Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amendments to Complex Orders, 16157-16160 [2020-05843]
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Federal Register / Vol. 85, No. 55 / Friday, March 20, 2020 / Notices
CAT will also permit regulators to use
CAT data to protect senior investors and
identify other types of fraudulent
activity that may target certain age
demographics.
Based on the foregoing, the
Commission is granting conditional
exemptive relief from Section
6.4(d)(ii)(C) and Appendix D, Sections
4.1.6, 6.2, 8.1.1, 8.2, 9.1, 9.2, 9.4, 10.1,
and 10.3 of the CAT NMS Plan (1)
related to SSNs to allow for the
implementation of the CCID Alternative;
and (2) related to dates of birth and
account numbers to allow for the
implementation of the Modified PII
Approach.
This order granting Exemptive Relief
is conditioned upon the implementation
of the CCID Alternative and the
Modified PII Approach in a manner
consistent with the January 29, 2020
Exemption Request, including each of
the representations made and
conditions included in the January 29,
2020 Exemption Request with regard to
the CCID Alternative and the Modified
PII Approach.
This order granting Exemptive Relief
also is conditioned upon the following:
(1) The Process described in the
January 29, 2020 Exemption Request,
Section D.9(5) will support the efficient
and accurate conversion of multiple
SSNs at the same time into their
corresponding CCIDs. The Commission
believes this condition is appropriate in
order to promote efficiency when a
regulator obtains multiple SSNs from
other sources;
(2) The Participants shall ensure the
timeliness, accuracy, completeness, and
integrity of the interim value, and shall
ensure the accuracy and overall
performance of the CCID Alternative
process and the CCID Subsystem to
support the creation of a global
Customer-ID that uniquely identifies
each Customer; and
(3) The Participants must assess the
overall performance and design of the
CCID Alternative process and the CCID
Subsystem as part of each annual
Regular Written Assessment of the Plan
Processor, as required by Article VI,
Section 6.6(b)(i)(A).
Accordingly, it is hereby ordered,
pursuant to Section 36 and Rule 608(e)
of the Exchange Act,80 that the
Commission grants the Participants’
request for exemptive relief, as set forth
in the January 29, 2020 Exemption
Request, from Section 6.4(d)(ii)(C) and
Appendix D, Sections 4.1.6, 6.2, 8.1.1,
8.2, 9.1, 9.2, 9.4, 10.1, and 10.3 of the
CAT NMS Plan, subject to the
conditions set forth above.
By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–05935 Filed 3–19–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88390; File No. SR–Phlx–
2020–07]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change to Amendments to
Complex Orders
March 16, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 4,
2020, 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 and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Options 3, Section 7, ‘‘Electronic
Acceptance of Quotes and Orders,’’
Options 3, Section 14, ‘‘Complex
Orders,’’ Options 8, Section 17,
‘‘Limitations on Members’ Trading
Because of Customers’ Orders’’ and
Options 8, Section 32, ‘‘Certain Types of
Floor-Based (Non-System) Orders
Defined.’’
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
1 15
80 17
CFR 242.608(e).
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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16157
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
Options 3, Section 7, ‘‘Electronic
Acceptance of Quotes and Orders,’’
Options 3, Section 14, ‘‘Complex
Orders,’’ Options 8, Section 17,
‘‘Limitations on Members’ Trading
Because of Customers’ Orders’’ and
Options 8, Section 32, ‘‘Certain Types of
Floor-Based (Non-System) Orders
Defined.’’ Each change is described
below.
Options 3, Section 7 and Options 8,
Section 32
The Exchange proposes to amend
Options 3, Section 7, titled ‘‘Electronic
Acceptance of Quotes and Orders’’ and
Options 8, Section 32, titled ‘‘Certain
Types of Floor-Based (Non-System)
Orders Defined’’ to complete the list of
Order Types available for trading on the
Exchange by referencing currently
available Complex Order types. Options
3, Section 7(b) currently lists all order
types that may be electronically
submitted to the System. Options 8,
Section 32(a) currently lists all order
types that may be utilized on the trading
floor. The Exchange lists all simple
order types in both Options 3, Section
7(b) and Options 8, Section 32(a), but
these lists do not include Complex
Orders which are currently described
within Options 3, Section 14, titled
‘‘Complex Orders.’’ The Exchange
proposes to amend Options 3, Section
7(b) and Options 8, Section 32(a) to
simply reference that a Complex Order
is as described in Options 3, Section
14(a)(i).3 The Exchange also proposes to
amend these rules to simply reference
that a Stock-Option Order is as
3 Options 3, Section 14(a)(i) provides, ‘‘a Complex
Order is an order involving the simultaneous
purchase and/or sale of two or more different
options series in the same underlying security,
priced as a net debit or credit based on the relative
prices of the individual components, for the same
account, for the purpose of executing a particular
investment strategy. With respect to Mini Options,
a Complex Order is an order involving the
simultaneous purchase and/or sale of two or more
different Mini Options series in the same
underlying security, priced as a net debit or credit
based on the relative prices of the individual
components, for the same account, for the purpose
of executing a particular investment strategy. Mini
Options may only be part of a Complex Order that
includes other Mini Options.’’
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described in Options 3, Section
14(a)(i).4
The Exchange believes that adding
reference to Complex Orders and StockOption Orders to Options 3, Section 7(b)
and Options 8, Section 32(a) will make
clear to market participants the various
types of orders that may be transacted
both electronically in the System and on
the Exchange’s trading floor.
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Options 3, Section 14
The Exchange recently relocated its
Rulebook into a new Rulebook Shell.5
Prior to that relocation, the Exchange
filed a rule proposal 6 which adopted
rule text within Phlx Rule 1080(f),
which stated, ‘‘Orders may not be
unbundled, nor may a firm solicit a
customer to unbundle an order for this
purpose.’’ The Phlx Rulebook
Relocation Rule Change inadvertently
removed the rule text in the Prior Rule
Change at Rule 1080(f). At this time, the
Exchange proposes to restore the Rule
1080(f) rule text within its current rules
at Options 3, Section 7(f). Similarly, the
Exchange inadvertently deleted rule text
within the Prior Rule Change at Rule
1098(b)(v), which stated ‘‘Complex
Orders may be submitted as: All-orNone Orders, Cancel-Replacement
Orders, Directed Orders, Limit Orders or
Market Orders as those terms are
defined in Rule 1080(b).’’ At this time,
the Exchange proposes to restore the
Rule 1098(b)(v) rule text within its
4 Options 3, Section 14(a)(i) provides, ‘‘Except
respecting Mini Options, a Complex Order can also
be a stock-option order, which is an order to buy
or sell a stated number of units of an underlying
security (stock or Exchange Traded Fund Share
(‘‘ETF’’)) coupled with the purchase or sale of
options contract(s). The underlying security must
be the deliverable for the options component of that
Complex Order and represent exactly 100 shares
per option for regular way delivery. Stock-option
orders can only be executed against other stockoption orders and cannot be executed by the System
against orders for the individual components.
Member organizations may only submit Complex
Orders with a stock/ETF component if such orders
comply with the Qualified Contingent Trade
Exemption from Rule 611(a) of Regulation NMS.
Member organizations submitting such Complex
Orders with a stock/ETF component represent that
such orders comply with the Qualified Contingent
Trade Exemption. Members of FINRA or The
Nasdaq Stock Market (‘‘Nasdaq’’) are required to
have a Uniform Service Bureau/Executing Broker
Agreement (‘‘AGU’’) with Nasdaq Execution
Services, LLC (‘‘NES’’) in order to trade Complex
Orders containing a stock/ETF component; firms
that are not members of FINRA or Nasdaq are
required to have a Qualified Special Representative
(‘‘QSR’’) arrangement with NES in order to trade
Complex Orders containing a stock/ETF
component.’’
5 See Securities Exchange Act Release No. 88213
(February 14, 2020), 85 FR 9859 (February 20, 2020)
(SR–Phlx–2020–03) (‘‘Phlx Rulebook Relocation
Rule Change’’).
6 See Securities Exchange Act Release No. 87691
(December 9, 2019), 84 FR 68197 (December 13,
2019) (SR–Phlx–2019–52) (‘‘Prior Rule Change’’).
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current rules at Options 3, Section
14(b)(v).
Options 8, Section 17
The Exchange proposes to delete the
current rule at Options 8, Section 17,
‘‘Limitations on Members’ Trading
Because of Customers’ Orders.’’ The
Exchange notes that this rule describes
a prohibition against trading ahead of
Customer Orders. The Exchange
currently has such a prohibition within
its rules at General 9, Section 1(a) which
provides, ‘‘Prohibition Against Trading
Ahead of Customer Orders. Phlx
members and persons associated with a
member shall comply with FINRA Rule
5320 as if such Rule were part of Phlx’s
rules.’’ The Exchange notes that General
9, Section 1 applies to all Phlx members
including members transacting options
on the trading floor. The Exchange
believes that Options 8, Section 17 is
redundant because a trading ahead
prohibition already exists in the Rules
and applies to the options trading floor.
The Exchange proposes to reserve
Options 8, Section 17.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,7 in general, and furthers the
objectives of Section 6(b)(5) of the Act,8
in particular, in that it is designed to
promote just and equitable principles of
trade and to protect investors and the
public interest by amending its rules to
provide greater transparency.
Options 3, Section 7 and Options 8,
Section 32
The Exchange’s proposal to amend
Options 3, Section 7, titled ‘‘Electronic
Acceptance of Quotes and Orders’’ and
Options 8, Section 32, titled ‘‘Certain
Types of Floor-Based (Non-System)
Orders Defined’’ to complete the list of
Order Types by referencing existing
Complex Order types is consistent with
the Act. Options 3, Section 7(b)
currently lists all order types that may
be electronically submitted to the
System. Options 8, Section 32(a)
currently lists all order types that may
be utilized on the trading floor.
However, these lists do not include
Complex Orders which are described
within Options 3, Section 14, titled
‘‘Complex Orders.’’ The Exchange
believes amending Options 3, Section
7(b) and Options 8, Section 32(a) to
reference Complex Orders and StockOption Orders, which are currently
described in Options 3, Section 14(a)(i),
will make clear to market participants
7 15
8 15
PO 00000
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
Frm 00112
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the various types of orders that may be
transacted both electronically in the
System and on the Exchange’s trading
floor.
Options 3, Section 14
The Exchange’s proposal to restore
inadvertently deleted rule text within
Options 3, Section 7(f) and Section
14(b)(v) from a Prior Rule Change will
correct Phlx’s rules to reflect previously
adopted rule text that was inadvertently
omitted when it adopted its shell
Rulebook as explained above.9
Options 8, Section 17
The Exchange’s proposal to delete the
current rule at Options 8, Section 17,
‘‘Limitations on Members’ Trading
Because of Customers’ Orders’’ is
consistent with the Act because this rule
is redundant. General 9, Section 1(a)
and Options 8, Section 17 both contain
a prohibition against trading ahead of
Customer Orders. The Exchange
proposes to delete the redundant rule
text within Options 8, Section 17. The
rule text within General 9, Section 1
applies to all Phlx members, including
members transacting options on the
trading floor. The deletion of Options 8,
Section 17 is a non-substantive
amendment to eliminate redundancy
within the rules.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
an unnecessary burden on intra-market
competition as explained below.
Options 3, Section 7 and Options 8,
Section 32
The Exchange’s proposal to amend
Options 3, Section 7, titled ‘‘Electronic
Acceptance of Quotes and Orders’’ and
Options 8, Section 32, titled ‘‘Certain
Types of Floor-Based (Non-System)
Orders Defined’’ to complete the list of
Order Types by referencing Complex
Order types, which are currently
described in Options 3, Section 14(a)(i),
does not impose an undue burden on
inter-market or intra-market
competition. The Exchange is
referencing Complex Orders and StockOptions Orders within Options 3,
Section 14(a)(i) within the Options 3,
Section 7(b) and Options 8, Section
32(a) lists of order types for greater
transparency as to the various types of
orders that may be transacted both
electronically in the System and on the
Exchange’s trading floor.
9 See
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Options 3, Section 14
The Exchange’s proposal to restore
inadvertently deleted rule text within
Options 3, Section 7(f) and Section
14(b)(v) does not impose an undue
burden on inter-market or intra-market
competition, rather restoring the rule
text will correct the current Phlx Rules
to reflect previously adopted rule text,
as explained herein.
Options 8, Section 17
The Exchange’s proposal to delete the
current rule at Options 8, Section 17,
‘‘Limitations on Members’ Trading
Because of Customers’ Orders’’ does not
impose an undue burden on intermarket or intra-market competition. A
prohibition against trading ahead of
Customer Orders, is currently contained
within General 9, Section 1(a) and
applies to all Phlx members, including
members transacting business on the
trading floor. The deletion of Options 8,
Section 17 is a non-substantive
amendment to avoid redundancy within
the rules.
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 Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 10 and Rule
19b–4(f)(6) thereunder.11 Because the
proposed rule change does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
for 30 days from the date on which it
was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 12 and Rule 19b–4(f)(6)
thereunder.13
10 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
12 15 U.S.C. 78s(b)(3)(A).
13 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s intent
to file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
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A proposed rule change filed under
Rule 19b–4(f)(6) 14 normally does not
become operative for 30 days after the
date of the filing. However, pursuant to
Rule 19b–4(f)(6)(iii),15 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest. The
Exchange has asked the Commission to
waive the 30-day operative delay so that
the proposed rule change may become
operative immediately. The Exchange
believes that the proposal to amend
Options 3, Section 7, titled ‘‘Electronic
Acceptance of Quotes and Orders’’ and
Options 8, Section 32, titled ‘‘Certain
Types of Floor-Based (Non-System)
Orders Defined’’ to include Complex
Orders and Stock-Options Orders,
which are described within Options 3,
Section 14, will make clear to market
participants the various types of orders
that may be transacted both
electronically in the System and on the
Exchange’s trading floor. The Exchange
also notes that the proposal to restore
inadvertently deleted rule text from a
Prior Rule Change within Options 3,
Section 7(f) and Section 14(b)(v) will
correct the current Phlx Rules to include
previously adopted rule text as
described above and views this as a
non-substantive rule change. In
addition, the Exchange states that
deleting Options 8, Section 17,
‘‘Limitations on Members’ Trading
Because of Customers’ Orders’’ is a nonsubstantive amendment designed to
eliminate a redundant prohibition in
Phlx’s Rules, and notes that a
prohibition against trading ahead of
Customer Orders on the options floor is
currently contained within General 9,
Section 1(a) and applies to all Phlx
members, including members
transacting business on the trading
floor. For these reasons, the Commission
believes that waiver of the 30-day
operative delay is consistent with the
protection of investors and the public
interest. Accordingly, the Commission
hereby waives the 30-day operative
delay and designates the proposal
operative upon filing.16
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 necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
14 17
CFR 240.19b–4(f)(6).
CFR 240.19b–4(f)(6)(iii).
16 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
15 17
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16159
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
Phlx–2020–07 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–2020–07. 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–2020–07, and should
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be submitted on or before April 10,
2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
J. Matthew DeLesDernier,
Assistant Secretary.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2020–05843 Filed 3–19–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88392; File No. SR–
CboeBZX–2020–023]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change Relating To
Amend Its Fee Schedule
March 16, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 10,
2020, Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) is filing with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
to amend its Fee Schedule. The text of
the proposed rule change is provided in
Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
equities/regulation/rule_filings/bzx/), at
the Exchange’s Office of the Secretary,
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
17 17
CFR 200.30–3(a)(12), (59).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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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. Purpose
The Exchange proposes to amend its
fee schedule for its equity options
platform (‘‘BZX Options’’), effective
March 2, 2020.3
The Exchange first notes that it
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. More
specifically, the Exchange is only one of
16 options venues to which market
participants may direct their order flow.
Based on publicly available information,
no single options exchange has more
than 17% of the market share and
currently the Exchange represents only
9% of the market share.4 Thus, in such
a low-concentrated and highly
competitive market, no single options
exchange, including the Exchange,
possesses significant pricing power in
the execution of option order flow. The
Exchange believes that the ever-shifting
market share among the exchanges from
month to month demonstrates that
market participants can shift order flow,
or discontinue to reduce use of certain
categories of products, in response to fee
changes. Accordingly, competitive
forces constrain the Exchange’s
transaction fees, and market participants
can readily trade on competing venues
if they deem pricing levels at those
other venues to be more favorable. The
Exchange’s fee schedule sets forth
standard rebates and rates applied per
contract. For example, the Exchange
assesses a standard rebate of $0.29 per
contract for Market Maker orders that
add liquidity in Penny Pilot Securities
and a standard rebate of $0.40 per
contract in Non-Penny Pilot Securities.
Additionally, in response to the
competitive environment, the Exchange
also offers tiered pricing which provides
Members opportunities to qualify for
3 The Exchange initially filed the proposed fee
changes on March 2, 2020 (SR–CboeBZX–2020–
019). On March 10, 2020, the Exchange withdrew
that filing and submitted this filing.
4 See Cboe Global Markets U.S. Options Market
Volume Summary (February 24, 2020), available at
https://markets.cboe.com/us/options/market_
statistics/.
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higher rebates or reduced fees where
certain volume criteria and thresholds
are met. Tiered pricing provides an
incremental incentive for Members to
strive for higher tier levels, which
provides increasingly higher benefits or
discounts for satisfying increasingly
more stringent criteria.
For example, the Exchange currently
offers two Market Maker Non-Penny
Pilot Add Volume Tiers under footnote
7 of the fee schedule which provides
enhanced rebates between $0.45 and
$0.54 per contract for qualifying Market
Maker orders which meet certain add
liquidity thresholds and yield fee code
NM.5 Under the current Market Maker
Non-Penny Pilot Add Volume Tiers, a
Member receives an enhanced rebate
between $0.45 and $0.54 per contract
where the Member has an ADAV 6 in
Market Maker orders greater or equal to
a specified percentage of OCV 7 (Tiers
1–2). The Exchange now proposes to
adopt a new Market Maker Non-Penny
Pilot Add Volume Tier, ‘‘Tier 3’’.
The Exchange believes the proposed
Market Maker Non-Penny Pilot Add
Volume Tier will provide Members an
additional opportunity to receive an
enhanced rebate for meeting the
corresponding proposed criteria. The
Exchange believes the proposed tier,
along with the existing tiers, also
provide an incremental incentive for
Members to strive for the highest tier
levels, which provide increasingly
higher rebates for such transactions.
Particularly, the Exchange proposes to
add new Market Maker Non-Penny Pilot
Add Volume Tier 3, which would
provide an enhanced rebate of $0.86 per
contract where a Member (i) has an
ADAV in Market Maker orders greater
than or equal to 1.00% of the average
OCV; and (ii) has an ADAV in Market
Maker Non-Penny Pilot orders of greater
than or equal to 0.20% of the average
OCV. As such, under the proposed Tier,
the Exchange is adopting an additional
threshold that Members must meet in
addition to the standard ADAV in
Market Maker orders threshold.
5 Orders yielding fee code NM are Market Maker
orders that add liquidity in Non-Penny Pilot
securities.
6 ‘‘ADAV’’ means average daily added volume
calculated as the number of contracts added,
‘‘ADRV’’ means average daily removed volume
calculated as the number of contracts removed, and
‘‘ADV’’ means average daily volume calculated as
the number of contracts added or removed,
combined, per day.
7 ‘‘OCC Customer Volume’’ or ‘‘OCV’’ means the
total equity and ETF options volume that clears in
the Customer range at the Options Clearing
Corporation (‘‘OCC’’) for the month for which the
fees apply, excluding volume on any day that the
Exchange experiences an Exchange System
Disruption and on any day with a scheduled early
market close.
E:\FR\FM\20MRN1.SGM
20MRN1
]]>Agencies
[Federal Register Volume 85, Number 55 (Friday, March 20, 2020)]
[Notices]
[Pages 16157-16160]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-05843]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88390; File No. SR-Phlx-2020-07]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change to Amendments to
Complex Orders
March 16, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on March 4, 2020, 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 and II below, which Items
have been prepared by the Exchange. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Options 3, Section 7, ``Electronic
Acceptance of Quotes and Orders,'' Options 3, Section 14, ``Complex
Orders,'' Options 8, Section 17, ``Limitations on Members' Trading
Because of Customers' Orders'' and Options 8, Section 32, ``Certain
Types of Floor-Based (Non-System) Orders Defined.''
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 Options 3, Section 7, ``Electronic
Acceptance of Quotes and Orders,'' Options 3, Section 14, ``Complex
Orders,'' Options 8, Section 17, ``Limitations on Members' Trading
Because of Customers' Orders'' and Options 8, Section 32, ``Certain
Types of Floor-Based (Non-System) Orders Defined.'' Each change is
described below.
Options 3, Section 7 and Options 8, Section 32
The Exchange proposes to amend Options 3, Section 7, titled
``Electronic Acceptance of Quotes and Orders'' and Options 8, Section
32, titled ``Certain Types of Floor-Based (Non-System) Orders Defined''
to complete the list of Order Types available for trading on the
Exchange by referencing currently available Complex Order types.
Options 3, Section 7(b) currently lists all order types that may be
electronically submitted to the System. Options 8, Section 32(a)
currently lists all order types that may be utilized on the trading
floor. The Exchange lists all simple order types in both Options 3,
Section 7(b) and Options 8, Section 32(a), but these lists do not
include Complex Orders which are currently described within Options 3,
Section 14, titled ``Complex Orders.'' The Exchange proposes to amend
Options 3, Section 7(b) and Options 8, Section 32(a) to simply
reference that a Complex Order is as described in Options 3, Section
14(a)(i).\3\ The Exchange also proposes to amend these rules to simply
reference that a Stock-Option Order is as
[[Page 16158]]
described in Options 3, Section 14(a)(i).\4\
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\3\ Options 3, Section 14(a)(i) provides, ``a Complex Order is
an order involving the simultaneous purchase and/or sale of two or
more different options series in the same underlying security,
priced as a net debit or credit based on the relative prices of the
individual components, for the same account, for the purpose of
executing a particular investment strategy. With respect to Mini
Options, a Complex Order is an order involving the simultaneous
purchase and/or sale of two or more different Mini Options series in
the same underlying security, priced as a net debit or credit based
on the relative prices of the individual components, for the same
account, for the purpose of executing a particular investment
strategy. Mini Options may only be part of a Complex Order that
includes other Mini Options.''
\4\ Options 3, Section 14(a)(i) provides, ``Except respecting
Mini Options, a Complex Order can also be a stock-option order,
which is an order to buy or sell a stated number of units of an
underlying security (stock or Exchange Traded Fund Share (``ETF''))
coupled with the purchase or sale of options contract(s). The
underlying security must be the deliverable for the options
component of that Complex Order and represent exactly 100 shares per
option for regular way delivery. Stock-option orders can only be
executed against other stock-option orders and cannot be executed by
the System against orders for the individual components. Member
organizations may only submit Complex Orders with a stock/ETF
component if such orders comply with the Qualified Contingent Trade
Exemption from Rule 611(a) of Regulation NMS. Member organizations
submitting such Complex Orders with a stock/ETF component represent
that such orders comply with the Qualified Contingent Trade
Exemption. Members of FINRA or The Nasdaq Stock Market (``Nasdaq'')
are required to have a Uniform Service Bureau/Executing Broker
Agreement (``AGU'') with Nasdaq Execution Services, LLC (``NES'') in
order to trade Complex Orders containing a stock/ETF component;
firms that are not members of FINRA or Nasdaq are required to have a
Qualified Special Representative (``QSR'') arrangement with NES in
order to trade Complex Orders containing a stock/ETF component.''
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The Exchange believes that adding reference to Complex Orders and
Stock-Option Orders to Options 3, Section 7(b) and Options 8, Section
32(a) will make clear to market participants the various types of
orders that may be transacted both electronically in the System and on
the Exchange's trading floor.
Options 3, Section 14
The Exchange recently relocated its Rulebook into a new Rulebook
Shell.\5\ Prior to that relocation, the Exchange filed a rule proposal
\6\ which adopted rule text within Phlx Rule 1080(f), which stated,
``Orders may not be unbundled, nor may a firm solicit a customer to
unbundle an order for this purpose.'' The Phlx Rulebook Relocation Rule
Change inadvertently removed the rule text in the Prior Rule Change at
Rule 1080(f). At this time, the Exchange proposes to restore the Rule
1080(f) rule text within its current rules at Options 3, Section 7(f).
Similarly, the Exchange inadvertently deleted rule text within the
Prior Rule Change at Rule 1098(b)(v), which stated ``Complex Orders may
be submitted as: All-or-None Orders, Cancel-Replacement Orders,
Directed Orders, Limit Orders or Market Orders as those terms are
defined in Rule 1080(b).'' At this time, the Exchange proposes to
restore the Rule 1098(b)(v) rule text within its current rules at
Options 3, Section 14(b)(v).
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\5\ See Securities Exchange Act Release No. 88213 (February 14,
2020), 85 FR 9859 (February 20, 2020) (SR-Phlx-2020-03) (``Phlx
Rulebook Relocation Rule Change'').
\6\ See Securities Exchange Act Release No. 87691 (December 9,
2019), 84 FR 68197 (December 13, 2019) (SR-Phlx-2019-52) (``Prior
Rule Change'').
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Options 8, Section 17
The Exchange proposes to delete the current rule at Options 8,
Section 17, ``Limitations on Members' Trading Because of Customers'
Orders.'' The Exchange notes that this rule describes a prohibition
against trading ahead of Customer Orders. The Exchange currently has
such a prohibition within its rules at General 9, Section 1(a) which
provides, ``Prohibition Against Trading Ahead of Customer Orders. Phlx
members and persons associated with a member shall comply with FINRA
Rule 5320 as if such Rule were part of Phlx's rules.'' The Exchange
notes that General 9, Section 1 applies to all Phlx members including
members transacting options on the trading floor. The Exchange believes
that Options 8, Section 17 is redundant because a trading ahead
prohibition already exists in the Rules and applies to the options
trading floor. The Exchange proposes to reserve Options 8, Section 17.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\7\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\8\ in particular, in that it is designed to promote
just and equitable principles of trade and to protect investors and the
public interest by amending its rules to provide greater transparency.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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Options 3, Section 7 and Options 8, Section 32
The Exchange's proposal to amend Options 3, Section 7, titled
``Electronic Acceptance of Quotes and Orders'' and Options 8, Section
32, titled ``Certain Types of Floor-Based (Non-System) Orders Defined''
to complete the list of Order Types by referencing existing Complex
Order types is consistent with the Act. Options 3, Section 7(b)
currently lists all order types that may be electronically submitted to
the System. Options 8, Section 32(a) currently lists all order types
that may be utilized on the trading floor. However, these lists do not
include Complex Orders which are described within Options 3, Section
14, titled ``Complex Orders.'' The Exchange believes amending Options
3, Section 7(b) and Options 8, Section 32(a) to reference Complex
Orders and Stock-Option Orders, which are currently described in
Options 3, Section 14(a)(i), will make clear to market participants the
various types of orders that may be transacted both electronically in
the System and on the Exchange's trading floor.
Options 3, Section 14
The Exchange's proposal to restore inadvertently deleted rule text
within Options 3, Section 7(f) and Section 14(b)(v) from a Prior Rule
Change will correct Phlx's rules to reflect previously adopted rule
text that was inadvertently omitted when it adopted its shell Rulebook
as explained above.\9\
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\9\ See notes 5 and 6 above.
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Options 8, Section 17
The Exchange's proposal to delete the current rule at Options 8,
Section 17, ``Limitations on Members' Trading Because of Customers'
Orders'' is consistent with the Act because this rule is redundant.
General 9, Section 1(a) and Options 8, Section 17 both contain a
prohibition against trading ahead of Customer Orders. The Exchange
proposes to delete the redundant rule text within Options 8, Section
17. The rule text within General 9, Section 1 applies to all Phlx
members, including members transacting options on the trading floor.
The deletion of Options 8, Section 17 is a non-substantive amendment to
eliminate redundancy within the rules.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose an unnecessary burden on intra-market competition as explained
below.
Options 3, Section 7 and Options 8, Section 32
The Exchange's proposal to amend Options 3, Section 7, titled
``Electronic Acceptance of Quotes and Orders'' and Options 8, Section
32, titled ``Certain Types of Floor-Based (Non-System) Orders Defined''
to complete the list of Order Types by referencing Complex Order types,
which are currently described in Options 3, Section 14(a)(i), does not
impose an undue burden on inter-market or intra-market competition. The
Exchange is referencing Complex Orders and Stock-Options Orders within
Options 3, Section 14(a)(i) within the Options 3, Section 7(b) and
Options 8, Section 32(a) lists of order types for greater transparency
as to the various types of orders that may be transacted both
electronically in the System and on the Exchange's trading floor.
[[Page 16159]]
Options 3, Section 14
The Exchange's proposal to restore inadvertently deleted rule text
within Options 3, Section 7(f) and Section 14(b)(v) does not impose an
undue burden on inter-market or intra-market competition, rather
restoring the rule text will correct the current Phlx Rules to reflect
previously adopted rule text, as explained herein.
Options 8, Section 17
The Exchange's proposal to delete the current rule at Options 8,
Section 17, ``Limitations on Members' Trading Because of Customers'
Orders'' does not impose an undue burden on inter-market or intra-
market competition. A prohibition against trading ahead of Customer
Orders, is currently contained within General 9, Section 1(a) and
applies to all Phlx members, including members transacting business on
the trading floor. The deletion of Options 8, Section 17 is a non-
substantive amendment to avoid redundancy within the rules.
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 Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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\10\ 15 U.S.C. 78s(b)(3)(A)(iii).
\11\ 17 CFR 240.19b-4(f)(6).
\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally
does not become operative for 30 days after the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\15\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposed
rule change may become operative immediately. The Exchange believes
that the proposal to amend Options 3, Section 7, titled ``Electronic
Acceptance of Quotes and Orders'' and Options 8, Section 32, titled
``Certain Types of Floor-Based (Non-System) Orders Defined'' to include
Complex Orders and Stock-Options Orders, which are described within
Options 3, Section 14, will make clear to market participants the
various types of orders that may be transacted both electronically in
the System and on the Exchange's trading floor. The Exchange also notes
that the proposal to restore inadvertently deleted rule text from a
Prior Rule Change within Options 3, Section 7(f) and Section 14(b)(v)
will correct the current Phlx Rules to include previously adopted rule
text as described above and views this as a non-substantive rule
change. In addition, the Exchange states that deleting Options 8,
Section 17, ``Limitations on Members' Trading Because of Customers'
Orders'' is a non-substantive amendment designed to eliminate a
redundant prohibition in Phlx's Rules, and notes that a prohibition
against trading ahead of Customer Orders on the options floor is
currently contained within General 9, Section 1(a) and applies to all
Phlx members, including members transacting business on the trading
floor. For these reasons, the Commission believes that waiver of the
30-day operative delay is consistent with the protection of investors
and the public interest. Accordingly, the Commission hereby waives the
30-day operative delay and designates the proposal operative upon
filing.\16\
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\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6)(iii).
\16\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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 necessary or
appropriate in the public interest, for the protection of investors, or
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 change 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-2020-07 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-2020-07. 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-2020-07, and should
[[Page 16160]]
be submitted on or before April 10, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12), (59).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-05843 Filed 3-19-20; 8:45 am]
BILLING CODE 8011-01-P
