Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Pricing Schedule, 16725-16730 [2019-07980]
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Federal Register / Vol. 84, No. 77 / Monday, April 22, 2019 / Notices
Regulation S–ID, including compliance
with the information collection
requirements thereunder, is mandatory
for each SEC-regulated entity that
qualifies as a ‘‘financial institution’’ or
‘‘creditor’’ under Regulation S–ID (as
discussed above, certain collections of
information under Regulation S–ID are
mandatory only for financial
institutions or creditors that offer or
maintain covered accounts). Responses
will not be kept confidential. An agency
may not conduct or sponsor, and a
person is not required to respond to, a
collection of information unless it
displays a currently valid control
number.
The public may view the background
documentation for this information
collection at the following website,
www.reginfo.gov. Comments should be
directed to: (i) Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Room 10102, New Executive
Office Building, Washington, DC 20503,
or by sending an email to:
Lindsay.M.Abate@omb.eop.gov; and (ii)
Charles Riddle, Acting Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Candace
Kenner, 100 F Street NE, Washington,
DC 20549 or send an email to: PRA_
Mailbox@sec.gov. Comments must be
submitted to OMB within 30 days of
this notice.
Dated: April 17, 2019.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–08038 Filed 4–19–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Submission for OMB Review;
Comment Request
Upon Written Request, Copies Available
From: Securities and Exchange
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20549–2736.
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Extension:
Form N–14, SEC File No. 270–297, OMB
Control No. 3235–0336.
Notice is hereby given that, under the
Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.) (‘‘Paperwork
Reduction Act’’), the Securities and
Exchange Commission (the
‘‘Commission’’) has submitted to the
Office of Management and Budget
(‘‘OMB’’) a request for extension of the
previously approved collection of
information discussed below.
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17:22 Apr 19, 2019
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Form N–14 (17 CFR 239.23) is the
form for registration under the
Securities Act of 1933 (15 U.S.C. 77a et
seq.) (‘‘Securities Act’’) of securities
issued by management investment
companies registered under the
Investment Company Act of 1940 (15
U.S.C. 80a–1 et seq.) (‘‘Investment
Company Act’’) and business
development companies as defined by
Section 2(a)(48) of the Investment
Company Act in: (1) A transaction of the
type specified in rule 145(a) under the
Securities Act (17 CFR 230.145(a)); (2) a
merger in which a vote or consent of the
security holders of the company being
acquired is not required pursuant to
applicable state law; (3) an exchange
offer for securities of the issuer or
another person; (4) a public reoffering or
resale of any securities acquired in an
offering registered on Form N–14; or (5)
two or more of the transactions listed in
(1) through (4) registered on one
registration statement. The principal
purpose of Form N–14 is to make
material information regarding
securities to be issued in connection
with business combination transactions
available to investors. The information
required to be filed with the
Commission permits verification of
compliance with securities law
requirements and assures the public
availability and dissemination of such
information. Without the registration
statement requirement, material
information may not necessarily be
available to investors.
We estimate that approximately 156
funds each file one new registration
statement on Form N–14 annually, and
that 97 funds each file one amendment
to a registration statement on Form N–
14 annually. Based on conversations
with fund representatives, we estimate
that the reporting burden is
approximately 620 hours per
respondent for a new Form N–14
registration statement and 300 hours per
respondent for amending the Form N–
14 registration statement. This time is
spent, for example, preparing and
reviewing the registration statements.
Accordingly, we calculate the total
estimated annual internal burden of
responding to Form N–14 to be
approximately 125,820 hours. In
addition to the burden hours, based on
conversations with fund representatives,
we estimate that the total cost burden of
compliance with the information
collection requirements of Form N–14 is
approximately $27,500 for preparing
and filing an initial registration
statement on Form N–14 and
approximately $16,000 for preparing
and filing an amendment to a
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registration statement on Form N–14.
This includes, for example, the cost of
goods and services purchased to prepare
and update registration statements on
Form N–14, such as for the services of
outside counsel. Accordingly, we
calculate the total estimated annual cost
burden of responding to Form N–14 to
be approximately $5,842,000.
Estimates of the average burden hours
are made solely for the purposes of the
Paperwork Reduction Act and are not
derived from a comprehensive or even
representative survey or study of the
costs of Commission rules and forms.
The collection of information under
Form N–14 is mandatory. The
information provided under Form N–14
will not be kept confidential. An agency
may not conduct or sponsor, and a
person is not required to respond to, a
collection of information unless it
displays a currently valid OMB control
number.
The public may view the background
documentation for this information
collection at the following website,
www.reginfo.gov. Comments should be
directed to: (i) Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Room 10102, New Executive
Office Building, Washington, DC 20503,
or by sending an email to:
Lindsay.M.Abate@omb.eop.gov; and (ii)
Charles Riddle, Acting Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Candace
Kenner, 100 F Street NE, Washington,
DC 20549 or send an email to: PRA_
Mailbox@sec.gov. Comments must be
submitted to OMB within 30 days of
this notice.
Dated: April 17, 2019.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–08043 Filed 4–19–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85654; File No. SR–PHLX–
2019–15]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the Pricing
Schedule
April 16, 2019.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
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Federal Register / Vol. 84, No. 77 / Monday, April 22, 2019 / Notices
(‘‘Act’’), 1 and Rule 19b–4 thereunder,2
notice is hereby given that on April 10,
2019, 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
Pricing Schedule at Section 1, B,
‘‘Customer Rebate Program,’’ Section 3,
‘‘Rebates and Fees for Adding and
Removing Liquidity in SPY’’ and
Section 6, E, ‘‘Market Access and
Routing Subsidy (‘‘MARS’’).’’ 3
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,
Customer rebate
tiers
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Tier
Tier
Tier
Tier
Tier
1
2
3
4
5
.................
.................
.................
.................
.................
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend the
Pricing Schedule at (i) Section 1, B,
Percentage thresholds of national customer volume in
multiply-listed equity and ETF options classes,
excluding SPY options (monthly)
Category
A
0.00%–0.60% ...................................................................
Above 0.60%–1.10% ........................................................
Above 1.10%–1.60% ........................................................
Above 1.60%–2.50% ........................................................
Above 2.50% ....................................................................
The Exchange pays a Category A
Rebate to members who execute
electronically-delivered Customer
Simple Orders in Penny Pilot Options
and Customer Simple Orders in NonPenny Pilot Options in Options 7,
Section 4 symbols.5 The Exchange pays
a Category B Rebate on Customer PIXL
Orders in Options 7, Section 4 symbols
that execute against non-Initiating Order
interest. In the instance where member
organizations qualify for Tier 4 or higher
in the Customer Rebate Program,
Customer PIXL Orders that execute
against a PIXL Initiating Order is paid
a rebate of $0.14 per contract. Rebates
on Customer PIXL Orders are capped at
4,000 contracts per order for Simple
PIXL Orders. The Exchange pays a
Category C Rebate to members who
execute electronically-delivered
Customer Complex Orders in Penny
Pilot Options in Options 7, Section 4
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 The Commission notes that the Exchange
initially filed the proposed Pricing Schedule
amendment on April 1, 2019 (SR–PHLX–2019–10).
2 17
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‘‘Customer Rebate Program,’’ to decrease
certain Customer Rebates; (ii) Section 3,
‘‘Rebates and Fees for Adding and
Removing Liquidity in SPY’’ to decrease
a Simple Order Customer Fee for
Removing Liquidity and decrease all
rebate tiers; an [sic] (iii) Section 6, E,
‘‘Market Access and Routing Subsidy
(‘‘MARS’’)’’ to add a new rebate tier.
Each change will be described below in
more detail.
Customer Rebate
The Exchange proposes to amend the
Pricing Schedule at Section 1, B,
‘‘Customer Rebate Program’’ to lower
certain rebates. Today, the Exchange
pays rebates to members who transacted
a certain amount of Customer volume.
Specifically, Phlx totals Customer
volume in Multiply Listed Options
(including SPY) that is electronicallydelivered and executed, except volume
associated with electronic QCC Orders,
as defined in Exchange Rule 1080(o).
Rebates are paid on Customer Rebate
Tiers according to the below: 4
Category
B
$0.00
* 0.10
0.15
0.20
0.21
$0.00
* 0.10
* 0.12
0.16
0.17
Category
C
$0.00
*# 0.16
*# 0.18
# 0.22
# 0.22
Category
D
$0.00
*# 0.21
*# 0.22
# 0.26
# 0.27
symbols. Rebates are paid on Customer
PIXL Complex Orders in Options 7,
Section 4 symbols that execute against
non-Initiating Order interest. Customer
Complex PIXL Orders that execute
against a Complex PIXL Initiating Order
are not paid a rebate under any
circumstance. The Category C Rebate is
not paid when an electronicallydelivered Customer Complex Order,
including a Customer Complex PIXL
Order, executes against another
electronically-delivered Customer
Complex Order. Finally, the Exchange
pays a Category D Rebate to members
who execute electronically-delivered
Customer Complex Orders in NonPenny Pilot Options in Options 7,
Section 4 symbols. Rebates are paid on
Customer PIXL Complex Orders in
Options 7, Section 4 symbols that
execute against non-Initiating Order
interest. Customer Complex PIXL
Orders that execute against a Complex
PIXL Initiating Order are not paid a
rebate under any circumstance. The
Category D Rebate are not paid when an
electronically-delivered Customer
Complex Order, including a Customer
Complex PIXL Order, executes against
another electronically-delivered
Customer Complex Order. Rebates are
not paid on NDX or NDXP contracts in
any Category, however NDX and NDXP
contracts will count toward the volume
requirement to qualify for a Customer
Rebate Tier.
Today, the Exchange pays a $0.05 per
contract Category C and D rebate in
addition to the applicable Tier 2, 3, 4
and 5 rebates to members or member
organizations or member or member
organization affiliated under Common
Ownership provided the member or
member organization qualified for any
MARS Payments in Options 7, Section
On April 10, 2019, the Exchange withdrew that
filing and submitted this filing.
4 Members and member organizations under
Common Ownership may aggregate their Customer
volume for purposes of calculating the Customer
Rebate Tiers and receiving rebates. Affiliated
Entities may aggregate their Customer volume for
purposes of calculating the Customer Rebate Tiers
and receiving rebates.
5 Options 7, Section 4 describes pricing for
Multiply Listed Options Fees (Includes options
overlying equities, ETFs, ETNs and indexes which
are Multiply Listed).
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6, E. The Exchange proposes to decrease
the Category C and D rebates applicable
Tier 2, 3, 4 and 5 rebates to members or
member organizations or member or
member organization affiliated under
Common Ownership provided the
member or member organization
qualified for any MARS Payments in
Options 7, Section 6, E. The Exchange
proposes to decrease the Category C
Rebate from $0.05 to $0.04 per contract.
The Exchange proposes to decrease the
Category D Rebate from $0.05 to $0.02
per contract. While these rebates are
decreasing, the Exchange believes that
the Customer Rebates will continue to
incentivize member organizations to
execute against Customer orders.
Rebates and Fees for SPY
The Exchange proposes to amend the
Pricing Schedule at Section 3, ‘‘Rebates
and Fees for Adding and Removing
Liquidity in SPY’’ to decrease the
Simple Order Customer Fee for
Removing Liquidity and decrease all
rebate tiers. Today, the Exchange
assesses a Customer Fee for Removing
Liquidity in SPY of $0.45 per contract.
All other market participants,
Specialists,6 Market Makers,7 Firms,8
Broker-Dealers 9 and Professionals,10 are
assessed a Fee for Removing Liquidity
in SPY of $0.48 per contract. The
Exchange proposes to lower the
Customer Fee for Removing Liquidity in
Tiers
1
2
3
4
5
6
SPY from $0.45 to $0.42 per contract.
The Exchange’s proposal to lower the
Customer Fee for Removing Liquidity in
SPY from $0.45 to $0.42 per contract
will encourage a greater amount of
Customer orders, even if submitted by
other market participants, to remove
volume from the Exchange.
Today, a Simple Order Rebate for
Adding Liquidity is paid to Specialists
and Market Makers who add the
requisite amount of electronically
executed Specialist and Market Maker
Simple Order contracts per day in a
month in SPY.11 Today the Exchange
pays the following rebates:
Rebate for
adding liquidity
Average daily volume ‘‘ADV’’
........................
........................
........................
........................
........................
........................
16727
1 to 2,499 .............................................................................................................................................................
2,500 to 4,999 ......................................................................................................................................................
5,000 to 19,999 ....................................................................................................................................................
20,000 to 34,999 ..................................................................................................................................................
35,000 to 49,999 ..................................................................................................................................................
greater than 49,999 ..............................................................................................................................................
$0.15
0.18
0.21
0.27
0.30
0.35
The Exchange proposes to lower each
rebate tier by $0.03 per contract so the
proposed rebates would be:
Tiers
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1
2
3
4
5
6
Rebate for
adding liquidity
Average daily volume ‘‘ADV’’
........................
........................
........................
........................
........................
........................
1 to 2,499 .............................................................................................................................................................
2,500 to 4,999 ......................................................................................................................................................
5,000 to 19,999 ....................................................................................................................................................
20,000 to 34,999 ..................................................................................................................................................
35,000 to 49,999 ..................................................................................................................................................
greater than 49,999 ..............................................................................................................................................
$0.12
0.15
0.18
0.24
0.27
0.32
While the Exchange is lowering the
amount of rebates 12 it would pay to
Specialists and Market Makers who add
the requisite amount of electronically
executed Specialist and Market Maker
Simple Order contracts per day in a
month in SPY, the Exchange believes
the proposed rebates will continue to
incentivize Market Makers to add
liquidity on Phlx.
MARS
6 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.
7 The term ‘‘ROT, SQT and RSQT’’ applies to
transactions for the accounts of Registered Option
Traders (‘‘ROTs’’), Streaming Quote Traders
(‘‘SQTs’’), and Remote Streaming Quote Traders
(‘‘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. RSQTs may also be referred to as
Remote Market Markers (‘‘RMMs’’). The term 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. The term 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. The term
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).
8 The term ‘‘Firm’’ applies to any transaction that
is identified by a member or member organization
for clearing in the Firm range at OCC.
9 The term ‘‘Broker-Dealer’’ applies to any
transaction which is not subject to any of the other
transaction fees applicable within a particular
category.
10 The term ‘‘Professional’’ applies to transactions
for the accounts of Professionals, as defined in
Exchange Rule 1000(b)(14) 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).
11 The Exchange notes that the Customer Rebates
offered in Section 1, B do not apply to electronic
executions in SPY.
12 The Exchange would lower Tier 1 (1 to 2,499)
from $0.15 to $0.12 per contract; Tier 2 (2,500 to
4,999) would be lowered from $0.18 to $0.15 per
contract; Tier 3 (5,000 to 19,999) would be lowered
from $0.21 to $0.18 per contract; Tier 4 (20,000 to
34,999) would be lowered from $0.27 to $0.24 per
contract; Tier 5 (35,000 to 49,999) would be
lowered from $0.30 to $0.27 per contract; and Tier
6 (greater than 49,999) would be lowered from
$0.35 to $0.32 per contract.
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Today, MARS, [sic] pays a subsidy to
Phlx members that provide certain order
routing functionalities to other Phlx
members and/or use such
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Federal Register / Vol. 84, No. 77 / Monday, April 22, 2019 / Notices
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 is required to meet certain
criteria.13 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 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, Broker-Dealer, Joint Back
Office or ‘‘JBO’’ 14 or Professional equity
option orders that are electronically
delivered and executed. Eligible
Contracts do not include floor-based
orders, qualified contingent cross or
‘‘QCC’’ orders,15 price improvement or
‘‘PIXL’’ orders,16 Mini-Option orders 17
or Singly-Listed Options 18 orders. The
Eligible Contracts requirements are not
being amended.
Today, 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: 19
MARS payment
Tiers
Average daily volume (‘‘ADV’’)
Non-SPY
1
2
3
4
5
6
........................
........................
........................
........................
........................
........................
1,000 .........................................................................................................................................
30,000 .......................................................................................................................................
40,000 .......................................................................................................................................
52,500 .......................................................................................................................................
65,000 .......................................................................................................................................
75,000 .......................................................................................................................................
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The Exchange proposes to adopt a
new Tier 2 rebate for members that have
System Eligibility and have executed
the requisite number of Eligible
Contracts in a month. The new Tier 2
rebate would require average daily
volume (‘‘ADV’’) of 20,000 contracts and
pay a Non-SPY and SPY MARS
Payment of $0.05. The Exchange
proposes to renumber each subsequent
tier.20 The Exchange believes that with
this proposal MARS will continue to
attract higher volumes of electronic
equity and ETF options volume to the
Exchange from non-Phlx market
participants as well as Phlx members
with the proposed amendments.
13 Specifically, a Phlx member’s routing system
(‘‘hereinafter System’’) is 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 needs
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 is
not 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 is
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. The
Exchange does not require Complex Orders to
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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.
Customer Rebate Program
The Exchange’s proposal to decrease
the Category C Rebate from $0.05 to
$0.04 and decrease the Category D
Rebate from $0.05 to $0.02 per contract
is reasonable because the Exchange will
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.
14 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
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.
15 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).
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$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
continue to pay a rebate to incentivize
members to execute Customer Complex
Orders in Penny Pilot Options, as well
as Customer Complex Orders in NonPenny Pilot Options, despite the lower
rebate.
The Exchange’s proposal to decrease
the Category C Rebate from $0.05 to
$0.04 and decrease the Category D
Rebate from $0.05 to $0.02 per contract
is equitable and not unfairly
discriminatory because the Exchange
will uniformly pay Category C and D
rebates to all qualifying market
participants. Any market participant
may qualify for a Customer Rebate.
Rebates and Fees for SPY
The Exchange’s proposal to lower the
Customer Fee for Removing Liquidity in
SPY from $0.45 to $0.42 per contract is
16 PIXL is the Exchange’s price improvement
mechanism known as Price Improvement XL or
(PIXLSM). See Rule 1087.
17 Mini Options are further specified in Phlx Rule
1012, Commentary .13.
18 Singly Listed Options are options overlying
currencies, equities, ETFs, ETNs treasury securities
and indexes not listed on another exchange.
19 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 [sic] made with respect to orders that
are routed to Phlx, but not executed. A Phlx
member is not entitled to receive any other revenue
for the use of its System specifically with respect
to orders routed to Phlx with the exception of the
Marketing Fee.
20 Current Tier 2 would be renumbered as Tier 3,
current Tier 3 would be renumbered as Tier 4,
current Tier 4 would be renumbered as Tier 5,
current Tier 5 would be renumbered as Tier 6, and
current Tier 6 would be renumbered as Tier 7.
21 15 U.S.C. 78f(b).
22 15 U.S.C. 78f(b)(4) and (5).
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amozie on DSK9F9SC42PROD with NOTICES
reasonable because it will encourage a
greater amount of Customer orders, even
if submitted by other market
participants, to remove volume from the
Exchange. Customer liquidity benefits
all market participants by providing
more trading opportunities, which
attracts Specialists and Market Makers.
The Exchange’s proposal to lower the
Customer Fee for Removing Liquidity in
SPY from $0.45 to $0.42 per contract is
equitable and not unfairly
discriminatory because Customer orders
will continue to be assessed the lowest
Fees for Removing Liquidity in SPY
Simple Orders. 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.
The Exchange’s proposal to lower the
amount of rebates paid to Specialists
and Market Makers who add the
requisite amount of electronically
executed Specialist and Market Maker
Simple Order contracts per day in a
month in SPY by $0.03 per contract for
each tier 23 is reasonable because
although the Exchange is lowering the
amount of rebates it would pay to
Specialists and Market Makers who add
the requisite amount of electronically
executed Specialist and Market Maker
Simple Order contracts per day in a
month in SPY, the Exchange believes
the proposed rebates will continue to
incentivize Market Makers to add
liquidity on Phlx.
The Exchange’s proposal to lower the
amount of rebates paid to Specialists
and Market Makers who add the
requisite amount of electronically
executed Specialist and Market Maker
Simple Order contracts per day in a
month in SPY by $0.03 per contract for
each tier is equitable and not unfairly
discriminatory because the Exchange is
uniformly reducing each tier of the 6
tier rebate it pays to Specialists and
Market Makers who add the requisite
amount of electronically executed
Specialist and Market Maker Simple
Order contracts per day in a month in
SPY. Every Specialist and Market Maker
will be equally impacted. Also, the
23 The Exchange would lower Tier 1 (1 to 2,499)
from $0.15 to $0.12 per contract; Tier 2 (2,500 to
4,999) would be lowered from $0.18 to $0.15 per
contract; Tier 3 (5,000 to 19,999) would be lowered
from $0.21 to $0.18 per contract; Tier 4 (20,000 to
34,999) would be lowered from $0.27 to $0.24 per
contract; Tier 5 (35,000 to 49,999) would be
lowered from $0.30 to $0.27 per contract; and Tier
6 (greater than 49,999) would be lowered from
$0.35 to $0.32 per contract.
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17:22 Apr 19, 2019
Jkt 247001
Exchange notes that every Specialist
and Market Maker may earn a rebate on
each contract as the tier schedule starts
with 1 contract.
MARS
The Exchange believes that adopting
a new Tier 2 with an ADV of 20,000
contracts which pays a MARS Payment
of $0.05 for Non-Penny and Penny is
reasonable because all Phlx members
may qualify for another tier that allows
contracts below 30,000 (Tier 2) but
higher than 1,000 contracts (Tier 1) and
in return receive the higher rebate of
$0.05 as compared to the $0.01 rebate
for Tier 1. The proposed tier should
attract higher volumes of electronic
equity and ETF options volume to the
Exchange, which will benefit all Phlx
members by offering greater price
discovery, increased transparency, and
an increased opportunity to trade on the
Exchange. The expanded MARS
Payments should enhance the
competitiveness of the Exchange,
particularly with respect to those
exchanges that offer their own front-end
order entry system or one they subsidize
in some manner. The adoption of a new
Tier 2 will incentivize Phlx members to
achieve an even higher rebate, provided
the Phlx member is eligible for MARS.
Further, the tier structure will allow
Phlx members to price their services at
a level that will enable them to attract
order flow from market participants
who would otherwise utilize an existing
front-end order entry mechanism
offered by the Exchange’s competitors
instead of incurring the cost in time and
money to develop their own internal
systems to be able to deliver orders
directly to the Exchange’s System.
The Exchange believes that adopting
a new Tier 2 with an ADV of 20,000
contracts which pays a MARS Payment
of $0.05 for Non-Penny and Penny is
equitable and not unfairly
discriminatory because the Exchange
will uniformly pay all Phlx members the
rebates specified in the proposed MARS
Payment tiers provided the Phlx
member has executed the requisite
number of Eligible Contracts. Moreover,
the Exchange believes that the proposed
MARS Payments offered by the
Exchange are equitable and not unfairly
discriminatory because any qualifying
Phlx member that offers market access
and connectivity to the Exchange and/
or utilize such functionality themselves
may earn the MARS Payment for all
Eligible Contracts.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
PO 00000
Frm 00093
Fmt 4703
Sfmt 4703
16729
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.
Customer Rebate Program
The Exchange’s proposal to decrease
the Category C Rebate from $0.05 to
$0.04 and decrease the Category D
Rebate from $0.05 to $0.02 per contract
does not impose an undue burden on
competition because the Exchange will
uniformly pay Category C and D rebates
to all qualifying market participants.
Any market participant may qualify for
a Customer Rebate.
Rebates and Fees for SPY
The Exchange’s proposal to lower the
Customer Fee for Removing Liquidity in
SPY from $0.45 to $0.42 per contract
does not create an undue burden on
competition because Customers will
continue to be assessed the lowest Fees
for Removing Liquidity in SPY Simple
Orders. 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.
The Exchange’s proposal to lower the
amount of rebates paid to Specialists
and Market Makers who add the
requisite amount of electronically
executed Specialist and Market Maker
Simple Order contracts per day in a
month in SPY by $0.03 per contract for
each tier does not impose an undue
burden on competition because the
Exchange is uniformly reducing each
tier of the 6 tier rebate it pays to
Specialists and Market Makers who add
the requisite amount of electronically
E:\FR\FM\22APN1.SGM
22APN1
16730
Federal Register / Vol. 84, No. 77 / Monday, April 22, 2019 / Notices
executed Specialist and Market Maker
Simple Order contracts per day in a
month in SPY. Every Specialist and
Market Maker will be equally impacted.
Also, the Exchange notes that every
Specialist and Market Maker may earn
a rebate on each contract as the tier
schedule starts with 1 contract.
Electronic Comments
MARS
The Exchange believes that adopting
a new Tier 2 with an ADV of 20,000
contracts which pays a MARS Payment
of $0.05 for Non-Penny and Penny does
not impose an undue burden on intramarket competition because the
Exchange will uniformly pay all Phlx
members the rebates specified in the
proposed MARS Payment tiers provided
the Phlx member has executed the
requisite number of Eligible Contracts.
Moreover, the Exchange believes that
the proposed MARS Payments offered
by the Exchange are equitable and not
unfairly discriminatory because any
qualifying Phlx member that offers
market access and connectivity to the
Exchange and/or utilizes such
functionality themselves may earn the
MARS Payment for all Eligible
Contracts.
Paper Comments
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.
amozie on DSK9F9SC42PROD 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.24
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:
• 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–2019–15 on the subject line.
• 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–2019–15. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet 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–2019–15 and should
be submitted on or before May 13, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–07980 Filed 4–19–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85662; File No. SR–
NASDAQ–2019–029]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend the
Exchange’s Pricing Schedule in
Options 7, Section 2
April 16, 2019.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’), 1 and Rule 19b–4 thereunder,2
notice is hereby given that on April 10,
2019, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ 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 in Options
7, Section 2, which governs the pricing
for Nasdaq participants using The
Nasdaq Options Market (‘‘NOM’’),
Nasdaq’s facility for executing and
routing standardized equity and index
options. The proposed changes are
described further below.
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaq.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.
1 15
24 15
U.S.C. 78s(b)(3)(A)(ii).
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25 17
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Frm 00094
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Sfmt 4703
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
22APN1
]]>Agencies
[Federal Register Volume 84, Number 77 (Monday, April 22, 2019)]
[Notices]
[Pages 16725-16730]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07980]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85654; File No. SR-PHLX-2019-15]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Pricing Schedule
April 16, 2019.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
[[Page 16726]]
(``Act''), \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on April 10, 2019, 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 Pricing Schedule at Section 1,
B, ``Customer Rebate Program,'' Section 3, ``Rebates and Fees for
Adding and Removing Liquidity in SPY'' and Section 6, E, ``Market
Access and Routing Subsidy (``MARS'').'' \3\
---------------------------------------------------------------------------
\3\ The Commission notes that the Exchange initially filed the
proposed Pricing Schedule amendment on April 1, 2019 (SR-PHLX-2019-
10). On April 10, 2019, the Exchange withdrew that filing and
submitted this filing.
---------------------------------------------------------------------------
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
The Exchange proposes to amend the Pricing Schedule at (i) Section
1, B, ``Customer Rebate Program,'' to decrease certain Customer
Rebates; (ii) Section 3, ``Rebates and Fees for Adding and Removing
Liquidity in SPY'' to decrease a Simple Order Customer Fee for Removing
Liquidity and decrease all rebate tiers; an [sic] (iii) Section 6, E,
``Market Access and Routing Subsidy (``MARS'')'' to add a new rebate
tier. Each change will be described below in more detail.
Customer Rebate
The Exchange proposes to amend the Pricing Schedule at Section 1,
B, ``Customer Rebate Program'' to lower certain rebates. Today, the
Exchange pays rebates to members who transacted a certain amount of
Customer volume. Specifically, Phlx totals Customer volume in Multiply
Listed Options (including SPY) that is electronically-delivered and
executed, except volume associated with electronic QCC Orders, as
defined in Exchange Rule 1080(o). Rebates are paid on Customer Rebate
Tiers according to the below: \4\
---------------------------------------------------------------------------
\4\ Members and member organizations under Common Ownership may
aggregate their Customer volume for purposes of calculating the
Customer Rebate Tiers and receiving rebates. Affiliated Entities may
aggregate their Customer volume for purposes of calculating the
Customer Rebate Tiers and receiving rebates.
----------------------------------------------------------------------------------------------------------------
Percentage thresholds
of national customer
volume in multiply-
Customer rebate tiers listed equity and ETF Category A Category B Category C Category D
options classes,
excluding SPY options
(monthly)
----------------------------------------------------------------------------------------------------------------
Tier 1................. 0.00%-0.60%............ $0.00 $0.00 $0.00 $0.00
Tier 2................. Above 0.60%-1.10%...... * 0.10 * 0.10 *# 0.16 *# 0.21
Tier 3................. Above 1.10%-1.60%...... 0.15 * 0.12 *# 0.18 *# 0.22
Tier 4................. Above 1.60%-2.50%...... 0.20 0.16 # 0.22 # 0.26
Tier 5................. Above 2.50%............ 0.21 0.17 # 0.22 # 0.27
----------------------------------------------------------------------------------------------------------------
The Exchange pays a Category A Rebate to members who execute
electronically-delivered Customer Simple Orders in Penny Pilot Options
and Customer Simple Orders in Non-Penny Pilot Options in Options 7,
Section 4 symbols.\5\ The Exchange pays a Category B Rebate on Customer
PIXL Orders in Options 7, Section 4 symbols that execute against non-
Initiating Order interest. In the instance where member organizations
qualify for Tier 4 or higher in the Customer Rebate Program, Customer
PIXL Orders that execute against a PIXL Initiating Order is paid a
rebate of $0.14 per contract. Rebates on Customer PIXL Orders are
capped at 4,000 contracts per order for Simple PIXL Orders. The
Exchange pays a Category C Rebate to members who execute
electronically-delivered Customer Complex Orders in Penny Pilot Options
in Options 7, Section 4 symbols. Rebates are paid on Customer PIXL
Complex Orders in Options 7, Section 4 symbols that execute against
non-Initiating Order interest. Customer Complex PIXL Orders that
execute against a Complex PIXL Initiating Order are not paid a rebate
under any circumstance. The Category C Rebate is not paid when an
electronically-delivered Customer Complex Order, including a Customer
Complex PIXL Order, executes against another electronically-delivered
Customer Complex Order. Finally, the Exchange pays a Category D Rebate
to members who execute electronically-delivered Customer Complex Orders
in Non-Penny Pilot Options in Options 7, Section 4 symbols. Rebates are
paid on Customer PIXL Complex Orders in Options 7, Section 4 symbols
that execute against non-Initiating Order interest. Customer Complex
PIXL Orders that execute against a Complex PIXL Initiating Order are
not paid a rebate under any circumstance. The Category D Rebate are not
paid when an electronically-delivered Customer Complex Order, including
a Customer Complex PIXL Order, executes against another electronically-
delivered Customer Complex Order. Rebates are not paid on NDX or NDXP
contracts in any Category, however NDX and NDXP contracts will count
toward the volume requirement to qualify for a Customer Rebate Tier.
---------------------------------------------------------------------------
\5\ Options 7, Section 4 describes pricing for Multiply Listed
Options Fees (Includes options overlying equities, ETFs, ETNs and
indexes which are Multiply Listed).
---------------------------------------------------------------------------
Today, the Exchange pays a $0.05 per contract Category C and D
rebate in addition to the applicable Tier 2, 3, 4 and 5 rebates to
members or member organizations or member or member organization
affiliated under Common Ownership provided the member or member
organization qualified for any MARS Payments in Options 7, Section
[[Page 16727]]
6, E. The Exchange proposes to decrease the Category C and D rebates
applicable Tier 2, 3, 4 and 5 rebates to members or member
organizations or member or member organization affiliated under Common
Ownership provided the member or member organization qualified for any
MARS Payments in Options 7, Section 6, E. The Exchange proposes to
decrease the Category C Rebate from $0.05 to $0.04 per contract. The
Exchange proposes to decrease the Category D Rebate from $0.05 to $0.02
per contract. While these rebates are decreasing, the Exchange believes
that the Customer Rebates will continue to incentivize member
organizations to execute against Customer orders.
Rebates and Fees for SPY
The Exchange proposes to amend the Pricing Schedule at Section 3,
``Rebates and Fees for Adding and Removing Liquidity in SPY'' to
decrease the Simple Order Customer Fee for Removing Liquidity and
decrease all rebate tiers. Today, the Exchange assesses a Customer Fee
for Removing Liquidity in SPY of $0.45 per contract. All other market
participants, Specialists,\6\ Market Makers,\7\ Firms,\8\ Broker-
Dealers \9\ and Professionals,\10\ are assessed a Fee for Removing
Liquidity in SPY of $0.48 per contract. The Exchange proposes to lower
the Customer Fee for Removing Liquidity in SPY from $0.45 to $0.42 per
contract. The Exchange's proposal to lower the Customer Fee for
Removing Liquidity in SPY from $0.45 to $0.42 per contract will
encourage a greater amount of Customer orders, even if submitted by
other market participants, to remove volume from the Exchange.
---------------------------------------------------------------------------
\6\ 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.
\7\ The term ``ROT, SQT and RSQT'' applies to transactions for
the accounts of Registered Option Traders (``ROTs''), Streaming
Quote Traders (``SQTs''), and Remote Streaming Quote Traders
(``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. RSQTs may also be referred to as Remote Market
Markers (``RMMs''). The term 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. The term 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. The term 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).
\8\ The term ``Firm'' applies to any transaction that is
identified by a member or member organization for clearing in the
Firm range at OCC.
\9\ The term ``Broker-Dealer'' applies to any transaction which
is not subject to any of the other transaction fees applicable
within a particular category.
\10\ The term ``Professional'' applies to transactions for the
accounts of Professionals, as defined in Exchange Rule 1000(b)(14)
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).
---------------------------------------------------------------------------
Today, a Simple Order Rebate for Adding Liquidity is paid to
Specialists and Market Makers who add the requisite amount of
electronically executed Specialist and Market Maker Simple Order
contracts per day in a month in SPY.\11\ Today the Exchange pays the
following rebates:
---------------------------------------------------------------------------
\11\ The Exchange notes that the Customer Rebates offered in
Section 1, B do not apply to electronic executions in SPY.
------------------------------------------------------------------------
Rebate for
Tiers Average daily volume adding
``ADV'' liquidity
------------------------------------------------------------------------
1.......................... 1 to 2,499................. $0.15
2.......................... 2,500 to 4,999............. 0.18
3.......................... 5,000 to 19,999............ 0.21
4.......................... 20,000 to 34,999........... 0.27
5.......................... 35,000 to 49,999........... 0.30
6.......................... greater than 49,999........ 0.35
------------------------------------------------------------------------
The Exchange proposes to lower each rebate tier by $0.03 per
contract so the proposed rebates would be:
------------------------------------------------------------------------
Rebate for
Tiers Average daily volume adding
``ADV'' liquidity
------------------------------------------------------------------------
1.......................... 1 to 2,499................. $0.12
2.......................... 2,500 to 4,999............. 0.15
3.......................... 5,000 to 19,999............ 0.18
4.......................... 20,000 to 34,999........... 0.24
5.......................... 35,000 to 49,999........... 0.27
6.......................... greater than 49,999........ 0.32
------------------------------------------------------------------------
While the Exchange is lowering the amount of rebates \12\ it would
pay to Specialists and Market Makers who add the requisite amount of
electronically executed Specialist and Market Maker Simple Order
contracts per day in a month in SPY, the Exchange believes the proposed
rebates will continue to incentivize Market Makers to add liquidity on
Phlx.
---------------------------------------------------------------------------
\12\ The Exchange would lower Tier 1 (1 to 2,499) from $0.15 to
$0.12 per contract; Tier 2 (2,500 to 4,999) would be lowered from
$0.18 to $0.15 per contract; Tier 3 (5,000 to 19,999) would be
lowered from $0.21 to $0.18 per contract; Tier 4 (20,000 to 34,999)
would be lowered from $0.27 to $0.24 per contract; Tier 5 (35,000 to
49,999) would be lowered from $0.30 to $0.27 per contract; and Tier
6 (greater than 49,999) would be lowered from $0.35 to $0.32 per
contract.
---------------------------------------------------------------------------
MARS
Today, MARS, [sic] pays a subsidy to Phlx members that provide
certain order routing functionalities to other Phlx members and/or use
such
[[Page 16728]]
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 is required to meet certain
criteria.\13\ 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 eligibility standards.
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\13\ Specifically, a Phlx member's routing system (``hereinafter
System'') is 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 needs 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 is not 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 is 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. The Exchange does 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.
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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, Broker-Dealer, Joint Back Office or ``JBO'' \14\ or Professional
equity option orders that are electronically delivered and executed.
Eligible Contracts do not include floor-based orders, qualified
contingent cross or ``QCC'' orders,\15\ price improvement or ``PIXL''
orders,\16\ Mini-Option orders \17\ or Singly-Listed Options \18\
orders. The Eligible Contracts requirements are not being amended.
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\14\ 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.
\15\ 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).
\16\ PIXL is the Exchange's price improvement mechanism known as
Price Improvement XL or (PIXL\SM\). See Rule 1087.
\17\ Mini Options are further specified in Phlx Rule 1012,
Commentary .13.
\18\ Singly Listed Options are options overlying currencies,
equities, ETFs, ETNs treasury securities and indexes not listed on
another exchange.
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Today, 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: \19\
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\19\ 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 [sic] made with respect to orders that are routed to
Phlx, but not executed. A Phlx member is not entitled to receive any
other revenue for the use of its System specifically with respect to
orders routed to Phlx with the exception of the Marketing Fee.
------------------------------------------------------------------------
MARS payment
Tiers Average daily -------------------------------
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 adopt a new Tier 2 rebate for members that
have System Eligibility and have executed the requisite number of
Eligible Contracts in a month. The new Tier 2 rebate would require
average daily volume (``ADV'') of 20,000 contracts and pay a Non-SPY
and SPY MARS Payment of $0.05. The Exchange proposes to renumber each
subsequent tier.\20\ The Exchange believes that with this proposal MARS
will continue to attract higher volumes of electronic equity and ETF
options volume to the Exchange from non-Phlx market participants as
well as Phlx members with the proposed amendments.
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\20\ Current Tier 2 would be renumbered as Tier 3, current Tier
3 would be renumbered as Tier 4, current Tier 4 would be renumbered
as Tier 5, current Tier 5 would be renumbered as Tier 6, and current
Tier 6 would be renumbered as Tier 7.
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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.
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\21\ 15 U.S.C. 78f(b).
\22\ 15 U.S.C. 78f(b)(4) and (5).
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Customer Rebate Program
The Exchange's proposal to decrease the Category C Rebate from
$0.05 to $0.04 and decrease the Category D Rebate from $0.05 to $0.02
per contract is reasonable because the Exchange will continue to pay a
rebate to incentivize members to execute Customer Complex Orders in
Penny Pilot Options, as well as Customer Complex Orders in Non-Penny
Pilot Options, despite the lower rebate.
The Exchange's proposal to decrease the Category C Rebate from
$0.05 to $0.04 and decrease the Category D Rebate from $0.05 to $0.02
per contract is equitable and not unfairly discriminatory because the
Exchange will uniformly pay Category C and D rebates to all qualifying
market participants. Any market participant may qualify for a Customer
Rebate.
Rebates and Fees for SPY
The Exchange's proposal to lower the Customer Fee for Removing
Liquidity in SPY from $0.45 to $0.42 per contract is
[[Page 16729]]
reasonable because it will encourage a greater amount of Customer
orders, even if submitted by other market participants, to remove
volume from the Exchange. Customer liquidity benefits all market
participants by providing more trading opportunities, which attracts
Specialists and Market Makers.
The Exchange's proposal to lower the Customer Fee for Removing
Liquidity in SPY from $0.45 to $0.42 per contract is equitable and not
unfairly discriminatory because Customer orders will continue to be
assessed the lowest Fees for Removing Liquidity in SPY Simple Orders.
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.
The Exchange's proposal to lower the amount of rebates paid to
Specialists and Market Makers who add the requisite amount of
electronically executed Specialist and Market Maker Simple Order
contracts per day in a month in SPY by $0.03 per contract for each tier
\23\ is reasonable because although the Exchange is lowering the amount
of rebates it would pay to Specialists and Market Makers who add the
requisite amount of electronically executed Specialist and Market Maker
Simple Order contracts per day in a month in SPY, the Exchange believes
the proposed rebates will continue to incentivize Market Makers to add
liquidity on Phlx.
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\23\ The Exchange would lower Tier 1 (1 to 2,499) from $0.15 to
$0.12 per contract; Tier 2 (2,500 to 4,999) would be lowered from
$0.18 to $0.15 per contract; Tier 3 (5,000 to 19,999) would be
lowered from $0.21 to $0.18 per contract; Tier 4 (20,000 to 34,999)
would be lowered from $0.27 to $0.24 per contract; Tier 5 (35,000 to
49,999) would be lowered from $0.30 to $0.27 per contract; and Tier
6 (greater than 49,999) would be lowered from $0.35 to $0.32 per
contract.
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The Exchange's proposal to lower the amount of rebates paid to
Specialists and Market Makers who add the requisite amount of
electronically executed Specialist and Market Maker Simple Order
contracts per day in a month in SPY by $0.03 per contract for each tier
is equitable and not unfairly discriminatory because the Exchange is
uniformly reducing each tier of the 6 tier rebate it pays to
Specialists and Market Makers who add the requisite amount of
electronically executed Specialist and Market Maker Simple Order
contracts per day in a month in SPY. Every Specialist and Market Maker
will be equally impacted. Also, the Exchange notes that every
Specialist and Market Maker may earn a rebate on each contract as the
tier schedule starts with 1 contract.
MARS
The Exchange believes that adopting a new Tier 2 with an ADV of
20,000 contracts which pays a MARS Payment of $0.05 for Non-Penny and
Penny is reasonable because all Phlx members may qualify for another
tier that allows contracts below 30,000 (Tier 2) but higher than 1,000
contracts (Tier 1) and in return receive the higher rebate of $0.05 as
compared to the $0.01 rebate for Tier 1. The proposed tier should
attract higher volumes of electronic equity and ETF options volume to
the Exchange, which will benefit all Phlx members by offering greater
price discovery, increased transparency, and an increased opportunity
to trade on the Exchange. The expanded MARS Payments should enhance the
competitiveness of the Exchange, particularly with respect to those
exchanges that offer their own front-end order entry system or one they
subsidize in some manner. The adoption of a new Tier 2 will incentivize
Phlx members to achieve an even higher rebate, provided the Phlx member
is eligible for MARS. Further, the tier structure will allow Phlx
members to price their services at a level that will enable them to
attract order flow from market participants who would otherwise utilize
an existing front-end order entry mechanism offered by the Exchange's
competitors instead of incurring the cost in time and money to develop
their own internal systems to be able to deliver orders directly to the
Exchange's System.
The Exchange believes that adopting a new Tier 2 with an ADV of
20,000 contracts which pays a MARS Payment of $0.05 for Non-Penny and
Penny is equitable and not unfairly discriminatory because the Exchange
will uniformly pay all Phlx members the rebates specified in the
proposed MARS Payment tiers provided the Phlx member has executed the
requisite number of Eligible Contracts. Moreover, the Exchange believes
that the proposed MARS Payments offered by the Exchange are equitable
and not unfairly discriminatory because any qualifying Phlx member that
offers market access and connectivity to the Exchange and/or utilize
such functionality themselves may earn the MARS Payment for all
Eligible Contracts.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. In terms of inter-market
competition, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues if they deem fee levels at a particular venue to be
excessive, or rebate opportunities available at other venues to be more
favorable. In such an environment, the Exchange must continually adjust
its fees to remain competitive with other exchanges and with
alternative trading systems that have been exempted from compliance
with the statutory standards applicable to exchanges. Because
competitors are free to modify their own fees in response, and because
market participants may readily adjust their order routing practices,
the Exchange believes that the degree to which fee changes in this
market may impose any burden on competition is extremely limited.
Customer Rebate Program
The Exchange's proposal to decrease the Category C Rebate from
$0.05 to $0.04 and decrease the Category D Rebate from $0.05 to $0.02
per contract does not impose an undue burden on competition because the
Exchange will uniformly pay Category C and D rebates to all qualifying
market participants. Any market participant may qualify for a Customer
Rebate.
Rebates and Fees for SPY
The Exchange's proposal to lower the Customer Fee for Removing
Liquidity in SPY from $0.45 to $0.42 per contract does not create an
undue burden on competition because Customers will continue to be
assessed the lowest Fees for Removing Liquidity in SPY Simple Orders.
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.
The Exchange's proposal to lower the amount of rebates paid to
Specialists and Market Makers who add the requisite amount of
electronically executed Specialist and Market Maker Simple Order
contracts per day in a month in SPY by $0.03 per contract for each tier
does not impose an undue burden on competition because the Exchange is
uniformly reducing each tier of the 6 tier rebate it pays to
Specialists and Market Makers who add the requisite amount of
electronically
[[Page 16730]]
executed Specialist and Market Maker Simple Order contracts per day in
a month in SPY. Every Specialist and Market Maker will be equally
impacted. Also, the Exchange notes that every Specialist and Market
Maker may earn a rebate on each contract as the tier schedule starts
with 1 contract.
MARS
The Exchange believes that adopting a new Tier 2 with an ADV of
20,000 contracts which pays a MARS Payment of $0.05 for Non-Penny and
Penny does not impose an undue burden on intra-market competition
because the Exchange will uniformly pay all Phlx members the rebates
specified in the proposed MARS Payment tiers provided the Phlx member
has executed the requisite number of Eligible Contracts. Moreover, the
Exchange believes that the proposed MARS Payments offered by the
Exchange are equitable and not unfairly discriminatory because any
qualifying Phlx member that offers market access and connectivity to
the Exchange and/or utilizes such functionality themselves may earn the
MARS Payment for all Eligible Contracts.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\24\
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\24\ 15 U.S.C. 78s(b)(3)(A)(ii).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-PHLX-2019-15 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-PHLX-2019-15. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet 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-2019-15 and should be submitted on
or before May 13, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-07980 Filed 4-19-19; 8:45 am]
BILLING CODE 8011-01-P
