed equity and ETF Options Classes (excluding SPY Options) in a given month, the member or member organization will be assessed $0.00 per contract for Complex PIXL Orders. Today, any member or member organization under Common Ownership with another member or member organization that qualifies for a Customer Rebate Tier 4 or 5 in Section B, or executes equal to or greater than 3.00% of National Customer Volume in Multiply-Listed equity and ETF Options Classes (excluding SPY Options) in a given month will receive one of the PIXL Initiating Order discounts as described above. Today, the Initiating Order Fee for Professional, Firm, Broker-Dealer, Specialist and Market Maker orders that are contra to a Customer PIXL Order will be reduced to $0.00 if the Customer PIXL Order is greater than 399 contracts. The Exchange proposes to continue to assess an Initiating Order Fee of $0.07 per contract. The Exchange proposes that if the member or member organization qualifies for the Tier 3, 4 or 5 Customer Rebate in Section B the member or member organization will be assessed $0.05 per contract. The Tier 3 qualifier is being added to provide another means to qualify for the lower fee. If the member or member organization executes equal to or greater than 3.00% of National Customer Volume in Multiply-Listed equity and ETF Options Classes (excluding SPY Options) in a given month, the member or member organization will continue to be assessed $0.00 per contract for Complex PIXL Orders. Any member or member organization under Common Ownership with another member or member organization that qualifies for a Customer Rebate Tier 4 or 5 in Section B, or executes equal to or greater than 3.00% of National Customer Volume in Multiply-Listed equity and ETF Options Classes (excluding SPY Options) in a given month will continue to receive one of the PIXL Initiating Order discounts as described above. The Exchange proposes to no longer offer the ability to not be assessed an Initiating Order Fee for Professional, Firm, Broker-Dealer, Specialist and Market Maker orders that are contra to a Customer PIXL Order if the Customer PIXL Order is greater than 399 contracts. Instead, the Exchange proposes to offer another incentive to attract more liquidity for Complex PIXL Orders similar to proposed SPY PIXL pricing. The Exchange proposes to offer Phlx members and member organizations that qualify for Section B, Customer Rebate Tiers 2 through 6 15 or qualify for the Monthly Firm Fee Cap 16 a rebate of $0.10 per contract for all Complex PIXL Orders (excluding SPY Options) greater than 499 contracts, provided the member or member organization executes an average of 2,500 contracts per day of Complex SPY PIXL Orders in a month. The Exchange desires to incentivize members and member organizations to transact a greater number of SPY Complex PIXL Orders while also incentivizing members and member organizations to submit Customer order flow on Phlx to obtain the $0.10 rebate on all Complex PIXL Orders (excluding SPY Options). 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,17 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,18 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, and is not designed to permit unfair 15 See 14 The Rebates for Adding Liquidity for Simple Orders are in Part A and for Complex Orders in Part B. PO 00000 Frm 00145 Fmt 4703 Sfmt 4703 11667 note 12 above. note 13 above. 17 15 U.S.C. 78f(b). 18 15 U.S.C. 78f(b)(4) and (5). 16 See E:\FR\FM\24FEN1.SGM 24FEN1 11668 Federal Register / Vol. 82, No. 36 / Friday, February 24, 2017 / Notices 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 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.’’ 19 Likewise, in NetCoalition v. Securities and Exchange Commission 20 (‘‘NetCoalition’’) the D.C. Circuit upheld the Commission’s use of a market-based approach in evaluating the fairness of market data fees against a challenge claiming that Congress mandated a costbased approach.21 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.’’ 22 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’ . . . .’’ 23 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. Proposed Amendments to Section I: Rebates and Fees for Adding and Removing Liquidity in SPY asabaliauskas on DSK3SPTVN1PROD with NOTICES The Exchange’s proposal to no longer offer the ability to not be assessed an Initiating Order Fee for Professional, Firm, Broker-Dealer, Specialist and 19 Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (‘‘Regulation NMS Adopting Release’’). 20 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010). 21 See NetCoalition, at 534–535. 22 Id. at 537. 23 Id. at 539 (quoting Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770, 74782–83 (December 9, 2008) (SR– NYSEArca–2006–21)). VerDate Sep<11>2014 17:20 Feb 23, 2017 Jkt 241001 Market Maker orders that are contra to a Customer SPY PIXL Order if the Customer SPY PIXL Order is greater than 399 contracts and instead offer Phlx members or member organizations that qualify for Section B, Customer Rebate Tiers 24 2 through 6 or qualify for the Monthly Firm Fee Cap 25 a rebate of $0.10 per contract for all SPY Complex PIXL Orders greater than 499 contracts, provided the member or member organization executes an average of 2,500 contracts per day of SPY Complex PIXL Orders in a month is reasonable. The proposed rebate will incentivize members and member organizations to transact a greater number of SPY Complex PIXL Orders will also incentivizing members and member organizations to submit Customer order flow on Phlx. All members and member organizations are eligible for this rebate which may be obtained by either sending in the requisite amount of Customer order, thereby benefitting all participants with order flow with which to interact or benefitting members and member organizations that have $75,000 in transaction fees for the month, which contributed to the Exchange’s revenue. The Exchange desires to incentivize members and member organizations to transact a greater amount of Complex SPY Orders as compared to Simple SPY Orders. The quantity of orders is being increased to receive the rebate, which order flow benefits all participants through order interaction. The Exchange’s proposal to no longer offer the ability to not be assessed an Initiating Order Fee for Professional, Firm, Broker-Dealer, Specialist and Market Maker orders that are contra to a Customer SPY PIXL Order if the Customer SPY PIXL Order is greater than 399 contracts and instead offer Phlx members and member organizations that qualify for Section B, Customer Rebate Tiers 2 through 6 or qualify for the Monthly Firm Fee Cap a rebate of $0.10 per contract for all SPY Complex PIXL Orders greater than 499 contracts, provided the member or member organization executes an average of 2,500 contracts per day of SPY Complex PIXL Orders in a month is equitable and not unfairly discriminatory. All members and member organizations are eligible for the proposed rebate, provided they met the requisite qualifications. Members and member organizations would be uniformly paid the new rebate. No member or member organization will be eligible to eliminate the Initiating Order Fee for Professional, Firm, Broker- 26 The Rebates for Adding Liquidity for Simple Orders are in Part A and for Complex Orders in Part B. 24 See note 12 above. 25 See note 13 above. PO 00000 Frm 00146 Fmt 4703 Dealer, Specialist and Market Maker orders that are contra to a Customer SPY PIXL Order if the Customer SPY PIXL Order is greater than 399 contracts. The Exchange’s proposal to amend its SPY PIXL pricing so that when the PIXL Order is contra to other than the Initiating Order, the PIXL Order will continue to be assessed $0.00 per contract, unless the order is a Customer, in which case the Customer will receive an increased rebate of $0.40 per contract is reasonable. The Exchange is increasing this rebate from $0.38 per contract to incentivize members and member organizations to transact a greater number of SPY PIXL Orders to earn the increased rebate. The Exchange’s proposal to amend its SPY PIXL pricing so that when the PIXL Order is contra to other than the Initiating Order, the PIXL Order will continue to be assessed $0.00 per contract, unless the order is a Customer, in which case the Customer will receive an increased rebate of $0.40 per contract is equitable and not unfairly discriminatory because the Exchange will uniformly pay this rebate. The Exchange’s proposal to amend the SPY PIXL pricing so that all other Non-Customer contra parties to the PIXL Order, other than the Initiating Order, will be assessed an increased Fee for Removing Liquidity of $0.50 per contract or will receive the Rebate for Adding Liquidity is reasonable.26 The Exchange is increasing the fee from $0.42 to $0.50 per contract so that it may offer members and member organizations increased SPY Complex PIXL rebates as proposed herein. The Exchange’s proposal to amend the SPY PIXL pricing so that all other Non-Customer contra parties to the PIXL Order, other than the Initiating Order, will be assessed an increased Fee for Removing Liquidity of $0.50 per contract or will receive the Rebate for Adding Liquidity is equitable and not unfairly discriminatory because the Exchange will uniformly assess the increased Fee for Removing Liquidity to all applicable members and member organizations. The Exchange’s proposal to not offer a rebate when the PIXL Order is contra to a Specialist or Market Maker quote, which was established at the initiation of a PIXL auction, the Customer PIXL Order is reasonable. The Exchange believes that not paying a rebate to the PIXL Order in this case is reasonable because the Exchange will be paying Specialists and Market Makers the Sfmt 4703 E:\FR\FM\24FEN1.SGM 24FEN1 Federal Register / Vol. 82, No. 36 / Friday, February 24, 2017 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES Rebate for Adding Liquidity 27 instead. Also, this proposal continues to encourage Specialists and Market Makers to quote their best price at the initiation of a PIXL auction to obtain the rebate. The Exchange’s proposal to not offer a rebate when the PIXL Order is contra to a Specialist or Market Maker quote, which was established at the initiation of a PIXL auction, the Customer PIXL Order is equitable and not unfairly discriminatory. The Exchange will uniformly not offer a rebate to any member or member organizations when the PIXL Order is contra to a Specialist or Market Maker quote, which was established at the initiation of a PIXL auction. Proposed Amendments to Section IV, Part A: PIXL Pricing The Exchange’s proposal that if the member or member organization qualifies for the Tier 3, 4 or 5 Customer Rebate in Section B the member or member organization will be assessed $0.05 per contract, instead of the $0.07 per contract Initiating Order fee is reasonable because the Exchange is offering members and member organizations a greater opportunity to qualify for the lower fee by adding Tier 3 as a qualifier. The Exchange’s proposal that if the member or member organization qualifies for the Tier 3, 4 or 5 Customer Rebate in Section B the member or member organization will be assessed $0.05 per contract, instead of the $0.07 per contract Initiating Order fee is equitable and not unfairly discriminatory because the Exchange will assess the fee in a uniform manner to all applicable members and member organizations. The Exchange’s proposal to no longer offer the ability to not be assessed an Initiating Order Fee for Professional, Firm, Broker-Dealer, Specialist and Market Maker orders that are contra to a Customer PIXL Order if the Customer PIXL Order is greater than 399 contracts and instead replace this offer with a rebate to attract more liquidity for Complex SPY PIXL Orders similar to proposed SPY PIXL pricing is reasonable. The proposed rebate will incentivize members and member organizations to transact a greater number of Complex SPY PIXL Orders will also incentivizing members and member organizations to submit Customer order flow on Phlx. All members and member organizations are eligible for this rebate, which applies to all Complex PIXL Orders excluding SPY 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 28 The Exchange is offering a rebate for Complex SPY PIXL Orders in Section I. 27 Id. VerDate Sep<11>2014 Options,28 which may be obtained by either sending in the requisite amount of Customer orders, thereby benefitting all participants with order flow with which to interact, or benefitting members and member organizations that have paid $75,000 in transaction fees for the month, which contributed to the Exchange’s revenue. The Exchange desires to incentivize members and member organizations to transact a greater amount of Complex SPY PIXL Orders. The quantity of orders required to be transacted to earn the rebate (2,500 Complex SPY PIXL Orders) will result in a greater amount of order flow to the Exchange, which benefits all participants through order interaction. The Exchange’s proposal to no longer offer the ability to not be assessed an Initiating Order Fee for Professional, Firm, Broker-Dealer, Specialist and Market Maker orders that are contra to a Customer PIXL Order if the Customer PIXL Order is greater than 399 contracts and instead replace this offer with a rebate to attract more liquidity for PIXL SPY Complex Orders similar to proposed SPY PIXL pricing is equitable and not unfairly discriminatory. All members and member organizations are eligible for the proposed rebate, provide they met the requisite qualifications. Members and member organizations would be uniformly paid the rebate, provided they qualify. No member will be eligible to eliminate the Initiating Order Fee for Professional, Firm, Broker-Dealer, Specialist and Market Maker orders that are contra to a Customer PIXL Order if the Customer PIXL Order is greater than 399 contracts. 17:20 Feb 23, 2017 Jkt 241001 PO 00000 Frm 00147 Fmt 4703 Sfmt 4703 11669 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 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. In terms of intra-market competition, the Exchange believes that its proposed rebates and fees continue to remain competitive in SPY and Multiply Listed Options. 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. Proposed Amendments to Section I: Rebates and Fees for Adding and Removing Liquidity in SPY The Exchange’s proposal to no longer offer the ability to not be assessed an Initiating Order Fee for Professional, Firm, Broker-Dealer, Specialist and Market Maker orders that are contra to a Customer SPY PIXL Order if the Customer SPY PIXL Order is greater than 399 contracts and instead offer Phlx members and member organizations that qualify for Section B, Customer Rebate Tiers 2 through 6 or qualify for the Monthly Firm Fee Cap a rebate of $0.10 per contract for all SPY Complex PIXL Orders greater than 499 contracts, provided the member or member organization executes an average of 2,500 contracts per day of SPY Complex PIXL Orders in a month does not impose an undue burden on intra-market competition. All members and member organizations are eligible for the proposed rebate, provide they met the requisite qualifications. Members and member organizations would be uniformly paid the new rebate. No member or member organization will be eligible to eliminate the Initiating Order Fee for Professional, Firm, Broker-Dealer, Specialist and Market Maker orders that are contra to a Customer SPY PIXL Order if the Customer SPY PIXL Order is greater than 399 contracts. The Exchange’s proposal to amend its SPY PIXL pricing so that when the PIXL E:\FR\FM\24FEN1.SGM 24FEN1 11670 Federal Register / Vol. 82, No. 36 / Friday, February 24, 2017 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES Order is contra to other than the Initiating Order, the PIXL Order will continue to be assessed $0.00 per contract, unless the order is a Customer, in which case the Customer will receive an increased rebate of $0.40 per contract does not impose an undue burden on intra-market competition because the Exchange will uniformly pay this rebate. The Exchange’s proposal to amend the SPY PIXL pricing so that all other Non-Customer contra parties to the PIXL Order, other than the Initiating Order, will be assessed an increased Fee for Removing Liquidity of $0.50 per contract or will receive the Rebate for Adding Liquidity does not impose an undue burden on intra-market competition because the Exchange will uniformly assess the increased Fee for Removing Liquidity to all applicable members and member organizations. The Exchange’s proposal to not offer a rebate when the PIXL Order is contra to a Specialist or Market Maker quote, which was established at the initiation of a PIXL auction, the Customer PIXL Order does not impose an undue burden on intra-market competition. The Exchange will uniformly not offer a rebate to any member or member organization when the PIXL Order is contra to a Specialist or Market Maker quote, which was established at the initiation of a PIXL auction. Proposed Amendments to Section IV, Part A: PIXL Pricing The Exchange’s proposal that if the member or member organization qualifies for the Tier 3, 4 or 5 Customer Rebate in Section B the member or member organization will be assessed $0.05 per contract, instead of the $0.07 per contract Initiating Order fee does not impose an undue burden on intramarket competition because the Exchange will assess the fee in a uniform manner to all applicable members and member organizations. The Exchange’s proposal to no longer offer the ability to not be assessed an Initiating Order Fee for Professional, Firm, Broker-Dealer, Specialist and Market Maker orders that are contra to a Customer PIXL Order if the Customer PIXL Order is greater than 399 contracts and instead replace this offer with a rebate to attract more liquidity for PIXL SPY Complex Orders similar to proposed SPY PIXL pricing does not impose an undue burden on intramarket competition. All members and member organizations are eligible for the proposed rebate, provide they met the requisite qualifications. Members and member organizations would be uniformly paid the rebate, provided they qualify. No member or member VerDate Sep<11>2014 17:20 Feb 23, 2017 Jkt 241001 organization will be eligible to eliminate the Initiating Order Fee for Professional, Firm, Broker-Dealer, Specialist and Market Maker orders that are contra to a Customer PIXL Order if the Customer PIXL Order is greater than 399 contracts. 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 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– 2017–15 and should be submitted on or before March 17, 2017. The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.29 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. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.30 Eduardo A. Aleman, Assistant Secretary. IV. Solicitation of Comments [FR Doc. 2017–03576 Filed 2–23–17; 8:45 am] 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: BILLING CODE 8011–01–P Electronic Comments Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule To Clarify Its Fees Relating to the MIAX Express Network Interconnect (‘‘MENI’’) • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– Phlx–2017–15 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–2017–15. 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 (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent SECURITIES AND EXCHANGE COMMISSION [Release No. 34–80062; File No. SR–MIAX– 2017–05] February 17, 2017. Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on February 13, 2017, Miami International Securities Exchange LLC (‘‘MIAX Options’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a 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 30 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 29 15 PO 00000 U.S.C. 78s(b)(3)(A)(ii). Frm 00148 Fmt 4703 Sfmt 4703 E:\FR\FM\24FEN1.SGM 24FEN1

Agencies

[Federal Register Volume 82, Number 36 (Friday, February 24, 2017)]
[Notices]
[Pages 11666-11670]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-03576]


=======================================================================
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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80064; File No. SR-Phlx-2017-15]


Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend PIXL 
pricing

February 17, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on February 8, 2017, 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 I, entitled ``Rebates and Fees for Adding and Removing 
Liquidity in SPY,'' and Section IV, Part A entitled ``PIXL Pricing'' to 
amend pricing related to PIXL \3\ executions.
---------------------------------------------------------------------------

    \3\ PIXL\SM\ is the Exchange's price improvement mechanism known 
as Price Improvement XL or PIXL. A member or member organization may 
electronically submit for execution an order it represents as agent 
on behalf of a public customer, broker-dealer, or any other entity 
(``PIXL Order'') against principal interest or against any other 
order (except as provided in Rule 1080(n)(i)(E)) it represents as 
agent (``Initiating Order''), provided it submits the PIXL order for 
electronic execution into the PIXL Auction pursuant to Rule 1080. 
See Exchange Rule 1080(n).
---------------------------------------------------------------------------

    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqphlx.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 I, entitled ``Rebates and Fees for Adding 
and Removing Liquidity in SPY,'' to amend PIXL Executions in Standard 
and Poor's Depositary Receipts/SPDRs (``SPY'').\4\ The Exchange also 
proposes to amend PIXL Pricing in Section IV, Part A, entitled ``PIXL 
Pricing'' for all other Multiply-Listed options symbols.\5\
---------------------------------------------------------------------------

    \4\ Options overlying Standard and Poor's Depositary Receipts/
SPDRs (``SPY'') are based on the SPDR exchange-traded fund 
(``ETF''), which is designed to track the performance of the S&P 500 
Index.
    \5\ The Exchange initially filed the proposed pricing changes on 
February 2 [sic], 2017 (SR-Phlx-2017-10). On February 8, 2017, the 
Exchange withdrew that filing and submitted this filing. The 
Commission notes that the Exchange filed SR-PHXL-2017-10 on February 
1, 2017.
---------------------------------------------------------------------------

Proposed Amendments to Section I: Rebates and Fees for Adding and 
Removing Liquidity in SPY
    Section I of the Pricing Schedule contains pricing for PIXL 
Executions in SPY. Today, with respect to PIXL executions in SPY, the 
Exchange assesses an Initiating Order fee of $0.05 per contract. Today, 
the Initiating Order Fee for Professional,\6\ Firm,\7\ Broker-
Dealer,\8\ Specialist \9\ and Market Maker \10\ orders that are contra 
to a Customer \11\ PIXL Order are reduced to $0.00 if the Customer PIXL 
Order is greater than 399 contracts. Further, when the PIXL Order is 
contra to the Initiating Order, a Customer PIXL Order is assessed $0.00 
per contract and all other non-Customer market participants are 
assessed a $0.38 per contract fee when contra to an Initiating Order. 
When the PIXL Order is contra to other than the Initiating Order, the 
PIXL Order is assessed $0.00 per contract, unless the order is a 
Customer, in which case the Customer will receive a rebate of $0.38 per 
contract. All other Non-Customer contra parties to the PIXL Order, 
other than the Initiating Order, are assessed a Fee for Removing 
Liquidity of $0.42 per contract or will receive the Rebate for Adding 
Liquidity. The aforementioned applies to pricing in SPY.
---------------------------------------------------------------------------

    \6\ The term ``Professional'' applies to transactions for the 
accounts of Professionals, as defined in Exchange Rule 1000(b)(14).
    \7\ 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.
    \8\ The term ``Broker-Dealer'' applies to any transaction which 
is not subject to any of the other transaction fees applicable 
within a particular category.
    \9\ The term ``Specialist'' applies to transactions for the 
account of a Specialist (as defined in Exchange Rule 1020(a)).
    \10\ 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 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 defined in Exchange Rule 1014(b)(ii)(A) 
as an ROT who has received permission from the Exchange to generate 
and submit option quotations electronically in options to which such 
SQT is assigned. An RSQT is defined in Exchange Rule in 
1014(b)(ii)(B) as an ROT that is a member affiliated with an RSQTO 
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 
Remote Streaming Quote Trader Organization or ``RSQTO,'' which may 
also be referred to as a Remote Market Making Organization 
(``RMO''), is a member organization in good standing that satisfies 
the RSQTO readiness requirements in Rule 507(a). RSQTs may also be 
referred to as Remote Market Markers (``RMMs'').
    \11\ 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)).
---------------------------------------------------------------------------

    The Exchange proposes to continue to assess an Initiating Order fee 
of $0.05 per contract for SPY Orders within PIXL. The Exchange proposes 
to no longer offer the ability to not be assessed an Initiating Order 
Fee for Professional, Firm, Broker-Dealer, Specialist and Market Maker 
orders that are contra to a Customer PIXL Order, which are currently 
reduced to $0.00 if the Customer PIXL Order is greater than 399 
contracts. The Exchange is replacing the incentive which reduces the 
Initiating Order Fee for Professional, Firm, Broker-Dealer, Specialist 
and Market Maker orders that are contra to a Customer PIXL Order, 
provided the

[[Page 11667]]

Customer PIXL Order is greater than 399 contracts, with another 
incentive to attract more liquidity for SPY PIXL Orders.
    The Exchange proposes to offer Phlx members or member organizations 
that qualify for Section B, Customer Rebate Tiers \12\ 2 through 6 or 
qualify for the Monthly Firm Fee Cap \13\ a rebate of $0.10 per 
contract for all SPY Complex PIXL Orders greater than 499 contracts, 
provided the member or member organization executes an average of 2,500 
contracts per day of SPY Complex PIXL Orders in a month. The Exchange 
desires to incentivize members or member organizations to transact a 
greater number of SPY Complex PIXL Orders while also incentivizing 
members or member organizations to submit Customer order flow on Phlx.
---------------------------------------------------------------------------

    \12\ Section B of the Pricing Schedule contains Customer Rebate 
Tiers which are calculated by totaling Customer volume in Multiply 
Listed Options (including SPY) that are electronically-delivered and 
executed, except volume associated with electronic QCC Orders, as 
defined in Exchange Rule 1080(o). Rebates are paid on Customer 
Rebate Tiers according to certain categories. Members and member 
organizations under Common Ownership may aggregate their Customer 
volume for purposes of calculating the Customer Rebate Tiers and 
receiving rebates. Affiliated Entities may aggregate their Customer 
volume for purposes of calculating the Customer Rebate Tiers and 
receiving rebates. See Section B of the Pricing Schedule.
    \13\ Firms are subject to a maximum fee of $75,000 (``Monthly 
Firm Fee Cap''). Firm Floor Option Transaction Charges and QCC 
Transaction Fees in Section II of the Pricing Schedule, in the 
aggregate, for one billing month may not exceed the Monthly Firm Fee 
Cap per member organization when such members are trading in their 
own proprietary account. All dividend, merger, and short stock 
interest strategy executions, as defined in Section II, will be 
excluded from the Monthly Firm Fee Cap. Reversal and conversion, 
jelly roll and box spread strategy executions, as defined in Section 
II, will be included in the Monthly Firm Fee Cap. QCC Transaction 
Fees are included in the calculation of the Monthly Firm Fee Cap. 
Member organizations must notify the Exchange in writing of all 
accounts in which the member is not trading in its own proprietary 
account. The Exchange will not make adjustments to billing invoices 
where transactions are commingled in accounts which are not subject 
to the Monthly Firm Fee Cap.
---------------------------------------------------------------------------

    The Exchange also proposes to amend its SPY PIXL pricing so that 
when the PIXL Order is contra to other than the Initiating Order, the 
PIXL Order will continue to be assessed $0.00 per contract, unless the 
order is a Customer, in which case the Customer will receive an 
increased rebate of $0.40 per contract (an increase from $0.38 per 
contract). The Exchange also proposes to amend the SPY PIXL pricing so 
that all other Non-Customer contra parties to the PIXL Order, other 
than the Initiating Order, will be assessed an increased Fee for 
Removing Liquidity of $0.50 per contract (an increase from $0.42 per 
contract) or will receive the Rebate for Adding Liquidity.\14\ The 
Exchange is increasing the Fee for Removing Liquidity because it seeks 
to offer an increase rebate to attract additional SPY PIXL Orders.
---------------------------------------------------------------------------

    \14\ The Rebates for Adding Liquidity for Simple Orders are in 
Part A and for Complex Orders in Part B.
---------------------------------------------------------------------------

    The Exchange proposes that when the PIXL Order is contra to a 
Specialist or Market Maker quote, which was established at the 
initiation of a PIXL auction, the Customer PIXL Order will not be 
eligible for a rebate. The Exchange believes that this proposal will 
encourage Specialists and Market Makers to quote their best price at 
the initiation of a PIXL auction to obtain the rebate.
Proposed Amendments to Section IV, Part A: PIXL Pricing
    Today, the PIXL pricing in all Multiply-Listed symbols except SPY 
is as described below. The Exchange assesses an Initiating Order Fee of 
$0.07 per contract. If the member or member organization qualifies for 
the Tier 4 or 5 Customer Rebate in Section B the member or member 
organization will be assessed $0.05 per contract. Today, if the member 
or member organization executes equal to or greater than 3.00% of 
National Customer Volume in Multiply-Listed equity and ETF Options 
Classes (excluding SPY Options) in a given month, the member or member 
organization will be assessed $0.00 per contract for Complex PIXL 
Orders.
    Today, any member or member organization under Common Ownership 
with another member or member organization that qualifies for a 
Customer Rebate Tier 4 or 5 in Section B, or executes equal to or 
greater than 3.00% of National Customer Volume in Multiply-Listed 
equity and ETF Options Classes (excluding SPY Options) in a given month 
will receive one of the PIXL Initiating Order discounts as described 
above. Today, the Initiating Order Fee for Professional, Firm, Broker-
Dealer, Specialist and Market Maker orders that are contra to a 
Customer PIXL Order will be reduced to $0.00 if the Customer PIXL Order 
is greater than 399 contracts.
    The Exchange proposes to continue to assess an Initiating Order Fee 
of $0.07 per contract. The Exchange proposes that if the member or 
member organization qualifies for the Tier 3, 4 or 5 Customer Rebate in 
Section B the member or member organization will be assessed $0.05 per 
contract. The Tier 3 qualifier is being added to provide another means 
to qualify for the lower fee. If the member or member organization 
executes equal to or greater than 3.00% of National Customer Volume in 
Multiply-Listed equity and ETF Options Classes (excluding SPY Options) 
in a given month, the member or member organization will continue to be 
assessed $0.00 per contract for Complex PIXL Orders. Any member or 
member organization under Common Ownership with another member or 
member organization that qualifies for a Customer Rebate Tier 4 or 5 in 
Section B, or executes equal to or greater than 3.00% of National 
Customer Volume in Multiply-Listed equity and ETF Options Classes 
(excluding SPY Options) in a given month will continue to receive one 
of the PIXL Initiating Order discounts as described above.
    The Exchange proposes to no longer offer the ability to not be 
assessed an Initiating Order Fee for Professional, Firm, Broker-Dealer, 
Specialist and Market Maker orders that are contra to a Customer PIXL 
Order if the Customer PIXL Order is greater than 399 contracts. 
Instead, the Exchange proposes to offer another incentive to attract 
more liquidity for Complex PIXL Orders similar to proposed SPY PIXL 
pricing. The Exchange proposes to offer Phlx members and member 
organizations that qualify for Section B, Customer Rebate Tiers 2 
through 6 \15\ or qualify for the Monthly Firm Fee Cap \16\ a rebate of 
$0.10 per contract for all Complex PIXL Orders (excluding SPY Options) 
greater than 499 contracts, provided the member or member organization 
executes an average of 2,500 contracts per day of Complex SPY PIXL 
Orders in a month. The Exchange desires to incentivize members and 
member organizations to transact a greater number of SPY Complex PIXL 
Orders while also incentivizing members and member organizations to 
submit Customer order flow on Phlx to obtain the $0.10 rebate on all 
Complex PIXL Orders (excluding SPY Options).
---------------------------------------------------------------------------

    \15\ See note 12 above.
    \16\ See note 13 above.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\17\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\18\ 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, and is not designed to permit unfair

[[Page 11668]]

discrimination between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f(b).
    \18\ 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.'' \19\
---------------------------------------------------------------------------

    \19\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
---------------------------------------------------------------------------

    Likewise, in NetCoalition v. Securities and Exchange Commission 
\20\ (``NetCoalition'') the D.C. Circuit upheld the Commission's use of 
a market-based approach in evaluating the fairness of market data fees 
against a challenge claiming that Congress mandated a cost-based 
approach.\21\ 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.'' \22\
---------------------------------------------------------------------------

    \20\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \21\ See NetCoalition, at 534-535.
    \22\ 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' . . . .'' \23\ 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.
---------------------------------------------------------------------------

    \23\ Id. at 539 (quoting Securities Exchange Act Release No. 
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008) 
(SR-NYSEArca-2006-21)).
---------------------------------------------------------------------------

Proposed Amendments to Section I: Rebates and Fees for Adding and 
Removing Liquidity in SPY
    The Exchange's proposal to no longer offer the ability to not be 
assessed an Initiating Order Fee for Professional, Firm, Broker-Dealer, 
Specialist and Market Maker orders that are contra to a Customer SPY 
PIXL Order if the Customer SPY PIXL Order is greater than 399 contracts 
and instead offer Phlx members or member organizations that qualify for 
Section B, Customer Rebate Tiers \24\ 2 through 6 or qualify for the 
Monthly Firm Fee Cap \25\ a rebate of $0.10 per contract for all SPY 
Complex PIXL Orders greater than 499 contracts, provided the member or 
member organization executes an average of 2,500 contracts per day of 
SPY Complex PIXL Orders in a month is reasonable. The proposed rebate 
will incentivize members and member organizations to transact a greater 
number of SPY Complex PIXL Orders will also incentivizing members and 
member organizations to submit Customer order flow on Phlx. All members 
and member organizations are eligible for this rebate which may be 
obtained by either sending in the requisite amount of Customer order, 
thereby benefitting all participants with order flow with which to 
interact or benefitting members and member organizations that have 
$75,000 in transaction fees for the month, which contributed to the 
Exchange's revenue. The Exchange desires to incentivize members and 
member organizations to transact a greater amount of Complex SPY Orders 
as compared to Simple SPY Orders. The quantity of orders is being 
increased to receive the rebate, which order flow benefits all 
participants through order interaction.
---------------------------------------------------------------------------

    \24\ See note 12 above.
    \25\ See note 13 above.
---------------------------------------------------------------------------

    The Exchange's proposal to no longer offer the ability to not be 
assessed an Initiating Order Fee for Professional, Firm, Broker-Dealer, 
Specialist and Market Maker orders that are contra to a Customer SPY 
PIXL Order if the Customer SPY PIXL Order is greater than 399 contracts 
and instead offer Phlx members and member organizations that qualify 
for Section B, Customer Rebate Tiers 2 through 6 or qualify for the 
Monthly Firm Fee Cap a rebate of $0.10 per contract for all SPY Complex 
PIXL Orders greater than 499 contracts, provided the member or member 
organization executes an average of 2,500 contracts per day of SPY 
Complex PIXL Orders in a month is equitable and not unfairly 
discriminatory. All members and member organizations are eligible for 
the proposed rebate, provided they met the requisite qualifications. 
Members and member organizations would be uniformly paid the new 
rebate. No member or member organization will be eligible to eliminate 
the Initiating Order Fee for Professional, Firm, Broker-Dealer, 
Specialist and Market Maker orders that are contra to a Customer SPY 
PIXL Order if the Customer SPY PIXL Order is greater than 399 
contracts.
    The Exchange's proposal to amend its SPY PIXL pricing so that when 
the PIXL Order is contra to other than the Initiating Order, the PIXL 
Order will continue to be assessed $0.00 per contract, unless the order 
is a Customer, in which case the Customer will receive an increased 
rebate of $0.40 per contract is reasonable. The Exchange is increasing 
this rebate from $0.38 per contract to incentivize members and member 
organizations to transact a greater number of SPY PIXL Orders to earn 
the increased rebate.
    The Exchange's proposal to amend its SPY PIXL pricing so that when 
the PIXL Order is contra to other than the Initiating Order, the PIXL 
Order will continue to be assessed $0.00 per contract, unless the order 
is a Customer, in which case the Customer will receive an increased 
rebate of $0.40 per contract is equitable and not unfairly 
discriminatory because the Exchange will uniformly pay this rebate.
    The Exchange's proposal to amend the SPY PIXL pricing so that all 
other Non-Customer contra parties to the PIXL Order, other than the 
Initiating Order, will be assessed an increased Fee for Removing 
Liquidity of $0.50 per contract or will receive the Rebate for Adding 
Liquidity is reasonable.\26\ The Exchange is increasing the fee from 
$0.42 to $0.50 per contract so that it may offer members and member 
organizations increased SPY Complex PIXL rebates as proposed herein.
---------------------------------------------------------------------------

    \26\ The Rebates for Adding Liquidity for Simple Orders are in 
Part A and for Complex Orders in Part B.
---------------------------------------------------------------------------

    The Exchange's proposal to amend the SPY PIXL pricing so that all 
other Non-Customer contra parties to the PIXL Order, other than the 
Initiating Order, will be assessed an increased Fee for Removing 
Liquidity of $0.50 per contract or will receive the Rebate for Adding 
Liquidity is equitable and not unfairly discriminatory because the 
Exchange will uniformly assess the increased Fee for Removing Liquidity 
to all applicable members and member organizations.
    The Exchange's proposal to not offer a rebate when the PIXL Order 
is contra to a Specialist or Market Maker quote, which was established 
at the initiation of a PIXL auction, the Customer PIXL Order is 
reasonable. The Exchange believes that not paying a rebate to the PIXL 
Order in this case is reasonable because the Exchange will be paying 
Specialists and Market Makers the

[[Page 11669]]

Rebate for Adding Liquidity \27\ instead. Also, this proposal continues 
to encourage Specialists and Market Makers to quote their best price at 
the initiation of a PIXL auction to obtain the rebate.
---------------------------------------------------------------------------

    \27\ Id.
---------------------------------------------------------------------------

    The Exchange's proposal to not offer a rebate when the PIXL Order 
is contra to a Specialist or Market Maker quote, which was established 
at the initiation of a PIXL auction, the Customer PIXL Order is 
equitable and not unfairly discriminatory. The Exchange will uniformly 
not offer a rebate to any member or member organizations when the PIXL 
Order is contra to a Specialist or Market Maker quote, which was 
established at the initiation of a PIXL auction.
Proposed Amendments to Section IV, Part A: PIXL Pricing
    The Exchange's proposal that if the member or member organization 
qualifies for the Tier 3, 4 or 5 Customer Rebate in Section B the 
member or member organization will be assessed $0.05 per contract, 
instead of the $0.07 per contract Initiating Order fee is reasonable 
because the Exchange is offering members and member organizations a 
greater opportunity to qualify for the lower fee by adding Tier 3 as a 
qualifier.
    The Exchange's proposal that if the member or member organization 
qualifies for the Tier 3, 4 or 5 Customer Rebate in Section B the 
member or member organization will be assessed $0.05 per contract, 
instead of the $0.07 per contract Initiating Order fee is equitable and 
not unfairly discriminatory because the Exchange will assess the fee in 
a uniform manner to all applicable members and member organizations.
    The Exchange's proposal to no longer offer the ability to not be 
assessed an Initiating Order Fee for Professional, Firm, Broker-Dealer, 
Specialist and Market Maker orders that are contra to a Customer PIXL 
Order if the Customer PIXL Order is greater than 399 contracts and 
instead replace this offer with a rebate to attract more liquidity for 
Complex SPY PIXL Orders similar to proposed SPY PIXL pricing is 
reasonable. The proposed rebate will incentivize members and member 
organizations to transact a greater number of Complex SPY PIXL Orders 
will also incentivizing members and member organizations to submit 
Customer order flow on Phlx. All members and member organizations are 
eligible for this rebate, which applies to all Complex PIXL Orders 
excluding SPY Options,\28\ which may be obtained by either sending in 
the requisite amount of Customer orders, thereby benefitting all 
participants with order flow with which to interact, or benefitting 
members and member organizations that have paid $75,000 in transaction 
fees for the month, which contributed to the Exchange's revenue. The 
Exchange desires to incentivize members and member organizations to 
transact a greater amount of Complex SPY PIXL Orders. The quantity of 
orders required to be transacted to earn the rebate (2,500 Complex SPY 
PIXL Orders) will result in a greater amount of order flow to the 
Exchange, which benefits all participants through order interaction.
---------------------------------------------------------------------------

    \28\ The Exchange is offering a rebate for Complex SPY PIXL 
Orders in Section I.
---------------------------------------------------------------------------

    The Exchange's proposal to no longer offer the ability to not be 
assessed an Initiating Order Fee for Professional, Firm, Broker-Dealer, 
Specialist and Market Maker orders that are contra to a Customer PIXL 
Order if the Customer PIXL Order is greater than 399 contracts and 
instead replace this offer with a rebate to attract more liquidity for 
PIXL SPY Complex Orders similar to proposed SPY PIXL pricing is 
equitable and not unfairly discriminatory. All members and member 
organizations are eligible for the proposed rebate, provide they met 
the requisite qualifications. Members and member organizations would be 
uniformly paid the rebate, provided they qualify. No member will be 
eligible to eliminate the Initiating Order Fee for Professional, Firm, 
Broker-Dealer, Specialist and Market Maker orders that are contra to a 
Customer PIXL Order if the Customer PIXL Order is greater than 399 
contracts.

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 
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.
    In terms of intra-market competition, the Exchange believes that 
its proposed rebates and fees continue to remain competitive in SPY and 
Multiply Listed Options. 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.
Proposed Amendments to Section I: Rebates and Fees for Adding and 
Removing Liquidity in SPY
    The Exchange's proposal to no longer offer the ability to not be 
assessed an Initiating Order Fee for Professional, Firm, Broker-Dealer, 
Specialist and Market Maker orders that are contra to a Customer SPY 
PIXL Order if the Customer SPY PIXL Order is greater than 399 contracts 
and instead offer Phlx members and member organizations that qualify 
for Section B, Customer Rebate Tiers 2 through 6 or qualify for the 
Monthly Firm Fee Cap a rebate of $0.10 per contract for all SPY Complex 
PIXL Orders greater than 499 contracts, provided the member or member 
organization executes an average of 2,500 contracts per day of SPY 
Complex PIXL Orders in a month does not impose an undue burden on 
intra-market competition. All members and member organizations are 
eligible for the proposed rebate, provide they met the requisite 
qualifications. Members and member organizations would be uniformly 
paid the new rebate. No member or member organization will be eligible 
to eliminate the Initiating Order Fee for Professional, Firm, Broker-
Dealer, Specialist and Market Maker orders that are contra to a 
Customer SPY PIXL Order if the Customer SPY PIXL Order is greater than 
399 contracts.
    The Exchange's proposal to amend its SPY PIXL pricing so that when 
the PIXL

[[Page 11670]]

Order is contra to other than the Initiating Order, the PIXL Order will 
continue to be assessed $0.00 per contract, unless the order is a 
Customer, in which case the Customer will receive an increased rebate 
of $0.40 per contract does not impose an undue burden on intra-market 
competition because the Exchange will uniformly pay this rebate.
    The Exchange's proposal to amend the SPY PIXL pricing so that all 
other Non-Customer contra parties to the PIXL Order, other than the 
Initiating Order, will be assessed an increased Fee for Removing 
Liquidity of $0.50 per contract or will receive the Rebate for Adding 
Liquidity does not impose an undue burden on intra-market competition 
because the Exchange will uniformly assess the increased Fee for 
Removing Liquidity to all applicable members and member organizations.
    The Exchange's proposal to not offer a rebate when the PIXL Order 
is contra to a Specialist or Market Maker quote, which was established 
at the initiation of a PIXL auction, the Customer PIXL Order does not 
impose an undue burden on intra-market competition. The Exchange will 
uniformly not offer a rebate to any member or member organization when 
the PIXL Order is contra to a Specialist or Market Maker quote, which 
was established at the initiation of a PIXL auction.
Proposed Amendments to Section IV, Part A: PIXL Pricing
    The Exchange's proposal that if the member or member organization 
qualifies for the Tier 3, 4 or 5 Customer Rebate in Section B the 
member or member organization will be assessed $0.05 per contract, 
instead of the $0.07 per contract Initiating Order fee does not impose 
an undue burden on intra-market competition because the Exchange will 
assess the fee in a uniform manner to all applicable members and member 
organizations.
    The Exchange's proposal to no longer offer the ability to not be 
assessed an Initiating Order Fee for Professional, Firm, Broker-Dealer, 
Specialist and Market Maker orders that are contra to a Customer PIXL 
Order if the Customer PIXL Order is greater than 399 contracts and 
instead replace this offer with a rebate to attract more liquidity for 
PIXL SPY Complex Orders similar to proposed SPY PIXL pricing does not 
impose an undue burden on intra-market competition. All members and 
member organizations are eligible for the proposed rebate, provide they 
met the requisite qualifications. Members and member organizations 
would be uniformly paid the rebate, provided they qualify. No member or 
member organization will be eligible to eliminate the Initiating Order 
Fee for Professional, Firm, Broker-Dealer, Specialist and Market Maker 
orders that are contra to a Customer PIXL Order if the Customer PIXL 
Order is greater than 399 contracts.

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.\29\ 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.
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    \29\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2017-15 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-2017-15. 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 (http://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-2017-15 and should be 
submitted on or before March 17, 2017.
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    \30\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-03576 Filed 2-23-17; 8:45 am]
 BILLING CODE 8011-01-P