Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Phlx Pricing at Options 7, Section 9, Titled Other Member Fees, 46578-46580 [2019-19006]
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Federal Register / Vol. 84, No. 171 / Wednesday, September 4, 2019 / Notices
C. Consistency With Rule 17Ad–
22(e)(13)
Rule 17Ad–22(e)(13) requires ICE
Clear Europe to, in relevant part,
establish, implement, maintain and
enforce written policies and procedures
reasonably designed to ensure that it has
the authority and operational capacity
to take timely action to contain losses
and liquidity demands and continue to
meet its obligations.
By amending the Framework to
include the new default management
and recovery tools in the Recovery Rule
Amendments, the Commission believes
that the proposal is consistent with Rule
17Ad–22(e)(13) because the various
recovery tools give ICEEU the authority
and capacity to timely contain losses
and liquidity demands. In particular, by
adding to the Framework a new section
that authorizes the use of RGD as a
recovery tool applied to customer and
house accounts in the event that its
remaining default resources are
insufficient to ensure solvency, ICEEU
would strengthen its ability to meet
obligations in the event of a default by
preserving its resources and limiting its
obligations to clearing members.
Similarly, the proposed amendments
that permit ICEEU to proceed with a
partial tear-up as a default tool when it
is unable to close out all of a defaulter’s
remaining positions through auctions
would also enhance ICEEU’s ability to
manage defaults by terminating
positions of non-defaulters that exactly
offset those in the defaulting clearing
member’s remaining portfolio and
restore a matched book. The
Commission believes that these tools,
along with the Framework amendments
discussed above, would promote
ICEEU’s ability to preserve its resources
and timely meet its obligations in
extreme default events and are therefore
consistent with Rule 17Ad–22(e)(13).
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IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act, and in
particular, with the requirements of
Section 17A(b)(3)(F) of the Act 11 and
Rules 17Ad–22(e)(2) and (e)(13)
thereunder.12
It is therefore ordered pursuant to
Section 19(b)(2) of the Act 13 that the
proposed rule change (SR–ICEEU–2019–
014) be, and hereby is, approved.14
11 15
U.S.C. 78q–1(b)(3)(F).
CFR 240.17Ad–22(e)(2) and (e)(13).
13 15 U.S.C. 78s(b)(2).
14 In approving the proposed rule change, the
Commission considered the proposal’s impact on
12 17
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–18998 Filed 9–3–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86795; File No. SR–Phlx–
2019–30]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Phlx Pricing at
Options 7, Section 9, Titled Other
Member Fees
August 28, 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 August
22, 2019, 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Phlx pricing at Options 7, Section 9
titled ‘‘Other Member Fees.’’ The
amendment will describe the pricing
with respect to an upcoming technology
infrastructure migration.
While the changes proposed herein
are effective upon filing, the Exchange
has designated the amendments become
operative on September 3, 2019.
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
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
15 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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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
a. Purpose
The Exchange proposes to amend
Phlx pricing at Options 7, Section 9
titled ‘‘Other Member Fees.’’ During the
month of September 2019, Phlx
members will be required to transition
from current FIX Ports 3 and CTI Ports 4
to new FIX Ports and CTI Ports in
connection with an upcoming
technology infrastructure migration.
Description of Migration and Pricing
Impact
In connection with this migration,
members will request new FIX Ports and
CTI Ports during the month of
September 2019, which are duplicative
of the type and quantity of their current
ports, at no additional cost to allow for
testing of the new ports and allow for
continuous connection to the match
engine during the transition period.5 For
example, a a Phlx member with 3 FIX
Ports and 1 CTI Port on September 3,
2019 could request 3 new FIX Ports and
1 new CTI Port for the month of
September 2019 at no additional cost.
The Phlx member would be assessed
only for the legacy market ports, in this
case 3 FIX Ports and 1 CTI Port for the
month of September 2019 and would
not be assessed for the new ports, which
3 Financial Information eXchange or ‘‘FIX’’ is an
interface that allows members and their Sponsored
Customers to connect, send, and receive messages
related to orders and auction orders and responses
to and from the Exchange. Features include the
following: (1) Execution messages; (2) order
messages; and (3) risk protection triggers and cancel
notifications. See Rule 1080(a)(i)(A).
4 Clearing Trade Interface or ‘‘CTI’’ is a real-time
clearing trade update message that is sent to a
member after an execution has occurred and
contains trade details specific to that member. The
information includes, among other things, the
following: (i) The Clearing Member Trade
Agreement or ‘‘CMTA’’ or ‘‘OCC’’ number; (ii)
Exchange badge or house number; (iii) the Exchange
internal firm identifier; (iv) an indicator which will
distinguish electronic and non-electronically
delivered orders; (v) liquidity indicators and
transaction type for billing purposes; and (vi)
capacity. See Rule 1070(b)(1).
5 Members would contact Market Operations to
acquire new duplicative FIX Ports and CTI Ports.
See Options Technical Update #2019–3.
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Federal Register / Vol. 84, No. 171 / Wednesday, September 4, 2019 / Notices
are duplicative of the current ports. A
member may acquire any additional
legacy ports during the month of
September 2019 and would be assessed
the charges indicated in the current
Pricing Schedule. The migration does
not require a member to acquire any
additional ports, rather the migration
requires a new port to replace any
existing ports provided the member
desired to maintain the same number of
ports.6 A member desiring to enter
orders into Phlx is required to obtain 1
FIX Port. A member may also obtain
order and execution ports, such as a CTI
Port, to receive clearing messages. The
number of additional FIX or order and
execution ports obtained by a member is
dependent on the member’s business
needs.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,8 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,9 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
proposal is also consistent with Section
11A of the Act relating to the
establishment of the national market
system for securities. Moreover, the
Exchange believes that its proposal
complies with Commission guidance on
SRO fee filings that the Commission
Staff issued on May 21, 2019.10
Applicability to and Impact on
Members 7
The Proposal Is Reasonable
The Exchange’s proposal is reasonable
in several respects. As a threshold
matter, the Exchange is subject to
significant competitive forces in the
market for options transaction services
that constrain its pricing determinations
in that market. The fact that this market
is competitive has long been recognized
by the courts. In NetCoalition v.
Securities and Exchange Commission,
the D.C. Circuit stated as follows: ‘‘[n]o
one disputes that competition for order
flow is ‘fierce.’ . . . As the SEC
explained, ‘[i]n the U.S. national market
system, buyers and sellers of securities,
and the broker-dealers that act as their
order-routing agents, have a wide range
of choices of where to route orders for
execution’; [and] ‘no exchange can
afford to take its market share
percentages for granted’ because ‘no
exchange possesses a monopoly,
regulatory or otherwise, in the execution
of order flow from broker
dealers’. . . .’’ 11
Numerous indicia demonstrate the
competitive nature of this market. For
example, clear substitutes to the
Exchange exist in the market for options
transaction services. The Exchange is
one of several options venues to which
market participants may direct their
order flow, and it represents a small
percentage of the overall market. The
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The proposal is not intended to
impose any additional fees on any Phlx
members. All members may enter orders
on Phlx. As noted above, a Phlx member
may enter all orders on Phlx through
one FIX Port. The Exchange does not
require a Phlx member to obtain more
than one FIX Port, however, a member
may obtain multiple FIX Ports or a CTI
Port to meet its individual business
needs. This proposal is intended to
permit a Phlx member to migrate its
current FIX Ports and CTI Ports at no
additional costs during the month of
September 2019 to allow for continuous
connection to the Exchange. Members
would only be assessed a fee for their
current FIX Ports and CTI Ports and not
be assessed a fee for any new
duplicative ports they acquire in
connection with the technology
infrastructure migration. This proposal
is not intended to have a pricing impact.
6 The migration is 1:1 and therefore would not
require a member to acquire new ports, nor would
it reduce the number of ports needed to connect.
7 On May 21, 2019, the SEC Division of Trading
and Markets (the ‘‘Division’’) issued fee filing
guidance titled ‘‘Staff Guidance on SRO Rule
Filings Relating to Fees’’ (‘‘Guidance’’). Within the
Guidance, the Division noted, among other things,
that the purpose discussion should address ‘‘how
the fee may apply differently (e.g., additional cost
vs. additional discount) to different types of market
participants (e.g., market makers, institutional
brokers, retail brokers, vendors, etc.) and different
sizes of market participants.’’ See Guidance
(available at https://www.sec.gov/tm/staff-guidancesro-rule-filings-fees). The Guidance also suggests
that the purpose discussion should include
numerical examples. Where possible, the Exchange
is including numerical examples. In addition, the
Exchange is providing data to the Commission in
support of its arguments herein. The Guidance
covers all aspects of a fee filing, which the
Exchange has addressed throughout this filing.
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8 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
10 See Guidance, supra note 7. Although the
Exchange believes that this filing complies with the
Guidance, the Exchange does not concede that the
standards set forth in the Guidance are consistent
with the Exchange Act and reserves its right to
challenge those standards through administrative
and judicial review, as appropriate.
11 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C.
Cir. 2010) (quoting Securities Exchange Act Release
No. 59039 (December 2, 2008), 73 FR 74770, 74782–
83 (December 9, 2008) (SR–NYSEArca–2006–21)).
9 15
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46579
Exchange believes its proposal is
reasonable because it will not cause a
pricing impact on any Phlx member,
rather the proposal is intended to permit
Phlx members to migrate their FIX Ports
and CTI Ports to new technology at no
additional cost during the month of
September 2019. This proposal, which
offers duplicative ports to members at
no cost, will allow members to test and
maintain continuous connection to the
Exchange during the month of
September 2019.
The Proposal Represents an Equitable
Allocation and Is Not Unfairly
Discriminatory
The Exchange believes its proposal
allocates its fees fairly among its market
participants. The proposal is equitable
and not unfairly discriminatory. All
members may enter orders on Phlx. As
noted above, a Phlx member may enter
all orders on Phlx through one FIX Port.
The Exchange does not require a Phlx
member to obtain more than one FIX
Port, however, a member may obtain
multiple FIX Ports or a CTI Port to meet
its individual business needs. This
proposal is not intended to have a
pricing impact to any Phlx member.
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.
Inter-Market Competition
The proposal does not impose an
undue burden on inter-market
competition. This proposal does not
amend pricing or functionality. Rather,
this technology migration will enable
Phlx members to continue to connect to
Phlx, as is the case today, for the entry
of orders.
Intra-Market Competition
The proposal does not impose an
undue burden on intra-market
competition. All members may enter
orders on Phlx. As noted above, a Phlx
member may enter all orders on Phlx
through one FIX Port. The Exchange
does not require a Phlx member to
obtain more than one FIX Port, however,
a member may obtain multiple FIX Ports
or a CTI Port to meet its individual
business needs. This proposal is not
intended to have a pricing impact to any
Phlx member.
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Federal Register / Vol. 84, No. 171 / Wednesday, September 4, 2019 / Notices
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.12
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:
jbell on DSK3GLQ082PROD with NOTICES
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
Phlx–2019–30 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–2019–30. 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–2019–30 and should
be submitted on or before September 25,
2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–19006 Filed 9–3–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86792; File No. SR–
NASDAQ–2019–059]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing of Proposed Rule Change To
Adopt Requirements for the Nasdaq
Capital and Global Markets Applicable
to Direct Listings
August 28, 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 August
15, 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 adopt
requirements for the Nasdaq Capital and
13 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
12 15
U.S.C. 78s(b)(3)(A)(ii).
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19:08 Sep 03, 2019
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Global Markets applicable to Direct
Listings.
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.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Nasdaq recognizes that some
companies that have sold common
equity securities in private placements,
which have not been listed on a national
securities exchange or traded in the
over-the-counter market pursuant to
FINRA Form 211 immediately prior to
the initial pricing, may wish to list those
securities to allow existing shareholders
to sell their shares. Nasdaq previously
adopted requirements applicable to
such Direct Listings listing on the
Nasdaq Global Select Market 3 and now
proposes to adopt requirements for the
Nasdaq Global and Capital Markets.
The proposed Listing Rules IM–5405–
1 and IM–5505–1 set forth the
additional listing requirements for
Direct Listings on the Nasdaq Global
and Capital Markets and describe how
the Exchange will calculate compliance
with the Nasdaq Global and Capital
Markets initial listing standards related
to the requirements based on the price
of a security, including the bid price,
Market Value of Listed Securities and
Market Value of Unrestricted Publicly
Held Shares.4
3 Securities Exchange Act Release No. 85156
(February 15, 2019), 84 FR 5787 (February 22, 2019)
(the ‘‘2019 Rule Change’’). Nasdaq proposes to
insert the defined term ‘‘Direct Listing’’ into the
existing language of Listing Rule IM–5315–1 and
update the title without further modification to that
rule section.
4 On March 21, 2019, Nasdaq filed with the
Commission a proposed rule change to revise the
initial listing standards related to liquidity that,
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]]>Agencies
[Federal Register Volume 84, Number 171 (Wednesday, September 4, 2019)]
[Notices]
[Pages 46578-46580]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-19006]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86795; File No. SR-Phlx-2019-30]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend Phlx
Pricing at Options 7, Section 9, Titled Other Member Fees
August 28, 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 August 22, 2019, 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.
---------------------------------------------------------------------------
\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 Phlx pricing at Options 7, Section 9
titled ``Other Member Fees.'' The amendment will describe the pricing
with respect to an upcoming technology infrastructure migration.
While the changes proposed herein are effective upon filing, the
Exchange has designated the amendments become operative on September 3,
2019.
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
a. Purpose
The Exchange proposes to amend Phlx pricing at Options 7, Section 9
titled ``Other Member Fees.'' During the month of September 2019, Phlx
members will be required to transition from current FIX Ports \3\ and
CTI Ports \4\ to new FIX Ports and CTI Ports in connection with an
upcoming technology infrastructure migration.
---------------------------------------------------------------------------
\3\ Financial Information eXchange or ``FIX'' is an interface
that allows members and their Sponsored Customers to connect, send,
and receive messages related to orders and auction orders and
responses to and from the Exchange. Features include the following:
(1) Execution messages; (2) order messages; and (3) risk protection
triggers and cancel notifications. See Rule 1080(a)(i)(A).
\4\ Clearing Trade Interface or ``CTI'' is a real-time clearing
trade update message that is sent to a member after an execution has
occurred and contains trade details specific to that member. The
information includes, among other things, the following: (i) The
Clearing Member Trade Agreement or ``CMTA'' or ``OCC'' number; (ii)
Exchange badge or house number; (iii) the Exchange internal firm
identifier; (iv) an indicator which will distinguish electronic and
non-electronically delivered orders; (v) liquidity indicators and
transaction type for billing purposes; and (vi) capacity. See Rule
1070(b)(1).
---------------------------------------------------------------------------
Description of Migration and Pricing Impact
In connection with this migration, members will request new FIX
Ports and CTI Ports during the month of September 2019, which are
duplicative of the type and quantity of their current ports, at no
additional cost to allow for testing of the new ports and allow for
continuous connection to the match engine during the transition
period.\5\ For example, a a Phlx member with 3 FIX Ports and 1 CTI Port
on September 3, 2019 could request 3 new FIX Ports and 1 new CTI Port
for the month of September 2019 at no additional cost. The Phlx member
would be assessed only for the legacy market ports, in this case 3 FIX
Ports and 1 CTI Port for the month of September 2019 and would not be
assessed for the new ports, which
[[Page 46579]]
are duplicative of the current ports. A member may acquire any
additional legacy ports during the month of September 2019 and would be
assessed the charges indicated in the current Pricing Schedule. The
migration does not require a member to acquire any additional ports,
rather the migration requires a new port to replace any existing ports
provided the member desired to maintain the same number of ports.\6\ A
member desiring to enter orders into Phlx is required to obtain 1 FIX
Port. A member may also obtain order and execution ports, such as a CTI
Port, to receive clearing messages. The number of additional FIX or
order and execution ports obtained by a member is dependent on the
member's business needs.
---------------------------------------------------------------------------
\5\ Members would contact Market Operations to acquire new
duplicative FIX Ports and CTI Ports. See Options Technical Update
#2019-3.
\6\ The migration is 1:1 and therefore would not require a
member to acquire new ports, nor would it reduce the number of ports
needed to connect.
---------------------------------------------------------------------------
Applicability to and Impact on Members \7\
---------------------------------------------------------------------------
\7\ On May 21, 2019, the SEC Division of Trading and Markets
(the ``Division'') issued fee filing guidance titled ``Staff
Guidance on SRO Rule Filings Relating to Fees'' (``Guidance'').
Within the Guidance, the Division noted, among other things, that
the purpose discussion should address ``how the fee may apply
differently (e.g., additional cost vs. additional discount) to
different types of market participants (e.g., market makers,
institutional brokers, retail brokers, vendors, etc.) and different
sizes of market participants.'' See Guidance (available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees). The Guidance
also suggests that the purpose discussion should include numerical
examples. Where possible, the Exchange is including numerical
examples. In addition, the Exchange is providing data to the
Commission in support of its arguments herein. The Guidance covers
all aspects of a fee filing, which the Exchange has addressed
throughout this filing.
---------------------------------------------------------------------------
The proposal is not intended to impose any additional fees on any
Phlx members. All members may enter orders on Phlx. As noted above, a
Phlx member may enter all orders on Phlx through one FIX Port. The
Exchange does not require a Phlx member to obtain more than one FIX
Port, however, a member may obtain multiple FIX Ports or a CTI Port to
meet its individual business needs. This proposal is intended to permit
a Phlx member to migrate its current FIX Ports and CTI Ports at no
additional costs during the month of September 2019 to allow for
continuous connection to the Exchange. Members would only be assessed a
fee for their current FIX Ports and CTI Ports and not be assessed a fee
for any new duplicative ports they acquire in connection with the
technology infrastructure migration. This proposal is not intended to
have a pricing impact.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\8\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\9\ 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 proposal is also consistent with
Section 11A of the Act relating to the establishment of the national
market system for securities. Moreover, the Exchange believes that its
proposal complies with Commission guidance on SRO fee filings that the
Commission Staff issued on May 21, 2019.\10\
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(4) and (5).
\10\ See Guidance, supra note 7. Although the Exchange believes
that this filing complies with the Guidance, the Exchange does not
concede that the standards set forth in the Guidance are consistent
with the Exchange Act and reserves its right to challenge those
standards through administrative and judicial review, as
appropriate.
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The Proposal Is Reasonable
The Exchange's proposal is reasonable in several respects. As a
threshold matter, the Exchange is subject to significant competitive
forces in the market for options transaction services that constrain
its pricing determinations in that market. The fact that this market is
competitive has long been recognized by the courts. In NetCoalition v.
Securities and Exchange Commission, the D.C. Circuit stated as follows:
``[n]o one disputes that competition for order flow is `fierce.' . . .
As the SEC explained, `[i]n the U.S. national market system, buyers and
sellers of securities, and the broker-dealers that act as their order-
routing agents, have a wide range of choices of where to route orders
for execution'; [and] `no exchange can afford to take its market share
percentages for granted' because `no exchange possesses a monopoly,
regulatory or otherwise, in the execution of order flow from broker
dealers'. . . .'' \11\
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\11\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
options transaction services. The Exchange is one of several options
venues to which market participants may direct their order flow, and it
represents a small percentage of the overall market. The Exchange
believes its proposal is reasonable because it will not cause a pricing
impact on any Phlx member, rather the proposal is intended to permit
Phlx members to migrate their FIX Ports and CTI Ports to new technology
at no additional cost during the month of September 2019. This
proposal, which offers duplicative ports to members at no cost, will
allow members to test and maintain continuous connection to the
Exchange during the month of September 2019.
The Proposal Represents an Equitable Allocation and Is Not Unfairly
Discriminatory
The Exchange believes its proposal allocates its fees fairly among
its market participants. The proposal is equitable and not unfairly
discriminatory. All members may enter orders on Phlx. As noted above, a
Phlx member may enter all orders on Phlx through one FIX Port. The
Exchange does not require a Phlx member to obtain more than one FIX
Port, however, a member may obtain multiple FIX Ports or a CTI Port to
meet its individual business needs. This proposal is not intended to
have a pricing impact to any Phlx member.
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.
Inter-Market Competition
The proposal does not impose an undue burden on inter-market
competition. This proposal does not amend pricing or functionality.
Rather, this technology migration will enable Phlx members to continue
to connect to Phlx, as is the case today, for the entry of orders.
Intra-Market Competition
The proposal does not impose an undue burden on intra-market
competition. All members may enter orders on Phlx. As noted above, a
Phlx member may enter all orders on Phlx through one FIX Port. The
Exchange does not require a Phlx member to obtain more than one FIX
Port, however, a member may obtain multiple FIX Ports or a CTI Port to
meet its individual business needs. This proposal is not intended to
have a pricing impact to any Phlx member.
[[Page 46580]]
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.\12\
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\12\ 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-2019-30 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-2019-30. 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-2019-30 and should be submitted on
or before September 25, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-19006 Filed 9-3-19; 8:45 am]
BILLING CODE 8011-01-P
