Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Exclude Options Overlying NDX From Several Pricing Programs, 58881-58884 [2017-26916]
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Federal Register / Vol. 82, No. 239 / Thursday, December 14, 2017 / Notices
(a) How those economies of scale
compare to operational economies of
scale; and
(b) Whether those economies of scale
reduce or increase the current
advantages enjoyed by larger
competitors or otherwise alter the
competitive landscape.
(20) Commenters’ views on whether
the fees could affect competition
between and among national securities
exchanges and FINRA, in light of the
fact that implementation of the fees does
not require the unanimous consent of all
such entities, and, specifically:
(a) Whether any of the national
securities exchanges or FINRA are
disadvantaged by the fees; and
(b) If so, whether any such
disadvantages would be of a magnitude
that would alter the competitive
landscape.
(21) Commenters’ views on any
potential burden imposed by the fees on
competitive quoting and other liquidity
provision in the market, including,
specifically:
(a) Commenters’ views on the kinds of
disincentives that discourage liquidity
provision and/or disincentives that the
Commission should consider in its
analysis;
(b) Commenters’ views as to whether
the fees could disincentivize the
provision of liquidity; and
(c) Commenters’ views as to whether
the fees limit any disincentives to
provide liquidity.
(22) Commenters’ views as to whether
the amendment adequately responds to
and/or addresses comments received on
related filings.
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 website 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 such
filing will also be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–BatsEDGA–2017–13
Amendment No. 1 and should be
submitted on or before January 4, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.99
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017–27011 Filed 12–13–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
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 rulecomments@sec.gov. Please include File
Number SR–BatsEDGA–2017–13 on the
subject line.
[Release No. 34–82250; File No. SR–Phlx–
2017–102]
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BatsEDGA–2017–13. 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 website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
December 8, 2017.
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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, ‘‘Multiply Listed Options Fees,’’ 3 and
Section IV, entitled ‘‘Other Transaction
Fees.’’ Specifically, the Exchange
proposes to exclude options overlying
NDX 4 from several pricing programs.
The text of the proposed rule change
is available on the Exchange’s website 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
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
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Exclude Options
Overlying NDX From Several Pricing
Programs
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 December
1, 2017, Nasdaq PHLX LLC (‘‘Phlx’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
99 17
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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Phlx proposes to exclude options
overlying NDX from the Monthly
Market Maker Cap, the Market Access
and Routing Subsidy or ‘‘MARS,’’ and
Phlx’s Price Improvement XL (‘‘PIXL’’)
pricing. Each of the proposals are
discussed in more detail below. The
Exchange seeks to differentiate pricing
for this exclusively-listed product from
other multiply listed product pricing.
3 This includes 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’’).
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Monthly Market Maker Cap
Today, Phlx Specialists 5 and Market
Makers 6 are subject to a ‘‘Monthly
Market Maker Cap’’ of $500,000 for: (i)
Electronic Option Transaction Charges,
excluding surcharges; and (ii) Qualified
Contingent Cross (‘‘QCC’’) Transaction
Fees (as defined in Exchange Rule
1080(o) and Floor QCC Orders, as
defined in 1064(e)).7 All dividend,
merger, short stock interest, reversal and
conversion, jelly roll and box spread
strategy executions (as defined in
Section II of the Pricing Schedule) will
be excluded from the Monthly Market
Maker Cap. Specialists or Market
Makers that (i) are on the contra-side of
an electronically-delivered and
executed Customer order, excluding
responses to a PIXL auction; and (ii)
have reached the Monthly Market Maker
Cap will be assessed fees as follows:
$0.05 per contract Fee for Adding
Liquidity in Penny Pilot Options, $0.18
per contract Fee for Removing Liquidity
in Penny Pilot Options and $0.18 per
contract in Non-Penny Pilot Options.
The Exchange proposes to amend the
Monthly Market Maker Cap to exclude
options overlying NDX from electronic
Options Transaction Charges as subject
to the Monthly Market Maker Cap.
Transactions in NDX will not be subject
to the the Monthly Market Maker Cap.
sradovich on DSK3GMQ082PROD with NOTICES
PIXL
Today, the Exchange assess a $0.07
per contract PIXL Initiating Order Fee.
However, if the member or member
organization qualifies for the Tier 3, 4 or
5 Customer Rebate in Section B the
member or member organization is
assessed $0.05 per contract. 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
5 The term ‘‘Specialist’’ applies to transactions for
the account of a Specialist (as defined in Exchange
Rule 1020(a)). A Specialist is an Exchange member
who is registered as an options specialist pursuant
to Rule 1020(a). An options Specialist includes a
Remote Specialist which is defined as an options
specialist in one or more classes that does not have
a physical presence on an Exchange floor and is
approved by the Exchange pursuant to Rule 501.
See Preface to Phlx’s Pricing Schedule.
6 The term ‘‘Registered Options Trader’’ or
‘‘ROT’’, ‘‘Streaming Quote Trader’’ or ‘‘SQT’’ and
‘‘Remote Streaming Quote Trader’’ or ‘‘RSQT’’
applies to transactions for the accounts of ROTS,
SQTs, and RSQTs. For purposes of the Pricing
Schedule, the term ‘‘Market Maker’’ will be utilized
to describe fees and rebates applicable to ROTs,
SQTs and RSQTs. See Preface to Phlx’s Pricing
Schedule.
7 The trading activity of separate Specialist and
Market Maker member organizations is aggregated
in calculating the Monthly Market Maker Cap if
there is Common Ownership between the member
organizations.
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given month, the member or member
organization is assessed no fee 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 receives one of the PIXL
Initiating Order discounts as described
above. Members or member
organizations that qualify for Customer
Rebate Tiers 2 through 6 or qualify for
the Monthly Firm Fee Cap 8 are eligible
for a rebate of $0.12 per contract for all
Complex PIXL Orders (excluding SPY
Options) greater than 499 contracts,
provided the member executes an
average of 2,500 contracts per day of
SPY Complex PIXL Orders in a month.
Further, the Exchange has pricing
noted for PIXL Order Executions in
Section II Multiply Listed Options.
When the PIXL Order is contra to the
Initiating Order a Customer PIXL Order
is assessed no fee and Non-Customer
PIXL Orders will be assessed $0.30 per
contract. When a PIXL Order is contra
to a PIXL Auction Responder, a
Customer PIXL Order is assessed no fee,
other Non-Customer PIXL Orders are
assessed $0.30 per contract in Penny
Pilot Options or $0.38 per contract in
Non-Penny Pilot Options. A Responder
that is a Specialist or a Market Maker is
assessed $0.25 per contract in Penny
Pilot Options or $0.40 per contract in
Non-Penny Pilot Options. Other NonCustomer Responders are assessed $0.48
per contract in Penny Pilot Options or
$0.70 per contract in Non-Penny Pilot
Options when contra to a PIXL Order.
A Responder that is a Customer is
assessed $0.00 per contract in Penny
Pilot Options and Non-Penny Pilot
Options. Finally, when a PIXL Order is
contra to a resting order or quote a
Customer PIXL Order is assessed no fee,
other Non-Customers are assessed $0.30
per contract and the resting order or
quote is assessed the appropriate
Options Transaction Charge in Section
II. All other fees discussed in Section II,
including Marketing Fees and
surcharges, apply as appropriate.
The Exchange proposes to exclude
options overlying NDX from the PIXL
Pricing in Section IV, Part A. NDX
would be subject to Section II pricing,
specifically the Options Transactions
Charges in NDX as noted.
8 Firms are subject to a maximum fee of $75,000
(‘‘Monthly Firm Fee Cap’’). Additional details on
the Monthly Firm Fee Cap are at Section II of the
Pricing Schedule.
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MARS
Today, MARS, pays a subsidy to Phlx
members that provide certain order
routing functionalities to other Phlx
members and/or use such
functionalities themselves. Generally,
under MARS, Phlx pays participating
Phlx members to subsidize their costs of
providing routing services to route
orders to Phlx. To qualify for MARS, a
Phlx member’s order routing
functionality would be required to meet
certain criteria.9 With respect to
Complex Orders, the Exchange would
not require Complex Orders to enable
the electronic routing of orders to all of
the U.S. options exchanges or provide
current consolidated market data from
the U.S. options exchanges. Any Phlx
member may apply for MARS, provided
the requirements are met, including a
robust and reliable System. The member
is solely responsible for implementing
and operating its System. The Exchange
is not proposing to amend this
eligibility standards.
Today, a MARS Payment would be
made to Phlx members that have System
Eligibility and have routed the requisite
number of Eligible Contracts daily in a
month, which were executed on Phlx.
For the purpose of qualifying for the
MARS Payment, Eligible Contracts
include Firm,10 Broker-Dealer,11 Joint
Back Office or ‘‘JBO’’ 12 or
9 Specifically, a Phlx member’s routing system
(hereinafter ‘‘System’’) would be required to: (1)
Enable the electronic routing of orders to all of the
U.S. options exchanges, including Phlx; (2) provide
current consolidated market data from the U.S.
options exchanges; and (3) be capable of interfacing
with Phlx’s API to access current Phlx match engine
functionality. Further, the member’s System would
also need to cause Phlx to be the one of the top five
default destination exchanges for individually
executed marketable orders if Phlx is at the national
best bid or offer (‘‘NBBO’’), regardless of size or
time, but allow any user to manually override Phlx
as a default destination on an order-by-order basis.
Notwithstanding the above, with respect to
Complex Orders a Phlx member’s routing system
would not be required to enable the electronic
routing of orders to all of the U.S. options
exchanges or provide current consolidated market
data from the U.S. options exchanges. Any Phlx
member would be permitted to avail itself of this
arrangement, provided that its order routing
functionality incorporates the features described
above and satisfies Phlx that it appears to be robust
and reliable. The member remains solely
responsible for implementing and operating its
system.
10 The term ‘‘Firm’’ or (‘‘F’’) applies to any
transaction that is identified by a Participant for
clearing in the Firm range at OCC.
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 ‘‘Joint Back Office’’ or ‘‘JBO’’ applies
to any transaction that is identified by a member or
member organization for clearing in the Firm range
at OCC and is identified with an origin code as a
JBO. A JBO will be priced the same as a BrokerDealer. A JBO participant is a member, member
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Federal Register / Vol. 82, No. 239 / Thursday, December 14, 2017 / Notices
Professional 13 equity option orders that
are electronically delivered and
executed. Eligible Contracts do not
include floor-based orders, qualified
contingent cross or ‘‘QCC’’ orders,14
price improvement or ‘‘PIXL’’ orders,15
Mini-Option orders 16 or Singly-Listed
Options 17 orders. The Eligible Contracts
requirements are not being amended.
Average daily
volume
(‘‘ADV’’)
Tiers
1
2
3
4
5
6
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
The Exchange proposes to exclude
options overlying NDX from Eligible
Contracts for purposes of qualifying for
a MARS Payment. Only Eligible
Contracts are paid rebates, therefore no
MARS Payment would be paid on
options overlying NDX.
2. Statutory Basis
sradovich on DSK3GMQ082PROD with NOTICES
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,19 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,20 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 Exchange believes that the
proposed pricing changes to exclude
options overlying NDX from the
Monthly Market Maker Cap, MARS and
PIXL pricing for NDX are reasonable,
equitable and not unfairly
discriminatory. NDX transitioned in
2017 to an exclusively-listed product.
Similar to other proprietary products,
the Exchange seeks to recoup the
operational costs for listing proprietary
products.21 Also, pricing by symbol is a
common practice on many U.S. options
exchanges as a means to incentivize
organization or non-member organization that
maintains a JBO arrangement with a clearing
broker-dealer (‘‘JBO Broker’’) subject to the
requirements of Regulation T Section 220.7 of the
Federal Reserve System as further discussed at
Exchange Rule 703.
13 The term ‘‘professional’’ means any person or
entity that (i) is not a broker or dealer in securities,
and (ii) places more than 390 orders in listed
options per day on average during a calendar month
for its own beneficial account(s). See Rule
1000(b)(14).
14 A QCC Order is comprised of an order to buy
or sell at least 1000 contracts that is identified as
being part of a qualified contingent trade, as that
term is defined in Rule 1080(o)(3), coupled with a
contra-side order to buy or sell an equal number of
contracts. The QCC Order must be executed at a
price at or between the NBBO and be rejected if a
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Phlx members that have System
Eligibility and have executed the
requisite number of Eligible Contracts in
a month are paid the following per
contract rebates: 18
order flow to be sent to an exchange for
execution in particular products. Other
options exchanges price by symbol.22
Further, the Exchange notes that with its
products, market participants are
offered an opportunity to either transact
options overlying NDX or separately
execute options overlying PowerShares
QQQ Trust (‘‘QQQ’’).23 Offering
products such as QQQ provides market
participants with a variety of choices in
selecting the product they desire to
utilize to transact NDX.24 When
exchanges are able to recoup costs
associated with offering proprietary
products, it incentivizes growth and
competition for the innovation of
additional products.
Monthly Market Maker Cap
The Exchange’s proposal to exclude
electronic Options Transaction Charges
for options overlying NDX from the
Monthly Market Maker Cap is
reasonable because Market Makers will
continue to be able to utilize the cap to
reduce electronic Option Transaction
Charges, excluding surcharges, QCC
transaction fees and Floor QCC Orders,
despite the exclusion of NDX
transactions. The Exchange’s proposal
to exclude electronic Options
Transaction Charges for options
overlying NDX from the Monthly
Market Maker Cap is equitable and not
Customer order is resting on the Exchange book at
the same price. A QCC Order shall only be
submitted electronically from off the floor to the
Exchange’s match engine. See Rule 1080(o).
15 PIXL is the Exchange’s price improvement
mechanism known as Price Improvement XL or
(PIXLSM). See Rule 1080(n).
16 Mini Options are further specified in Phlx Rule
1012, Commentary .13.
17 Singly Listed Options are options overlying
currencies, equities, ETFs, ETNs treasury securities
and indexes not listed on another exchange.
18 The specified MARS Payment are paid on all
executed Eligible Contracts which are routed to
Phlx through a participating Phlx member’s System
and meet the requisite Eligible Contracts ADV. No
payment are made with respect to orders that are
routed to Phlx, but not executed.
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1,000
30,000
40,000
52,500
65,000
75,000
MARS payment
Non-SPY
$0.01
0.10
0.12
0.14
0.18
0.20
SPY
$0.01
0.10
0.12
0.12
0.12
0.12
unfairly discriminatory because the
Exchange will uniformly exclude
electronic options overlying NDX from
the Monthly Market Maker Cap.
PIXL
The Exchange’s proposal to exclude
options overlying NDX from the PIXL
Pricing in Section IV, Part A is
reasonable because the Exchange
believes that the PIXL pricing continues
to be competitive despite the exclusion
of NDX. The Exchange’s proposal to
exclude options overlying NDX from the
PIXL Pricing in Section IV, Part A is
equitable and not unfairly
discriminatory because the Exchange
will uniformly exclude options
overlying NDX from PIXL pricing.
MARS
The Exchange’s proposal to exclude
options overlying NDX from Eligible
Contracts for purposes of qualifying for
a MARS Payment is reasonable because
the Exchange believes that despite the
exclusion of NDX, MARS remains a
competitive offering. The Exchange’s
proposal to exclude options overlying
NDX from Eligible Contracts for
purposes of qualifying for a MARS
Payment is equitable and not unfairly
discriminatory because the Exchange
will uniformly exclude options
overlying NDX from MARS.
19 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
21 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.
22 See pricing for Russell 2000 Index (‘‘RUT’’) on
Cboe Exchange, Inc.’s Fees Schedule.
23 QQQ is an exchange-traded fund based on the
Nasdaq-100 Index®.
24 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.
20 15
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Federal Register / Vol. 82, No. 239 / Thursday, December 14, 2017 / Notices
IV. Solicitation of Comments
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.
The Exchange’s proposal to exclude
electronic Options Transaction Charges
for options overlying NDX from the
Monthly Market Maker Cap does not
impose an undue burden on intramarket competition because the
Exchange will uniformly exclude
electronic options overlying NDX from
the Monthly Market Maker Cap. The
Exchange’s proposal to exclude options
overlying NDX from the PIXL Pricing in
Section IV, Part A does not impose an
undue burden on intra-market
competition because the Exchange will
uniformly exclude options overlying
NDX from PIXL pricing. The Exchange’s
proposal to exclude options overlying
NDX from Eligible Contracts for
purposes of qualifying for a MARS
Payment does not impose an undue
burden on intra-market competition
because the Exchange will uniformly
exclude options overlying NDX from
MARS.
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.
sradovich on DSK3GMQ082PROD with NOTICES
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.25
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.
25 15
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:
21:28 Dec 13, 2017
Jkt 244001
• 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–2017–102 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE, Washington, DC 20549–1090.
All submissions should refer to File
Number SR–Phlx–2017–102. 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 website (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 website 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.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–Phlx–2017–102 and should
be submitted on or before January 4,
2018.
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[FR Doc. 2017–26916 Filed 12–13–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
U.S.C. 78s(b)(3)(A)(ii).
VerDate Sep<11>2014
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
Eduardo A. Aleman,
Assistant Secretary.
Sfmt 4703
[Release No. 34–82249; File No. SR–
NYSEArca–2017–110]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of
Amendment No. 2 and Order
Approving on an Accelerated Basis a
Proposed Rule Change, as Modified by
Amendment No. 2, To List and Trade
Shares of the GraniteShares Platinum
Trust Under NYSE Arca Rule 8.201–E
December 8, 2017.
I. Introduction
On September 12, 2017, NYSE Arca,
Inc. (‘‘NYSE Arca’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to list and trade shares of the
GraniteShares Platinum Trust under
NYSE Arca Rule 8.201–E. The proposed
rule change was published for comment
in the Federal Register on September
27, 2017.3 On October 24, 2017, the
Exchange filed Amendment No. 1 to the
proposed rule change, which
superseded the proposed rule change as
originally filed. On November 16, 2017,
the Exchange filed Amendment No. 2 to
the proposed rule change, which
superseded the proposed rule change as
modified by Amendment No. 1.4 The
26 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 81675
(Sept. 21, 2017), 82 FR 45080.
4 In Amendment No. 2, the Exchange: (1) Clarified
the permitted investments of the Trust (as defined
herein); (2) supplemented its description of the
duties of the Trust Custodian (as defined herein);
(3) provided information about platinum futures; (4)
supplemented its description of the process of
Share (as defined herein) redemptions; (5)
supplemented its description of how the Trust’s net
asset value (‘‘NAV’’) will be calculated; (6)
increased the minimum number of Shares that the
Exchange will require to be outstanding at the
commencement of trading; (7) expanded the
circumstances in which the Exchange would or
might halt trading in the Shares; (8) specified that
the Shares would trade in all of the Exchange’s
trading sessions; (9) represented that platinum
futures trade on significant exchanges, including
NYMEX (as defined herein), which is regulated by
the CFTC (as defined herein) and is a member of
ISG (as defined herein); and (10) made certain
1 15
E:\FR\FM\14DEN1.SGM
14DEN1
]]>Agencies
[Federal Register Volume 82, Number 239 (Thursday, December 14, 2017)]
[Notices]
[Pages 58881-58884]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-26916]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82250; File No. SR-Phlx-2017-102]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Exclude Options
Overlying NDX From Several Pricing Programs
December 8, 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 December 1, 2017, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III, below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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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, ``Multiply Listed Options Fees,'' \3\ and Section IV,
entitled ``Other Transaction Fees.'' Specifically, the Exchange
proposes to exclude options overlying NDX \4\ from several pricing
programs.
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\3\ This includes 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'').
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The text of the proposed rule change is available on the Exchange's
website 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 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 proposes to exclude options overlying NDX from the Monthly
Market Maker Cap, the Market Access and Routing Subsidy or ``MARS,''
and Phlx's Price Improvement XL (``PIXL'') pricing. Each of the
proposals are discussed in more detail below. The Exchange seeks to
differentiate pricing for this exclusively-listed product from other
multiply listed product pricing.
[[Page 58882]]
Monthly Market Maker Cap
Today, Phlx Specialists \5\ and Market Makers \6\ are subject to a
``Monthly Market Maker Cap'' of $500,000 for: (i) Electronic Option
Transaction Charges, excluding surcharges; and (ii) Qualified
Contingent Cross (``QCC'') Transaction Fees (as defined in Exchange
Rule 1080(o) and Floor QCC Orders, as defined in 1064(e)).\7\ All
dividend, merger, short stock interest, reversal and conversion, jelly
roll and box spread strategy executions (as defined in Section II of
the Pricing Schedule) will be excluded from the Monthly Market Maker
Cap. Specialists or Market Makers that (i) are on the contra-side of an
electronically-delivered and executed Customer order, excluding
responses to a PIXL auction; and (ii) have reached the Monthly Market
Maker Cap will be assessed fees as follows: $0.05 per contract Fee for
Adding Liquidity in Penny Pilot Options, $0.18 per contract Fee for
Removing Liquidity in Penny Pilot Options and $0.18 per contract in
Non-Penny Pilot Options.
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\5\ The term ``Specialist'' applies to transactions for the
account of a Specialist (as defined in Exchange Rule 1020(a)). A
Specialist is an Exchange member who is registered as an options
specialist pursuant to Rule 1020(a). An options Specialist includes
a Remote Specialist which is defined as an options specialist in one
or more classes that does not have a physical presence on an
Exchange floor and is approved by the Exchange pursuant to Rule 501.
See Preface to Phlx's Pricing Schedule.
\6\ The term ``Registered Options Trader'' or ``ROT'',
``Streaming Quote Trader'' or ``SQT'' and ``Remote Streaming Quote
Trader'' or ``RSQT'' applies to transactions for the accounts of
ROTS, SQTs, and RSQTs. For purposes of the Pricing Schedule, the
term ``Market Maker'' will be utilized to describe fees and rebates
applicable to ROTs, SQTs and RSQTs. See Preface to Phlx's Pricing
Schedule.
\7\ The trading activity of separate Specialist and Market Maker
member organizations is aggregated in calculating the Monthly Market
Maker Cap if there is Common Ownership between the member
organizations.
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The Exchange proposes to amend the Monthly Market Maker Cap to
exclude options overlying NDX from electronic Options Transaction
Charges as subject to the Monthly Market Maker Cap. Transactions in NDX
will not be subject to the the Monthly Market Maker Cap.
PIXL
Today, the Exchange assess a $0.07 per contract PIXL Initiating
Order Fee. However, if the member or member organization qualifies for
the Tier 3, 4 or 5 Customer Rebate in Section B the member or member
organization is assessed $0.05 per contract. 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 is assessed no fee 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 receives one of the PIXL
Initiating Order discounts as described above. Members or member
organizations that qualify for Customer Rebate Tiers 2 through 6 or
qualify for the Monthly Firm Fee Cap \8\ are eligible for a rebate of
$0.12 per contract for all Complex PIXL Orders (excluding SPY Options)
greater than 499 contracts, provided the member executes an average of
2,500 contracts per day of SPY Complex PIXL Orders in a month.
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\8\ Firms are subject to a maximum fee of $75,000 (``Monthly
Firm Fee Cap''). Additional details on the Monthly Firm Fee Cap are
at Section II of the Pricing Schedule.
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Further, the Exchange has pricing noted for PIXL Order Executions
in Section II Multiply Listed Options. When the PIXL Order is contra to
the Initiating Order a Customer PIXL Order is assessed no fee and Non-
Customer PIXL Orders will be assessed $0.30 per contract. When a PIXL
Order is contra to a PIXL Auction Responder, a Customer PIXL Order is
assessed no fee, other Non-Customer PIXL Orders are assessed $0.30 per
contract in Penny Pilot Options or $0.38 per contract in Non-Penny
Pilot Options. A Responder that is a Specialist or a Market Maker is
assessed $0.25 per contract in Penny Pilot Options or $0.40 per
contract in Non-Penny Pilot Options. Other Non-Customer Responders are
assessed $0.48 per contract in Penny Pilot Options or $0.70 per
contract in Non-Penny Pilot Options when contra to a PIXL Order. A
Responder that is a Customer is assessed $0.00 per contract in Penny
Pilot Options and Non-Penny Pilot Options. Finally, when a PIXL Order
is contra to a resting order or quote a Customer PIXL Order is assessed
no fee, other Non-Customers are assessed $0.30 per contract and the
resting order or quote is assessed the appropriate Options Transaction
Charge in Section II. All other fees discussed in Section II, including
Marketing Fees and surcharges, apply as appropriate.
The Exchange proposes to exclude options overlying NDX from the
PIXL Pricing in Section IV, Part A. NDX would be subject to Section II
pricing, specifically the Options Transactions Charges in NDX as noted.
MARS
Today, MARS, pays a subsidy to Phlx members that provide certain
order routing functionalities to other Phlx members and/or use such
functionalities themselves. Generally, under MARS, Phlx pays
participating Phlx members to subsidize their costs of providing
routing services to route orders to Phlx. To qualify for MARS, a Phlx
member's order routing functionality would be required to meet certain
criteria.\9\ With respect to Complex Orders, the Exchange would not
require Complex Orders to enable the electronic routing of orders to
all of the U.S. options exchanges or provide current consolidated
market data from the U.S. options exchanges. Any Phlx member may apply
for MARS, provided the requirements are met, including a robust and
reliable System. The member is solely responsible for implementing and
operating its System. The Exchange is not proposing to amend this
eligibility standards.
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\9\ Specifically, a Phlx member's routing system (hereinafter
``System'') would be required to: (1) Enable the electronic routing
of orders to all of the U.S. options exchanges, including Phlx; (2)
provide current consolidated market data from the U.S. options
exchanges; and (3) be capable of interfacing with Phlx's API to
access current Phlx match engine functionality. Further, the
member's System would also need to cause Phlx to be the one of the
top five default destination exchanges for individually executed
marketable orders if Phlx is at the national best bid or offer
(``NBBO''), regardless of size or time, but allow any user to
manually override Phlx as a default destination on an order-by-order
basis. Notwithstanding the above, with respect to Complex Orders a
Phlx member's routing system would not be required to enable the
electronic routing of orders to all of the U.S. options exchanges or
provide current consolidated market data from the U.S. options
exchanges. Any Phlx member would be permitted to avail itself of
this arrangement, provided that its order routing functionality
incorporates the features described above and satisfies Phlx that it
appears to be robust and reliable. The member remains solely
responsible for implementing and operating its system.
---------------------------------------------------------------------------
Today, a MARS Payment would be made to Phlx members that have
System Eligibility and have routed the requisite number of Eligible
Contracts daily in a month, which were executed on Phlx. For the
purpose of qualifying for the MARS Payment, Eligible Contracts include
Firm,\10\ Broker-Dealer,\11\ Joint Back Office or ``JBO'' \12\ or
[[Page 58883]]
Professional \13\ equity option orders that are electronically
delivered and executed. Eligible Contracts do not include floor-based
orders, qualified contingent cross or ``QCC'' orders,\14\ price
improvement or ``PIXL'' orders,\15\ Mini-Option orders \16\ or Singly-
Listed Options \17\ orders. The Eligible Contracts requirements are not
being amended.
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\10\ The term ``Firm'' or (``F'') applies to any transaction
that is identified by a Participant for clearing in the Firm range
at OCC.
\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 ``Joint Back Office'' or ``JBO'' applies to any
transaction that is identified by a member or member organization
for clearing in the Firm range at OCC and is identified with an
origin code as a JBO. A JBO will be priced the same as a Broker-
Dealer. A JBO participant is a member, member organization or non-
member organization that maintains a JBO arrangement with a clearing
broker-dealer (``JBO Broker'') subject to the requirements of
Regulation T Section 220.7 of the Federal Reserve System as further
discussed at Exchange Rule 703.
\13\ The term ``professional'' means any person or entity that
(i) is not a broker or dealer in securities, and (ii) places more
than 390 orders in listed options per day on average during a
calendar month for its own beneficial account(s). See Rule
1000(b)(14).
\14\ A QCC Order is comprised of an order to buy or sell at
least 1000 contracts that is identified as being part of a qualified
contingent trade, as that term is defined in Rule 1080(o)(3),
coupled with a contra-side order to buy or sell an equal number of
contracts. The QCC Order must be executed at a price at or between
the NBBO and be rejected if a Customer order is resting on the
Exchange book at the same price. A QCC Order shall only be submitted
electronically from off the floor to the Exchange's match engine.
See Rule 1080(o).
\15\ PIXL is the Exchange's price improvement mechanism known as
Price Improvement XL or (PIXLSM). See Rule 1080(n).
\16\ Mini Options are further specified in Phlx Rule 1012,
Commentary .13.
\17\ Singly Listed Options are options overlying currencies,
equities, ETFs, ETNs treasury securities and indexes not listed on
another exchange.
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Phlx members that have System Eligibility and have executed the
requisite number of Eligible Contracts in a month are paid the
following per contract rebates: \18\
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\18\ The specified MARS Payment are paid on all executed
Eligible Contracts which are routed to Phlx through a participating
Phlx member's System and meet the requisite Eligible Contracts ADV.
No payment are made with respect to orders that are routed to Phlx,
but not executed.
----------------------------------------------------------------------------------------------------------------
Average daily MARS payment
Tiers volume -------------------------------
(``ADV'') Non-SPY SPY
----------------------------------------------------------------------------------------------------------------
1............................................................... 1,000 $0.01 $0.01
2............................................................... 30,000 0.10 0.10
3............................................................... 40,000 0.12 0.12
4............................................................... 52,500 0.14 0.12
5............................................................... 65,000 0.18 0.12
6............................................................... 75,000 0.20 0.12
----------------------------------------------------------------------------------------------------------------
The Exchange proposes to exclude options overlying NDX from
Eligible Contracts for purposes of qualifying for a MARS Payment. Only
Eligible Contracts are paid rebates, therefore no MARS Payment would be
paid on options overlying NDX.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\19\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\20\ 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.
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\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that the proposed pricing changes to exclude
options overlying NDX from the Monthly Market Maker Cap, MARS and PIXL
pricing for NDX are reasonable, equitable and not unfairly
discriminatory. NDX transitioned in 2017 to an exclusively-listed
product. Similar to other proprietary products, the Exchange seeks to
recoup the operational costs for listing proprietary products.\21\
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.\22\ Further, the Exchange notes that with its
products, market participants are offered an opportunity to either
transact options overlying NDX or separately execute options overlying
PowerShares QQQ Trust (``QQQ'').\23\ Offering products such as QQQ
provides market participants with a variety of choices in selecting the
product they desire to utilize to transact NDX.\24\ 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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\21\ 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.
\22\ See pricing for Russell 2000 Index (``RUT'') on Cboe
Exchange, Inc.'s Fees Schedule.
\23\ QQQ is an exchange-traded fund based on the Nasdaq-100
Index[supreg].
\24\ 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.
---------------------------------------------------------------------------
Monthly Market Maker Cap
The Exchange's proposal to exclude electronic Options Transaction
Charges for options overlying NDX from the Monthly Market Maker Cap is
reasonable because Market Makers will continue to be able to utilize
the cap to reduce electronic Option Transaction Charges, excluding
surcharges, QCC transaction fees and Floor QCC Orders, despite the
exclusion of NDX transactions. The Exchange's proposal to exclude
electronic Options Transaction Charges for options overlying NDX from
the Monthly Market Maker Cap is equitable and not unfairly
discriminatory because the Exchange will uniformly exclude electronic
options overlying NDX from the Monthly Market Maker Cap.
PIXL
The Exchange's proposal to exclude options overlying NDX from the
PIXL Pricing in Section IV, Part A is reasonable because the Exchange
believes that the PIXL pricing continues to be competitive despite the
exclusion of NDX. The Exchange's proposal to exclude options overlying
NDX from the PIXL Pricing in Section IV, Part A is equitable and not
unfairly discriminatory because the Exchange will uniformly exclude
options overlying NDX from PIXL pricing.
MARS
The Exchange's proposal to exclude options overlying NDX from
Eligible Contracts for purposes of qualifying for a MARS Payment is
reasonable because the Exchange believes that despite the exclusion of
NDX, MARS remains a competitive offering. The Exchange's proposal to
exclude options overlying NDX from Eligible Contracts for purposes of
qualifying for a MARS Payment is equitable and not unfairly
discriminatory because the Exchange will uniformly exclude options
overlying NDX from MARS.
[[Page 58884]]
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.
The Exchange's proposal to exclude electronic Options Transaction
Charges for options overlying NDX from the Monthly Market Maker Cap
does not impose an undue burden on intra-market competition because the
Exchange will uniformly exclude electronic options overlying NDX from
the Monthly Market Maker Cap. The Exchange's proposal to exclude
options overlying NDX from the PIXL Pricing in Section IV, Part A does
not impose an undue burden on intra-market competition because the
Exchange will uniformly exclude options overlying NDX from PIXL
pricing. The Exchange's proposal to exclude options overlying NDX from
Eligible Contracts for purposes of qualifying for a MARS Payment does
not impose an undue burden on intra-market competition because the
Exchange will uniformly exclude options overlying NDX from MARS.
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.\25\
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\25\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-Phlx-2017-102 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-Phlx-2017-102. 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 website (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 website 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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-Phlx-2017-102 and should be submitted on
or before January 4, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-26916 Filed 12-13-17; 8:45 am]
BILLING CODE 8011-01-P
