Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Pricing for NDX and MNX, 14388-14392 [2017-05409]
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Federal Register / Vol. 82, No. 52 / Monday, March 20, 2017 / Notices
sradovich on DSK3GMQ082PROD with NOTICES
Commission to consider matters related
to negotiated service agreement(s). The
request(s) may propose the addition or
removal of a negotiated service
agreement from the market dominant or
the competitive product list, or the
modification of an existing product
currently appearing on the market
dominant or the competitive product
list.
Section II identifies the docket
number(s) associated with each Postal
Service request, the title of each Postal
Service request, the request’s acceptance
date, and the authority cited by the
Postal Service for each request. For each
request, the Commission appoints an
officer of the Commission to represent
the interests of the general public in the
proceeding, pursuant to 39 U.S.C. 505
(Public Representative). Section II also
establishes comment deadline(s)
pertaining to each request.
The public portions of the Postal
Service’s request(s) can be accessed via
the Commission’s Web site (https://
www.prc.gov). Non-public portions of
the Postal Service’s request(s), if any,
can be accessed through compliance
with the requirements of 39 CFR
3007.40.
The Commission invites comments on
whether the Postal Service’s request(s)
in the captioned docket(s) are consistent
with the policies of title 39. For
request(s) that the Postal Service states
concern market dominant product(s),
applicable statutory and regulatory
requirements include 39 U.S.C. 3622, 39
U.S.C. 3642, 39 CFR part 3010, and 39
CFR part 3020, subpart B. For request(s)
that the Postal Service states concern
competitive product(s), applicable
statutory and regulatory requirements
include 39 U.S.C. 3632, 39 U.S.C. 3633,
39 U.S.C. 3642, 39 CFR part 3015, and
39 CFR part 3020, subpart B. Comment
deadline(s) for each request appear in
section II.
II. Docketed Proceeding(s)
1. Docket No(s).: CP2016–223; Filing
Title: Notice of the United States Postal
Service of Filing Modification to Global
Expedited Package Services 3
Negotiated Service Agreement; Filing
Acceptance Date: March 13, 2017; Filing
Authority: 39 CFR 3015.5; Public
Representative: Kenneth R. Moeller;
Comments Due: March 21, 2017.
2. Docket No(s).: CP2017–130; Filing
Title: Notice of United States Postal
Service of Filing Functionally
Equivalent Inbound Competitive MultiService Agreement with a Foreign Postal
Operator, and Application for NonPublic Treatment of Materials; Filing
Acceptance Date: March 13, 2017; Filing
Authority: 39 CFR 3015.5; Public
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18:36 Mar 17, 2017
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Representative: Natalie R. Ward;
Comments Due: March 21, 2017.
3. Docket No(s).: CP2017–131; Filing
Title: Notice of United States Postal
Service of Filing Functionally
Equivalent Inbound Competitive MultiService Agreement with a Foreign Postal
Operator, and Application for NonPublic Treatment of Materials; Filing
Acceptance Date: March 13, 2017; Filing
Authority: 39 CFR 3015.5; Public
Representative: Natalie R. Ward;
Comments Due: March 21, 2017.
This notice will be published in the
Federal Register.
Ruth Ann Abrams,
Acting Secretary.
[FR Doc. 2017–05412 Filed 3–17–17; 8:45 am]
BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–80244; File No. SR–Phlx–
2017–24]
Self-Regulatory Organizations;
NASDAQ PHLX LLC; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change To Amend
Pricing for NDX and MNX
March 14, 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 March 9,
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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Exchange’s Pricing Schedule at Section
II, entitled ‘‘Multiply Listed Options
Fees,’’ 3 to amend pricing related to
options overlying NDX 4 and MNX.5
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaqphlx.cchwallstreet.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 These fees include options overlying equities,
ETFs, ETNs and indexes which are Multiply Listed.
4 NDX represents options on the Nasdaq 100
Index traded under the symbol NDX (‘‘NDX’’).
5 MNX represents options on one-tenth the value
of the Nasdaq 100 Index traded under the symbol
MNX (‘‘MNX’’).
2 17
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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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
pricing related to NDX and MNX by
adopting Options Transaction Charges
for NDX and MNX and also eliminating
the Marketing Fee for NDX and MNX.6
The Exchange notes that both NDX and
MNX are transitioning to be exclusively
listed on the Exchange and its affiliated
markets in 2017.7
Today, the Exchange assesses
transactions in NDX and MNX the
following Options Transaction Charges
for non-Penny Pilot Options: A $0.75
per contract for electronic Professional 8
transactions and $0.25 per contract for
floor Professional transactions; $0.25
per contract for Specialist 9 and Market
Maker 10 electronic transactions and
6 The Exchange initially filed the proposed
pricing change on February 28, 2017 (SR–Phlx–
2017–20). On March 8, 2017, the Exchange
withdrew that filing and submitted this filing.
7 The Exchange will exclusively list NDX and
MNX in the near future upon expiration of open
expiries in these products on other markets.
8 The term ‘‘Professional’’ applies to transactions
for the accounts of Professionals, as defined in
Exchange Rule 1000(b)(14).
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’’ describes fees and
rebates applicable to Registered Options Traders
(‘‘ROT’’), Streaming Quote Traders (‘‘SQT’’) and
Remote Streaming Quote Traders (‘‘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.
A ROT includes SQTs and RSQTs as well as on and
off-floor ROTS. 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
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$0.35 per contract for Specialist and
Market Maker floor transactions; $0.75
per contract for Broker-Dealer 11
electronic transactions and $0.25 per
contract for floor Broker-Dealer
transactions; and $0.75 per contact for
Firm 12 electronic transactions and
$0.25 per contract for Firm floor
transactions. Today, Customers 13 are
not assessed a non-Penny Options
Transaction Charge for NDX and MNX
transactions. Also, today, all NonCustomers 14 are assessed a $0.25 per
contract surcharge in NDX an MNX.
The Exchange proposes to indicate
that the Options Transaction charges for
non-Penny Pilot Options will not apply
to NDX and MNX transactions and
instead adopt new pricing for NDX and
MNX. The Exchange proposes to adopt
the following Options Transaction
Charges for NDX and MNX. Customers
will continue to not be assessed an
Options Transaction Charge for NDX
and MNX. Professionals will be assessed
the same $0.75 per contract electronic
Options Transaction Charge and an
increased floor Options Transaction
Charge of $0.75 per contract 15 for NDX
and MNX transactions. A Specialist and
Market Maker will be assessed an
increased electronic Options
Transaction Charge of $0.75 per
contract 16 and the same $0.35 per
contract floor Options Transaction
Charge for NDX and MNX transactions.
A Broker-Dealer will be assessed the
same $0.75 per contract electronic
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).
11 The term ‘‘Broker-Dealer’’ applies to any
transaction which is not subject to any of the other
transaction fees applicable within a particular
category.
12 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.
13 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)).
14 The term ‘‘Non-Customer’’ applies to
transactions for the accounts of Specialists, Market
Makers, Firms, Professionals, Broker-Dealers and
Joint Back Office.
15 Today, a Professional is assessed a $0.25 per
contract floor Options Transaction Charge when
transacting NDX and MNX.
16 Today, a Specialist and Market Maker are
assessed a $0.25 per contract floor Options
Transaction Charge when transacting NDX and
MNX.
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Options Transaction Charge and an
increased floor Options Transaction
Charge of $0.75 per contract 17 for NDX
and MNX transactions. Finally, a Firm
will be assessed the same $0.75 per
contract electronic Options Transaction
Charge and an increased floor Options
Transaction Charge of $0.75 per
contract 18 for NDX and MNX
transactions. The Exchange will
continue to assess Non-Customers an
Options Surcharge for NDX and MNX of
$0.25 per contract as is the case today.19
The Exchange is proposing to relocate
the surcharge to a new note 5 within the
Pricing Schedule instead of stating the
pricing within the current table in
Section II of the Pricing Schedule.
The Exchange is also proposing to
note that a Marketing Fee 20 will not be
assessed on NDX and MNX. Today, for
trades resulting from either Directed or
non-Directed Orders that are delivered
electronically and executed on the
Exchange, Specialists, Market Makers
and Directed ROTs are assessed certain
fees on those trades when the Specialist
unit or Directed ROT elects to
participate in the marketing program.
Specifically, the Exchange assesses
options that are trading in the Penny
Pilot Program $0.25 per contract and the
remaining equity options are assessed
$0.70 per contract (including NDX and
MNX). No Marketing Fees are assessed
on trades that are not delivered
electronically. No Marketing Fees are
assessed on Professional orders.
Marketing Fees are assessed on
transactions resulting from Customer
orders and are available to be disbursed
by the Exchange according to the
17 Today, a Broker-Dealer is assessed a $0.25 per
contract floor Options Transaction Charge when
transacting NDX and MNX.
18 Today, a Firm is assessed a $0.25 per contract
floor Options Transaction Charge when transacting
NDX and MNX.
19 For clarity, the Exchange is amending the
Customer charge from ‘‘N/A’’ to ‘‘$0.00.’’ The
Exchange believes that $0.00 is more appropriate to
reflect no charge.
20 The Exchange’s Marketing Fee helps its
Specialists and Directed Registered Options Traders
(‘‘Directed ROTs’’) establish payment arrangements
with an order flow provider in exchange for that
order flow provider directing some or all of its order
flow to that Specialist or Directed ROT. This
program is funded through fees paid by Registered
Options Traders (‘‘ROTs’’), Specialists and Directed
ROTs and assessed on transactions resulting from
customer orders. A Registered Option Trader 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.
See Exchange Rule 1014 (b)(i) and (ii). A ‘‘Directed
ROT’’ is an ROT who is a Directed Participant. The
term ‘‘Directed Participant’’ applies to transactions
for the account of a Specialist or ROT resulting from
a customer order that is (1) directed to it by an order
flow provider, and (2) executed by it electronically
on Phlx XL II.
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14389
instructions of the Specialist units/
Specialists or Directed ROTs to order
flow providers who are members or
member organizations, who submit, as
agent, Customer orders to the Exchange
or non-members or non-member
organizations who submit, as agent,
Customer orders to the Exchange
through a member or member
organization who is acting as agent for
those Customer orders.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,21 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,22 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
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.’’ 23
Likewise, in NetCoalition v. Securities
and Exchange Commission 24
(‘‘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.25 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.’’ 26
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 broker21 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
23 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
24 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir.
2010).
25 See NetCoalition, at 534–535.
26 Id. at 537.
22 15
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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’. . . .’’ 27 Although the court
and the SEC were discussing the cash
equities markets, the Exchange believes
that these views apply with equal force
to the options markets.
The Exchange’s proposal to increase
the floor Options Transaction Charges
for Professionals, Firms and BrokerDealers from $0.25 to $0.75 per contract
for NDX and MNX is reasonable because
the Exchange is assessing the same
transaction fee whether the transaction
occurred electronically or on the
Exchange’s trading floor for these
market participants. The Exchange’s
increase for this proprietary product is
competitive when compared with
similar proprietary products.28
With respect to Specialists and
Market Makers, the electronic Options
Transaction Charge for NDX and MNX
will be $0.75 per contract, similar to
other Non-Customer market
participants. The Exchange believes that
it is reasonable to assess Specialists and
Market Markers the same electronic
Options Transactions Charge in NDX
and MNX as other market participants,
except Customers. The Exchange’s
increase for this proprietary product is
competitive when compared with
similar proprietary products.29 The
Specialist and Market Maker floor
Options Transaction Charge is not being
amended and will remain at $0.35 per
contract. The Exchange will continue to
assess a Specialist and Market Maker
Options Transaction Charge of $0.35 per
contract for floor transactions in NDX
and MNX because the Exchange desires
to incentivize Specialists and Market
Makers to continue to make markets in
27 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)).
28 See Chicago Board Options Exchange,
Incorporated’s (‘‘CBOE’’) Fees Schedule. Russell
2000 Index (‘‘RUT’’) options transactions on CBOE,
except customers, are assessed a $0.45 per contract
surcharge. CBOE assesses Professionals and BrokerDealers a manual and AIM transaction fee of $0.25
per contract and a non-AIM transaction fee of $0.65
per contract. CBOE assesses Clearing Trade Permit
Holders a transaction fee of $0.22 [sic] per contract,
subject to a sliding scale.
29 See CBOE’s Fees Schedule. RUT transactions
on CBOE, except customers, are assessed a $0.45
per contract surcharge. CBOE assesses market
makers a manual and AIM transaction fee of $0.25
per contract for RUT transactions. CBOE assesses
market makers a non-AIM electronic transaction fee
of $0.65 per contract for RUT transactions.
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the NDX and MNX products on the
trading floor.
The Exchange’s proposal to increase
the floor Options Transaction Charges
for Professionals, Firms and BrokerDealers from $0.25 to $0.75 per contract
for NDX and MNX is equitable and not
unfairly discriminatory because the
Exchange will uniformly assess a $0.75
per contract Options Transaction
Charges for all market participants,
except for Customers, Specialists and
Market Makers transacting on the floor,
regardless of whether the transaction is
submitted electronically or on the floor.
The Exchange believes that assessing
Customers no transaction fee for NDX
and MNX is equitable and not unfairly
discriminatory because Customer orders
bring valuable liquidity to the market,
which liquidity benefits other market
participants. Customer liquidity benefits
all market participants by providing
more trading opportunities, which
attracts Specialists and Market Makers.
An increase in the activity of these
market participants in turn facilitates
tighter spreads, which may cause an
additional corresponding increase in
order flow from other market
participants.
With respect to Specialists and
Market Makers, the electronic Options
Transaction Charge for NDX and MNX
will be $0.75 per contract, similar to
other market participants. While this fee
is increasing from $0.25 to $0.75 per
contract, the Exchange, as proposed
herein, will no longer assess a
Marketing Fee for transactions in NDX
and MNX, thereby effectively lowering
the rate. For example, today, a Specialist
or Market Maker transacting an
electronic order in NDX or MNX will be
assessed a $0.25 per contract Options
Transaction Charge in non-Penny Pilot
Options, a $0.25 per contract Options
Surcharge and a $0.70 per contract
Marketing Fee for a total charge of
$1.20. With this proposal, a Specialist or
Market Maker transacting an electronic
order for NDX or MNX will be assessed
a $0.75 per contract Options
Transaction Charge and a $0.25 per
contract Options Surcharge for a total
charge of $1.00. No Marketing Fee
would be assessed. While all NonCustomer market participants would be
assessed an electronic Options
Transaction Charge of $0.75 per contract
for NDX or MNX, a Specialist or Market
Maker will be assessed a lower total
transaction charge as explained above,
compared to today.
The Exchange believes that assessing
Specialist and Market Makers a lower
floor Options Transaction Charge of
$0.35 per contract for options overlying
NDX and MNX and a higher electronic
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Options Transaction Charge of $0.75 per
contract is equitable and not unfairly
discriminatory. Unlike other market
participants, Specialists and Market
Makers have obligations to the market
and regulatory requirements, which
normally do not apply to other market
participants.30 They have obligations to
make continuous markets, engage in a
course of dealings reasonably calculated
to contribute to the maintenance of a
fair and orderly market, and not make
bids or offers or enter into transactions
that are inconsistent with a course of
dealings. The differentiation as between
Specialists and Market Makers and all
other market participants recognizes the
differing contributions made to the
liquidity and trading environment on
the Exchange by these market
participants. An increase in the activity
of these market participants in turn
facilitates tighter spreads, which may
cause an additional corresponding
increase in order flow from other market
participants. Further, Specialists and
Market Makers have a time and place
advantage on the trading floor with
respect to orders, unlike other market
participants. A Professional, BrokerDealer or a Firm would necessarily
require a floor broker to represent their
trading interest on the trading floor as
compared to a Specialist or Market
Maker that could directly transact such
orders on the trading floor. For these
reasons, the Exchange is encouraging
Specialists and Market Makers to
transact NDX and MNX on the trading
floor and recognizing the obligations of
these market participants as compared
to other market participants.
The Exchange notes that the proposed
rule changes are reasonable, equitable
and not unfairly discriminatory as NDX
and MNX transition to exclusively listed
products. Similar to other proprietary
products, the Exchange seeks to recoup
the operational costs 31 for listing
proprietary products. Also, pricing by
symbol is a common practice on many
U.S. options exchanges as a means to
incentivize order flow to be sent to an
exchange for execution in particular
products. Other options exchanges price
by symbol.32 Further, the Exchange
notes that with its products, market
participants are offered an opportunity
to either transact options overlying NDX
and MNX or separately execute options
30 See
Phlx Rule 1014.
way of example, in analyzing an obvious
error, the Exchange would have additional data
points available in establishing a theoretical price
for a Multiply Listed Option as compared to a
proprietary product, which requires additional
analysis and administrative time to comply with
Exchange rules to resolve an obvious error.
32 See pricing for RUT on CBOE’s Fees Schedule.
31 By
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overlying PowerShares QQQ Trust
(‘‘QQQ’’).33 Offering products such as
QQQ provides market participants with
a variety of choices in selecting the
product they desire to utilize to transact
NDX and MNX.34 When exchanges are
able to recoup costs associated with
offering proprietary products, it
incentivizes growth and competition for
the innovation of additional products.
The Exchange’s proposal to eliminate
the Marketing Fee for NDX and MNX is
reasonable because in light of the
transition of NDX and MNX to
exclusively listed products and new
pricing, the Exchange is increasing the
Specialist and Marker Maker electronic
Options Transaction Charges for options
overlying NDX and MNX. By removing
the Marketing Fee, Specialists and
Market Makers will avoid an increase in
costs.
The Exchange’s proposal to eliminate
the Marketing Fee for NDX and MNX is
equitable and not unfairly
discriminatory because in light of the
transition of NDX and MNX to
exclusively listed products and new
pricing, the elimination of this fee will
cause Specialists and Market Makers to
continue to be assessed a lower total
charge for the transaction as compared
to other market participants.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. In terms of
inter-market competition, the Exchange
notes that it operates in a highly
competitive market in which market
participants can readily favor competing
venues if they deem fee levels at a
particular venue to be excessive, or
rebate opportunities available at other
venues to be more favorable. In such an
environment, the Exchange must
continually adjust its fees to remain
competitive with other exchanges and
with alternative trading systems that
have been exempted from compliance
with the statutory standards applicable
to exchanges. Because competitors are
free to modify their own fees in
response, and because market
participants may readily adjust their
order routing practices, the Exchange
believes that the degree to which fee
changes in this market may impose any
33 QQQ is an exchange-traded fund based on the
Nasdaq-100 Index®.
34 By comparison, a market participant may trade
options overlying RUT or separately the market
participant has the choice of trading iShares Russell
2000 Index Fund (‘‘IWM’’) Exchange-Traded Fund
Shares options, which are also multiply listed.
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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 change
will impair the ability of members or
competing order execution venues to
maintain their competitive standing in
the financial markets or will impose any
inter-market burden on competition for
the reasons stated above.
The Exchange’s proposal to increase
the floor Options Transaction Charges
for Professionals, Firms and BrokerDealers from $0.25 to $0.75 per contract
for NDX and MNX does not impose an
undue burden on intra-market
competition because the Exchange will
uniformly assess a $0.75 per contract
Options Transaction Charges for all
market participants, except for
Customers and Specialists and Markets
transacting on the floor, regardless of
whether the transaction is submitted
electronically or on the floor. The
Exchange believes that assessing
Customers no transaction fee for NDX
and MNX does not impose an undue
burden on intra-market competition
because Customer orders bring valuable
liquidity to the market, which liquidity
benefits other market participants.
Customer liquidity benefits all market
participants by providing more trading
opportunities, which attract Specialists
and Market Makers. An increase in the
activity of these market participants in
turn facilitates tighter spreads, which
may cause an additional corresponding
increase in order flow from other market
participants. It is also important to note
that despite the fee increases with
respect to NDX, members may continue
to separately execute options overlying
PowerShares QQQ Trust (‘‘QQQ’’).35
With respect to Specialists and
Market Makers, increasing the electronic
Options Transaction Charge for NDX
and MNX from $0.25 to $0.75 per
contract, the Exchange, as proposed
herein, does not impose an undue
burden on intra-market competition as
the Exchange will no longer assess a
Marketing Fee for on NDX and MNX,
thereby effectively lowering the rate.
The Exchange believes that assessing
Specialists and Market Makers a lower
floor Options Transaction Charge of
$0.35 per contract for NDX and MNX
and a higher electronic Options
Transaction Charge of $0.75 per contract
does not impose an undue burden on
35 By comparison, a market participant may trade
options overlying RUT or separately the market
participant has the choice of trading iShares Russell
2000 Index Fund (‘‘IWM’’) Exchange-Traded Fund
Shares options, which are also multiply listed.
PO 00000
Frm 00049
Fmt 4703
Sfmt 4703
14391
intra-market competition. Unlike other
market participants, Specialists and
Market Makers have obligations to the
market and regulatory requirements,
which normally do not apply to other
market participants.36 They have
obligations to make continuous markets,
engage in a course of dealings
reasonably calculated to contribute to
the maintenance of a fair and orderly
market, and not make bids or offers or
enter into transactions that are
inconsistent with a course of dealings.
The differentiation as between
Specialists and Market Makers and all
other market participants recognizes the
differing contributions made to the
liquidity and trading environment on
the Exchange by these market
participants. An increase in the activity
of these market participants in turn
facilitates tighter spreads, which may
cause an additional corresponding
increase in order flow from other market
participants. Further, Specialists and
Market Makers have a time and place
advantage on the trading floor with
respect to orders, unlike other market
participants. A Professional, BrokerDealer or a Firm would necessarily
require a floor broker to represent their
trading interest on the trading floor as
compared to a Specialist or Market
Maker that could directly transact such
orders on the trading floor. For these
reasons, the Exchange is encouraging
Specialists and Market Makers to
transact NDX and MNX on the trading
floor and recognizing the obligations of
these market participants as compared
to other market participants.
The Exchange’s proposal to eliminate
the Marketing Fee for NDX and MNX
does not impose an undue burden on
intra-market competition because the
elimination of this fee will cause
Specialists and Market Makers to
continue to be assessed a lower total
charge for the transaction as compared
to other market participants.
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.37
At any time within 60 days of the
filing of the proposed rule change, the
36 See
37 15
E:\FR\FM\20MRN1.SGM
note 28.
U.S.C. 78s(b)(3)(A)(ii).
20MRN1
14392
Federal Register / Vol. 82, No. 52 / Monday, March 20, 2017 / Notices
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:
sradovich on DSK3GMQ082PROD with NOTICES
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–2017–24 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–2017–24. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
VerDate Sep<11>2014
18:36 Mar 17, 2017
Jkt 241001
available publicly. All submissions
should refer to File Number SR–Phlx–
2017–24, and should be submitted on or
before April 10, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.38
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017–05409 Filed 3–17–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–80243; File No. SR–Phlx–
2017–23]
Self-Regulatory Organizations;
NASDAQ PHLX LLC; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change To Amend the
Address of the Exchange and Its
Shareholder
March 14, 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 March 3,
2017, NASDAQ PHLX LLC (‘‘Phlx’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the 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
addresses for Phlx and its shareholder,
Nasdaq, Inc.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://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
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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
Phlx is planning to relocate from its
current location at 1900 Market Street in
Philadelphia, Pennsylvania to a new
location at FMC Tower, 2929 Walnut
Street in Philadelphia, Pennsylvania.
The relocation is currently scheduled to
occur in April 2017.
The purpose of this rule change is to
amend the Second Amended Limited
Liability Company Agreement of
NASDAQ PHLX LLC as well as Rule 60,
entitled ‘‘Sanctions for Breach of
Regulations’’ to amend the addresses
referenced therein for Phlx. In addition,
the Second Amended Limited Liability
Company Agreement lists the address of
Phlx’s shareholder, Nasdaq, Inc. The
Exchange proposes to amend that
address as well. The description for
each change is below.
Change to 1900 Market Street Address
As noted above, Phlx will relocate in
April 2017 to a new address at FMC
Tower, 2929 Walnut Street in
Philadelphia, Pennsylvania. The Second
Amended Limited Liability Company
Agreement and Rule 60 currently
contain references to Phlx’s current
address at 1900 Market Street. The
Exchange proposes to amend the Phlx
address as of April 1, 2017 to the new
address at FMC Tower, 2929 Walnut
Street in Philadelphia, Pennsylvania.
Change to Nasdaq, Inc. Address
Nasdaq, Inc., the sole shareholder of
Phlx, is currently listed in the Second
Amended Limited Liability Company
Agreement with an address of 1900
Market Street, Philadelphia,
Pennsylvania. At this time the Exchange
proposes to list the address of its
shareholder at One Liberty Plaza, New
York, NY 10006. This address is the
headquarters of Nasdaq, Inc.
The Exchange proposes that the Phlx
address rule change will become
operative on April 1, 2017.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,3 in general, and furthers the
objectives of Section 6(b)(5) of the Act,4
38 17
1 15
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3 15
4 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
E:\FR\FM\20MRN1.SGM
20MRN1
]]>Agencies
[Federal Register Volume 82, Number 52 (Monday, March 20, 2017)]
[Notices]
[Pages 14388-14392]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-05409]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-80244; File No. SR-Phlx-2017-24]
Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Pricing
for NDX and MNX
March 14, 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 March 9, 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 II, entitled ``Multiply Listed Options Fees,'' \3\ to amend
pricing related to options overlying NDX \4\ and MNX.\5\
---------------------------------------------------------------------------
\3\ These fees include options overlying equities, ETFs, ETNs
and indexes which are Multiply Listed.
\4\ NDX represents options on the Nasdaq 100 Index traded under
the symbol NDX (``NDX'').
\5\ MNX represents options on one-tenth the value of the Nasdaq
100 Index traded under the symbol MNX (``MNX'').
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
Web site at https://nasdaqphlx.cchwallstreet.com/ 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend pricing related to NDX and MNX by
adopting Options Transaction Charges for NDX and MNX and also
eliminating the Marketing Fee for NDX and MNX.\6\ The Exchange notes
that both NDX and MNX are transitioning to be exclusively listed on the
Exchange and its affiliated markets in 2017.\7\
---------------------------------------------------------------------------
\6\ The Exchange initially filed the proposed pricing change on
February 28, 2017 (SR-Phlx-2017-20). On March 8, 2017, the Exchange
withdrew that filing and submitted this filing.
\7\ The Exchange will exclusively list NDX and MNX in the near
future upon expiration of open expiries in these products on other
markets.
---------------------------------------------------------------------------
Today, the Exchange assesses transactions in NDX and MNX the
following Options Transaction Charges for non-Penny Pilot Options: A
$0.75 per contract for electronic Professional \8\ transactions and
$0.25 per contract for floor Professional transactions; $0.25 per
contract for Specialist \9\ and Market Maker \10\ electronic
transactions and
[[Page 14389]]
$0.35 per contract for Specialist and Market Maker floor transactions;
$0.75 per contract for Broker-Dealer \11\ electronic transactions and
$0.25 per contract for floor Broker-Dealer transactions; and $0.75 per
contact for Firm \12\ electronic transactions and $0.25 per contract
for Firm floor transactions. Today, Customers \13\ are not assessed a
non-Penny Options Transaction Charge for NDX and MNX transactions.
Also, today, all Non-Customers \14\ are assessed a $0.25 per contract
surcharge in NDX an MNX.
---------------------------------------------------------------------------
\8\ The term ``Professional'' applies to transactions for the
accounts of Professionals, as defined in Exchange Rule 1000(b)(14).
\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'' describes fees and rebates
applicable to Registered Options Traders (``ROT''), Streaming Quote
Traders (``SQT'') and Remote Streaming Quote Traders (``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. A ROT
includes SQTs and RSQTs as well as on and off-floor ROTS. 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).
\11\ The term ``Broker-Dealer'' applies to any transaction which
is not subject to any of the other transaction fees applicable
within a particular category.
\12\ 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.
\13\ 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)).
\14\ The term ``Non-Customer'' applies to transactions for the
accounts of Specialists, Market Makers, Firms, Professionals,
Broker-Dealers and Joint Back Office.
---------------------------------------------------------------------------
The Exchange proposes to indicate that the Options Transaction
charges for non-Penny Pilot Options will not apply to NDX and MNX
transactions and instead adopt new pricing for NDX and MNX. The
Exchange proposes to adopt the following Options Transaction Charges
for NDX and MNX. Customers will continue to not be assessed an Options
Transaction Charge for NDX and MNX. Professionals will be assessed the
same $0.75 per contract electronic Options Transaction Charge and an
increased floor Options Transaction Charge of $0.75 per contract \15\
for NDX and MNX transactions. A Specialist and Market Maker will be
assessed an increased electronic Options Transaction Charge of $0.75
per contract \16\ and the same $0.35 per contract floor Options
Transaction Charge for NDX and MNX transactions. A Broker-Dealer will
be assessed the same $0.75 per contract electronic Options Transaction
Charge and an increased floor Options Transaction Charge of $0.75 per
contract \17\ for NDX and MNX transactions. Finally, a Firm will be
assessed the same $0.75 per contract electronic Options Transaction
Charge and an increased floor Options Transaction Charge of $0.75 per
contract \18\ for NDX and MNX transactions. The Exchange will continue
to assess Non-Customers an Options Surcharge for NDX and MNX of $0.25
per contract as is the case today.\19\ The Exchange is proposing to
relocate the surcharge to a new note 5 within the Pricing Schedule
instead of stating the pricing within the current table in Section II
of the Pricing Schedule.
---------------------------------------------------------------------------
\15\ Today, a Professional is assessed a $0.25 per contract
floor Options Transaction Charge when transacting NDX and MNX.
\16\ Today, a Specialist and Market Maker are assessed a $0.25
per contract floor Options Transaction Charge when transacting NDX
and MNX.
\17\ Today, a Broker-Dealer is assessed a $0.25 per contract
floor Options Transaction Charge when transacting NDX and MNX.
\18\ Today, a Firm is assessed a $0.25 per contract floor
Options Transaction Charge when transacting NDX and MNX.
\19\ For clarity, the Exchange is amending the Customer charge
from ``N/A'' to ``$0.00.'' The Exchange believes that $0.00 is more
appropriate to reflect no charge.
---------------------------------------------------------------------------
The Exchange is also proposing to note that a Marketing Fee \20\
will not be assessed on NDX and MNX. Today, for trades resulting from
either Directed or non-Directed Orders that are delivered
electronically and executed on the Exchange, Specialists, Market Makers
and Directed ROTs are assessed certain fees on those trades when the
Specialist unit or Directed ROT elects to participate in the marketing
program. Specifically, the Exchange assesses options that are trading
in the Penny Pilot Program $0.25 per contract and the remaining equity
options are assessed $0.70 per contract (including NDX and MNX). No
Marketing Fees are assessed on trades that are not delivered
electronically. No Marketing Fees are assessed on Professional orders.
Marketing Fees are assessed on transactions resulting from Customer
orders and are available to be disbursed by the Exchange according to
the instructions of the Specialist units/Specialists or Directed ROTs
to order flow providers who are members or member organizations, who
submit, as agent, Customer orders to the Exchange or non-members or
non-member organizations who submit, as agent, Customer orders to the
Exchange through a member or member organization who is acting as agent
for those Customer orders.
---------------------------------------------------------------------------
\20\ The Exchange's Marketing Fee helps its Specialists and
Directed Registered Options Traders (``Directed ROTs'') establish
payment arrangements with an order flow provider in exchange for
that order flow provider directing some or all of its order flow to
that Specialist or Directed ROT. This program is funded through fees
paid by Registered Options Traders (``ROTs''), Specialists and
Directed ROTs and assessed on transactions resulting from customer
orders. A Registered Option Trader 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. See Exchange Rule 1014 (b)(i) and (ii).
A ``Directed ROT'' is an ROT who is a Directed Participant. The term
``Directed Participant'' applies to transactions for the account of
a Specialist or ROT resulting from a customer order that is (1)
directed to it by an order flow provider, and (2) executed by it
electronically on Phlx XL II.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\21\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\22\ 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 discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\21\ 15 U.S.C. 78f(b).
\22\ 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.'' \23\
---------------------------------------------------------------------------
\23\ 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
\24\ (``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.\25\ 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.'' \26\
---------------------------------------------------------------------------
\24\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\25\ See NetCoalition, at 534-535.
\26\ 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-
[[Page 14390]]
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'. . . .'' \27\ 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.
---------------------------------------------------------------------------
\27\ 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)).
---------------------------------------------------------------------------
The Exchange's proposal to increase the floor Options Transaction
Charges for Professionals, Firms and Broker-Dealers from $0.25 to $0.75
per contract for NDX and MNX is reasonable because the Exchange is
assessing the same transaction fee whether the transaction occurred
electronically or on the Exchange's trading floor for these market
participants. The Exchange's increase for this proprietary product is
competitive when compared with similar proprietary products.\28\
---------------------------------------------------------------------------
\28\ See Chicago Board Options Exchange, Incorporated's
(``CBOE'') Fees Schedule. Russell 2000 Index (``RUT'') options
transactions on CBOE, except customers, are assessed a $0.45 per
contract surcharge. CBOE assesses Professionals and Broker-Dealers a
manual and AIM transaction fee of $0.25 per contract and a non-AIM
transaction fee of $0.65 per contract. CBOE assesses Clearing Trade
Permit Holders a transaction fee of $0.22 [sic] per contract,
subject to a sliding scale.
---------------------------------------------------------------------------
With respect to Specialists and Market Makers, the electronic
Options Transaction Charge for NDX and MNX will be $0.75 per contract,
similar to other Non-Customer market participants. The Exchange
believes that it is reasonable to assess Specialists and Market Markers
the same electronic Options Transactions Charge in NDX and MNX as other
market participants, except Customers. The Exchange's increase for this
proprietary product is competitive when compared with similar
proprietary products.\29\ The Specialist and Market Maker floor Options
Transaction Charge is not being amended and will remain at $0.35 per
contract. The Exchange will continue to assess a Specialist and Market
Maker Options Transaction Charge of $0.35 per contract for floor
transactions in NDX and MNX because the Exchange desires to incentivize
Specialists and Market Makers to continue to make markets in the NDX
and MNX products on the trading floor.
---------------------------------------------------------------------------
\29\ See CBOE's Fees Schedule. RUT transactions on CBOE, except
customers, are assessed a $0.45 per contract surcharge. CBOE
assesses market makers a manual and AIM transaction fee of $0.25 per
contract for RUT transactions. CBOE assesses market makers a non-AIM
electronic transaction fee of $0.65 per contract for RUT
transactions.
---------------------------------------------------------------------------
The Exchange's proposal to increase the floor Options Transaction
Charges for Professionals, Firms and Broker-Dealers from $0.25 to $0.75
per contract for NDX and MNX is equitable and not unfairly
discriminatory because the Exchange will uniformly assess a $0.75 per
contract Options Transaction Charges for all market participants,
except for Customers, Specialists and Market Makers transacting on the
floor, regardless of whether the transaction is submitted
electronically or on the floor. The Exchange believes that assessing
Customers no transaction fee for NDX and MNX is equitable and not
unfairly discriminatory because Customer orders bring valuable
liquidity to the market, which liquidity benefits other market
participants. Customer liquidity benefits all market participants by
providing more trading opportunities, which attracts Specialists and
Market Makers. An increase in the activity of these market participants
in turn facilitates tighter spreads, which may cause an additional
corresponding increase in order flow from other market participants.
With respect to Specialists and Market Makers, the electronic
Options Transaction Charge for NDX and MNX will be $0.75 per contract,
similar to other market participants. While this fee is increasing from
$0.25 to $0.75 per contract, the Exchange, as proposed herein, will no
longer assess a Marketing Fee for transactions in NDX and MNX, thereby
effectively lowering the rate. For example, today, a Specialist or
Market Maker transacting an electronic order in NDX or MNX will be
assessed a $0.25 per contract Options Transaction Charge in non-Penny
Pilot Options, a $0.25 per contract Options Surcharge and a $0.70 per
contract Marketing Fee for a total charge of $1.20. With this proposal,
a Specialist or Market Maker transacting an electronic order for NDX or
MNX will be assessed a $0.75 per contract Options Transaction Charge
and a $0.25 per contract Options Surcharge for a total charge of $1.00.
No Marketing Fee would be assessed. While all Non-Customer market
participants would be assessed an electronic Options Transaction Charge
of $0.75 per contract for NDX or MNX, a Specialist or Market Maker will
be assessed a lower total transaction charge as explained above,
compared to today.
The Exchange believes that assessing Specialist and Market Makers a
lower floor Options Transaction Charge of $0.35 per contract for
options overlying NDX and MNX and a higher electronic Options
Transaction Charge of $0.75 per contract is equitable and not unfairly
discriminatory. Unlike other market participants, Specialists and
Market Makers have obligations to the market and regulatory
requirements, which normally do not apply to other market
participants.\30\ They have obligations to make continuous markets,
engage in a course of dealings reasonably calculated to contribute to
the maintenance of a fair and orderly market, and not make bids or
offers or enter into transactions that are inconsistent with a course
of dealings. The differentiation as between Specialists and Market
Makers and all other market participants recognizes the differing
contributions made to the liquidity and trading environment on the
Exchange by these market participants. An increase in the activity of
these market participants in turn facilitates tighter spreads, which
may cause an additional corresponding increase in order flow from other
market participants. Further, Specialists and Market Makers have a time
and place advantage on the trading floor with respect to orders, unlike
other market participants. A Professional, Broker-Dealer or a Firm
would necessarily require a floor broker to represent their trading
interest on the trading floor as compared to a Specialist or Market
Maker that could directly transact such orders on the trading floor.
For these reasons, the Exchange is encouraging Specialists and Market
Makers to transact NDX and MNX on the trading floor and recognizing the
obligations of these market participants as compared to other market
participants.
---------------------------------------------------------------------------
\30\ See Phlx Rule 1014.
---------------------------------------------------------------------------
The Exchange notes that the proposed rule changes are reasonable,
equitable and not unfairly discriminatory as NDX and MNX transition to
exclusively listed products. Similar to other proprietary products, the
Exchange seeks to recoup the operational costs \31\ for listing
proprietary products. Also, pricing by symbol is a common practice on
many U.S. options exchanges as a means to incentivize order flow to be
sent to an exchange for execution in particular products. Other options
exchanges price by symbol.\32\ Further, the Exchange notes that with
its products, market participants are offered an opportunity to either
transact options overlying NDX and MNX or separately execute options
[[Page 14391]]
overlying PowerShares QQQ Trust (``QQQ'').\33\ Offering products such
as QQQ provides market participants with a variety of choices in
selecting the product they desire to utilize to transact NDX and
MNX.\34\ When exchanges are able to recoup costs associated with
offering proprietary products, it incentivizes growth and competition
for the innovation of additional products.
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\31\ By way of example, in analyzing an obvious error, the
Exchange would have additional data points available in establishing
a theoretical price for a Multiply Listed Option as compared to a
proprietary product, which requires additional analysis and
administrative time to comply with Exchange rules to resolve an
obvious error.
\32\ See pricing for RUT on CBOE's Fees Schedule.
\33\ QQQ is an exchange-traded fund based on the Nasdaq-100
Index[supreg].
\34\ By comparison, a market participant may trade options
overlying RUT or separately the market participant has the choice of
trading iShares Russell 2000 Index Fund (``IWM'') Exchange-Traded
Fund Shares options, which are also multiply listed.
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The Exchange's proposal to eliminate the Marketing Fee for NDX and
MNX is reasonable because in light of the transition of NDX and MNX to
exclusively listed products and new pricing, the Exchange is increasing
the Specialist and Marker Maker electronic Options Transaction Charges
for options overlying NDX and MNX. By removing the Marketing Fee,
Specialists and Market Makers will avoid an increase in costs.
The Exchange's proposal to eliminate the Marketing Fee for NDX and
MNX is equitable and not unfairly discriminatory because in light of
the transition of NDX and MNX to exclusively listed products and new
pricing, the elimination of this fee will cause Specialists and Market
Makers to continue to be assessed a lower total charge for the
transaction as compared to other market participants.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. In terms of inter-market
competition, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues if they deem fee levels at a particular venue to be
excessive, or rebate opportunities available at other venues to be more
favorable. In such an environment, the Exchange must continually adjust
its fees to remain competitive with other exchanges and with
alternative trading systems that have been exempted from compliance
with the statutory standards applicable to exchanges. Because
competitors are free to modify their own fees in response, and because
market participants may readily adjust their order routing practices,
the Exchange believes that the degree to which fee changes in this
market may impose any burden on competition is extremely limited. In
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
change will impair the ability of members or competing order execution
venues to maintain their competitive standing in the financial markets
or will impose any inter-market burden on competition for the reasons
stated above.
The Exchange's proposal to increase the floor Options Transaction
Charges for Professionals, Firms and Broker-Dealers from $0.25 to $0.75
per contract for NDX and MNX does not impose an undue burden on intra-
market competition because the Exchange will uniformly assess a $0.75
per contract Options Transaction Charges for all market participants,
except for Customers and Specialists and Markets transacting on the
floor, regardless of whether the transaction is submitted
electronically or on the floor. The Exchange believes that assessing
Customers no transaction fee for NDX and MNX does not impose an undue
burden on intra-market competition because Customer orders bring
valuable liquidity to the market, which liquidity benefits other market
participants. Customer liquidity benefits all market participants by
providing more trading opportunities, which attract Specialists and
Market Makers. An increase in the activity of these market participants
in turn facilitates tighter spreads, which may cause an additional
corresponding increase in order flow from other market participants. It
is also important to note that despite the fee increases with respect
to NDX, members may continue to separately execute options overlying
PowerShares QQQ Trust (``QQQ'').\35\
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\35\ By comparison, a market participant may trade options
overlying RUT or separately the market participant has the choice of
trading iShares Russell 2000 Index Fund (``IWM'') Exchange-Traded
Fund Shares options, which are also multiply listed.
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With respect to Specialists and Market Makers, increasing the
electronic Options Transaction Charge for NDX and MNX from $0.25 to
$0.75 per contract, the Exchange, as proposed herein, does not impose
an undue burden on intra-market competition as the Exchange will no
longer assess a Marketing Fee for on NDX and MNX, thereby effectively
lowering the rate. The Exchange believes that assessing Specialists and
Market Makers a lower floor Options Transaction Charge of $0.35 per
contract for NDX and MNX and a higher electronic Options Transaction
Charge of $0.75 per contract does not impose an undue burden on intra-
market competition. Unlike other market participants, Specialists and
Market Makers have obligations to the market and regulatory
requirements, which normally do not apply to other market
participants.\36\ They have obligations to make continuous markets,
engage in a course of dealings reasonably calculated to contribute to
the maintenance of a fair and orderly market, and not make bids or
offers or enter into transactions that are inconsistent with a course
of dealings. The differentiation as between Specialists and Market
Makers and all other market participants recognizes the differing
contributions made to the liquidity and trading environment on the
Exchange by these market participants. An increase in the activity of
these market participants in turn facilitates tighter spreads, which
may cause an additional corresponding increase in order flow from other
market participants. Further, Specialists and Market Makers have a time
and place advantage on the trading floor with respect to orders, unlike
other market participants. A Professional, Broker-Dealer or a Firm
would necessarily require a floor broker to represent their trading
interest on the trading floor as compared to a Specialist or Market
Maker that could directly transact such orders on the trading floor.
For these reasons, the Exchange is encouraging Specialists and Market
Makers to transact NDX and MNX on the trading floor and recognizing the
obligations of these market participants as compared to other market
participants.
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\36\ See note 28.
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The Exchange's proposal to eliminate the Marketing Fee for NDX and
MNX does not impose an undue burden on intra-market competition because
the elimination of this fee will cause Specialists and Market Makers to
continue to be assessed a lower total charge for the transaction as
compared to other market participants.
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.\37\
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\37\ 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
[[Page 14392]]
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-2017-24 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-2017-24. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-Phlx-2017-24, and should be
submitted on or before April 10, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\38\
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\38\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-05409 Filed 3-17-17; 8:45 am]
BILLING CODE 8011-01-P
