Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Proposed Rule Change To Amend Options 7, Section 3, “Rebates and Fees for Adding and Removing Liquidity in SPY”, 14352-14355 [2021-05240]
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14352
Federal Register / Vol. 86, No. 48 / Monday, March 15, 2021 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91285; File No. SR–Phlx–
2021–12)
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change to Proposed Rule Change
To Amend Options 7, Section 3,
‘‘Rebates and Fees for Adding and
Removing Liquidity in SPY’’
March 9, 2021.
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 1,
2021, 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 the Substance
of the Proposed Rule Change
The Exchange proposes to amend
Phlx’s Pricing Schedule at Options 7,
Section 3, ‘‘Rebates and Fees for Adding
and Removing Liquidity in SPY.’’
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/phlx/rules, 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
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Phlx proposes to amend its pricing
within Options 7, Section 3, ‘‘Rebates
and Fees for Adding and Removing
Liquidity in SPY.’’ Specifically, the
Exchange proposes to amend Options 7,
Section 3, Part A, Simple Orders to: (1)
Decrease the SPY Simple Order
Customer Fee for Removing Liquidity;
and (2) amend the SPY Lead Market
Maker and Market Maker tier
qualifications to earn a Simple Order
Rebate for Adding Liquidity. Each
change will be described below.
Fee for Removing Liquidity
The Exchange proposes to decrease
the current $0.42 per contract Customer
Fee for Removing Liquidity in SPY to
$0.38 per contract for Simple Orders.
The Exchange believes decreasing this
fee will incentivize market participants
to send additional Customer Simple
Orders to Phlx in SPY.
The Exchange is not amending any
other Fees for Removing Liquidity 3 in
SPY for Simple Orders. Customers will
continue to pay the lowest Simple Order
Fee for Removing Liquidity in SPY.
Rebate for Adding Liquidity
Today, Lead Market Makers and
Market Makers are paid Simple Order
Rebates for Adding Liquidity on
electronically executed Simple Order
contracts per day in a month when
adding liquidity in SPY. The Simple
Order Rebate for Adding Liquidity is
determined by calculating the average
daily volume of electronically executed
Lead Market Maker and Market Maker
Simple Order contracts per day in a
month in SPY.4 Today, the applicable
tier schedule is as follows:
khammond on DSKJM1Z7X2PROD with NOTICES
Tiers
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
2 17
16:36 Mar 12, 2021
................
................
................
................
................
................
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 ..
Rebate for
adding
liquidity
$0.12
0.15
0.18
0.24
0.27
0.32
The Exchange proposes to amend the
current tier schedule. Instead of
utilizing average daily volume to qualify
for a Lead Market Maker or Market
Maker Simple Order Rebate to Add
Liquidity when adding liquidity in SPY,
3 Today, all non-Customers pay a $0.48 per
contract Fee for Removing Liquidity in SPY.
4 This would include Lead Market Maker or
Market Maker quotes or orders that were executed.
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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1
2
3
4
5
6
Average daily volume
‘‘ADV’’
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the Exchange proposes to utilize a
percentage of all cleared customer
volume at The Options Clearing
Corporation in Multiply Listed Equity
Options and Exchange-Traded Products
(‘‘TCV’’). Simple Order Rebates to Add
Liquidity will continue to be paid on
electronically executed Lead Market
Maker and Market Maker Simple Order
contracts per day in a month which add
liquidity in SPY. The Exchange is not
amending the Rebates for Adding
Liquidity that are paid to Lead Market
Makers and Market Makers for
transacting Simple Orders in SPY. Lead
Market Makers and Market Makers will
be paid per the highest tier achieved
pursuant to the below tier schedule:
Adds liquidity in SPY
as a percentage of
TCV
Tiers
1
2
3
4
5
6
................
................
................
................
................
................
up to 0.02%
up to 0.04%
up to 0.10%
up to 0.20%
up to 0.40%
greater than
..............
..............
..............
..............
..............
0.40% ...
Rebate for
adding
liquidity
$0.12
0.15
0.18
0.24
0.27
0.32
Specifically, the Exchange would pay
a $0.12 per contract Lead Market Maker
or Market Maker Simple Order Rebate to
Add Liquidity for TCV up to 0.02% 5
which adds [sic] in SPY. Today, the
Exchange pays a $0.12 per contract Lead
Market Maker or Market Maker Simple
Order Rebate to Add Liquidity for
average daily volume up to 2,499
contracts per day in a month which add
liquidity in SPY.
The Exchange proposes to pay a $0.15
per contract Lead Market Maker or
Market Maker Simple Order Rebate to
Add Liquidity for TCV up to 0.04% 6
which adds liquidity in SPY. Today, the
Exchange pays a $0.15 per contract Lead
Market Maker or Market Maker Simple
Order Rebate to Add Liquidity for
average daily volume from 2,500 to
4,999 contracts per day in a month
which adds liquidity in SPY.
The Exchange proposes to pay a $0.18
per contract Lead Market Maker or
Market Maker Simple Order Rebate to
Add Liquidity for TCV up to 0.10% 7
which adds liquidity in SPY. Today, the
Exchange pays a $0.18 per contract Lead
Market Maker or Market Maker Simple
Order Rebate to Add Liquidity for
average daily volume from 5,000 to
5 0.02% TCV is representative of approximately
5,000 contracts per day when TCV is 25,000,000
contracts per day.
6 0.04% TCV is representative of approximately
10,000 contracts per day when TCV is 25,000,000
contracts per day.
7 0.10% TCV is representative of approximately
25,000 contracts per day when TCV is 25,000,000
contracts per day.
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Federal Register / Vol. 86, No. 48 / Monday, March 15, 2021 / Notices
19,999 contracts per day in a month
which adds liquidity in SPY.
The Exchange proposes to pay a $0.24
per contract Lead Market Maker or
Market Maker Simple Order Rebate to
Add Liquidity for TCV up to 0.20% 8
which adds liquidity in SPY. Today, the
Exchange pays a $0.24 per contract Lead
Market Maker or Market Maker Simple
Order Rebate to Add Liquidity for
average daily volume from 20,000 to
34,999 contracts per day in a month
which adds liquidity in SPY.
The Exchange proposes to pay a $0.27
per contract Lead Market Maker or
Market Maker Simple Order Rebate to
Add Liquidity for TCV up to 0.40% 9
which adds liquidity in SPY. Today, the
Exchange pays a $0.27 per contract Lead
Market Maker or Market Maker Simple
Order Rebate to Add Liquidity for
average daily volume from 35,000 to
49,999 contracts per day in a month
which adds liquidity in SPY.
The Exchange proposes to pay a $0.32
per contract Lead Market Maker or
Market Maker Simple Order Rebate to
Add Liquidity for TCV greater than
0.40% which adds liquidity in SPY.
Today, the Exchange pays a $0.32 per
contract Lead Market Maker or Market
Maker Simple Order Rebate to Add
Liquidity for average daily volume
greater than 49,999 contracts per day in
a month which adds liquidity in SPY.
As proposed, Lead Market Maker and
Market Maker Simple Order Rebates to
Add Liquidity in SPY would require an
increased amount of electronically
executed Lead Market Maker and
Market Maker Simple Order contracts
per day in a month which adds liquidity
in SPY to qualify for the same tiers as
members qualified in the past. For
example, with this proposal, the Tier 1
Simple Order Rebate to Add Liquidity
will continue to pay a $0.12 per contract
Simple Order Lead Market Maker and
Market Maker Rebates to Add Liquidity
in SPY; however, instead of executing
contracts which adds liquidity from 1 to
2,499 ADV to qualify for a Tier 1 rebate,
a Participant that executes from 1 to
approximately 5,000 contracts in a day
(which is the percentage of all cleared
customer volume at The Options
Clearing Corporation in Multiply Listed
Equity Options and Exchange-Traded
Products or ‘‘TCV’’), which adds
liquidity, would now qualify for the
Tier 1 $0.12 Simple Order Lead Market
Maker and Market Maker Rebate to Add
Liquidity in SPY. Today, Participants
that execute 2,500 to 4,999 ADV of
Simple Order Lead Market Maker and
Market Maker contracts, which adds
liquidity, would qualify for the Tier 2
Simple Order Lead Market Maker and
Market Maker Rebate to Add Liquidity
in SPY which pays $0.15 per contract.
With this proposal, those Participants
that previously qualified for the Tier 2
rebate would now qualify for the Tier 1
Simple Order Lead Market Maker and
Market Maker Rebate to Add Liquidity.
Likewise, with this proposal the Tier 2
Simple Order Rebate to Add Liquidity
will continue to pay a $0.15 per contract
Simple Order Lead Market Maker and
Market Maker Rebate to Add Liquidity
in SPY; however, instead of executing
contracts from 2,500 to 4,999 ADV,
which adds liquidity, to qualify for a
Tier 2 rebate, a Participant that executes
up to approximately 10,000 contracts
TCV in a day, which adds liquidity,
would now qualify for the Tier 2 Simple
Order Lead Market Maker and Market
Maker Rebate to Add Liquidity which
pays $0.15 per contract. Today,
Participants who executed 5,000 to
19,999 ADV qualify for the higher Tier
3 Simple Order Lead Market Maker and
Market Maker Rebate to Add Liquidity
of $0.18 per contract. Each tier
requirement has been increased and
therefore Participants in Tiers 2–6
would have to execute a greater amount
of Simple Order Lead Market Maker and
Market Maker contracts which adds
liquidity in SPY to earn the same rebate
as they previously earned.
With this proposal, all Simple Order
Rebate to Add Liquidity tiers require a
greater amount of executed contracts
which add liquidity in SPY to qualify
for the same tier, except for those
Participants that today qualify for Tier
1.10 Phlx believes its proposal will
continue to incentivize the submission
of Lead Market Maker and Market
Maker Simple Orders by continuing to
offer rebates for the submission of these
orders which add liquidity in SPY.
Today, the Exchange only pays Simple
Order Rebates to Add Liquidity in SPY
for Lead Market Maker and Market
Maker Simple Orders which add
liquidity in SPY and this will remain
the case.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,11 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,12 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees, and other charges
among members and issuers and other
persons using any facility, and is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The Exchange’s proposed changes to
its Pricing Schedule are reasonable in
several respects. As a threshold matter,
the Exchange is subject to significant
competitive forces in the market for
options securities 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’. . . .’’ 13
The Commission and the courts have
repeatedly expressed their preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. In Regulation NMS, while
adopting a series of steps to improve the
current market model, the Commission
highlighted the importance of market
forces in determining prices and SRO
revenues and, also, recognized that
current regulation of the market system
‘‘has been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 14
Numerous indicia demonstrate the
competitive nature of this market. For
example, clear substitutes to the
Exchange exist in the market for options
security transaction services. The
Exchange is only one of sixteen options
exchanges to which market participants
may direct their order flow. Within this
environment, market participants can
freely and often do shift their order flow
among the Exchange and competing
12 15
U.S.C. 78f(b)(4) and (5).
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)).
14 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
13 NetCoalition
8 0.20% TCV is representative of approximately
50,000 contracts per day when TCV is 25,000,000
contracts per day.
9 0.40% TCV is representative of approximately
100,000 contracts per day when TCV is 25,000,000
contracts per day.
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16:36 Mar 12, 2021
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10 Tier 1 continues to pay the same $0.12 per
contract Simple Order Lead Market Maker and
Market Maker Rebate to Add Liquidity for
Participants who submit up to approximately 5,000
TCV contracts which add liquidity in SPY.
11 15 U.S.C. 78f(b).
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14353
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14354
Federal Register / Vol. 86, No. 48 / Monday, March 15, 2021 / Notices
venues in response to changes in their
respective pricing schedules. As such,
the proposal represents a reasonable
attempt by the Exchange to increase its
liquidity and market share relative to its
competitors.
khammond on DSKJM1Z7X2PROD with NOTICES
Fee for Removing Liquidity
The Exchange’s proposal to decrease
the current $0.42 per contract Customer
Fee for Removing Liquidity in SPY to
$0.38 per contract for Simple Orders is
reasonable. Decreasing the Simple Order
Customer Fee for Removing Liquidity in
SPY will incentivize market participants
to send additional Customer SPY
Simple Orders to Phlx. Customers will
continue to pay the lowest Simple Order
Fee for Removing Liquidity in SPY as
compared to other market
participants.15
The Exchange’s proposal to decrease
the current $0.42 per contract Customer
Fee for Removing Liquidity in SPY to
$0.38 per contract for Simple Orders is
equitable and not unfairly
discriminatory. Customers would
continue to receive favorable pricing as
compared to other market participants
because Customer liquidity enhances
liquidity on the Exchange for the benefit
of all market participants. Specifically,
Customer liquidity benefits all market
participants by providing more trading
opportunities which attracts market
makers. An increase in the activity of
these market participants (particularly
in response to pricing) in turn facilitates
tighter spreads which may cause an
additional corresponding increase in
order flow from other market
participants.
Rebate for Adding Liquidity
The Exchange’s proposal to amend
the current tier schedule to remove
average daily volume as a tier qualifier
for a Lead Market Maker or Market
Maker Simple Order Rebate to Add
Liquidity when adding liquidity in SPY
and instead utilize a percentage of all
cleared customer volume at The Options
Clearing Corporation in Multiply Listed
Equity Options and Exchange-Traded
Products or ‘‘TCV’’ is reasonable,
equitable and not unfairly
discriminatory. The Exchange’s
proposal is intended to provide a
measure for the amount of contracts that
would be eligible to qualify a market
participant submitting electronically
executed Lead Market Maker and
Market Maker Simple Order contracts
per day in a month which add liquidity
in SPY for a certain rebate. The greater
the amount of contracts submitted by
the member, the larger the Lead Market
15 See
note 3 above.
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16:36 Mar 12, 2021
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Maker or Market Maker Simple Order
Rebate to Add Liquidity when adding
liquidity in SPY. The Exchange believes
that measuring the contracts as a
percentage of TCV is a fair and equitable
method for calculating Simple Order
Customer volume executed on Phlx
when adding liquidity in SPY. The
Exchange would uniformly apply this
measure to all eligible members to
determine the corresponding rebate.
Lead Market Makers and Market Makers
will be paid per the highest tier
achieved.
The Exchange’s proposal to amend
the tier qualifications for Lead Market
Maker or Market Maker Simple Order
Rebates to Add Liquidity when adding
liquidity in SPY is reasonable.16 As
proposed, an increased amount of
electronically executed Lead Market
Maker and Market Maker Simple Order
contracts per day in a month which add
liquidity in SPY would need to be
submitted to qualify for the same tiers
as members qualified in the past with
16 With this proposal, Phlx would pay a $0.12 per
contract Lead Market Maker or Market Maker
Simple Order Rebate to Add Liquidity for TCV up
to 0.02% which adds liquidity in SPY. Today, the
Exchange pays a $0.12 per contract Lead Market
Maker or Market Maker Simple Order Rebate to
Add Liquidity for average daily volume up to 2,499
contracts per day in a month which adds liquidity
in SPY. The Exchange proposes to pay a $0.15 per
contract Lead Market Maker or Market Maker
Simple Order Rebate to Add Liquidity for TCV up
to 0.04% which adds liquidity in SPY. Today, the
Exchange pays a $0.15 per contract Lead Market
Maker or Market Maker Simple Order Rebate to
Add Liquidity for average daily volume from 2,500
to 4,999 contracts per day in a month which adds
liquidity in SPY. The Exchange proposes to pay a
$0.18 per contract Lead Market Maker or Market
Maker Simple Order Rebate to Add Liquidity for
TCV up to 0.10% which adds in SPY. Today, the
Exchange pays a $0.18 per contract Lead Market
Maker or Market Maker Simple Order Rebate to
Add Liquidity for average daily volume from 5,000
to 19,999 contracts per day in a month which adds
liquidity in SPY. The Exchange proposes to pay a
$0.24 per contract Lead Market Maker or Market
Maker Simple Order Rebate to Add Liquidity for
TCV up to 0.20% which adds liquidity in SPY.
Today, the Exchange pays a $0.24 per contract Lead
Market Maker or Market Maker Simple Order
Rebate to Add Liquidity for average daily volume
from 20,000 to 34,999 contracts per day in a month
which adds liquidity in SPY. The Exchange
proposes to pay a $0.27 per contract Lead Market
Maker or Market Maker Simple Order Rebate to
Add Liquidity for TCV up to 0.40% which adds
liquidity in SPY. Today, the Exchange pays a $0.27
per contract Lead Market Maker or Market Maker
Simple Order Rebate to Add Liquidity for average
daily volume from 35,000 to 49,999 contracts per
day in a month which adds liquidity in SPY.
The Exchange proposes to pay a $0.32 per
contract Lead Market Maker or Market Maker
Simple Order Rebate to Add Liquidity for TCV
greater than 0.40% which adds liquidity in SPY.
Today, the Exchange pays a $0.32 per contract Lead
Market Maker or Market Maker Simple Order
Rebate to Add Liquidity for average daily volume
greater than 49,999 contracts per day in a month
which adds liquidity in SPY.
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Sfmt 4703
the exception of Tier 1.17 With this
proposal, all Simple Order Rebate to
Add Liquidity tiers require a greater
amount of executed contracts which add
liquidity in SPY to qualify for the same
rebate as the Participant had previously
qualified for prior to this proposal.
Despite the increased volume
qualifications, Phlx believes its proposal
will continue to incentivize the
submission of Lead Market Maker and
Market Maker Simple Orders by
continuing to offer rebates for the
submission of these orders which add
liquidity in SPY. Today, the Exchange
only pays Simple Order Rebates to Add
Liquidity in SPY for Lead Market Maker
and Market Maker Simple Orders and
this will remain the case. Lead Market
Makers and Market Makers will be paid
per the highest tier achieved.
The Exchange’s proposal to amend
the tier qualifications for Lead Market
Maker or Market Maker Simple Order
Rebates to Add Liquidity in SPY is
equitable and not unfairly
discriminatory. Phlx Lead Market
Makers and Market Makers add value
through continuous quoting 18 and are
subject to additional requirements and
obligations 19 that other market
participants are not. Incentivizing Lead
Market Makers and Market Makers to
provide greater liquidity benefits all
market participants through the quality
of order interaction.
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 intermarket
competition. The Exchange believes its
proposal remains competitive with
other options markets and will offer
market participants with another choice
of where to transact options. 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
17 Tier 1 continues to pay the same $0.12 per
contract Simple Order Lead Market Maker and
Market Maker Rebate to Add Liquidity for
Participants who submit up to approximately 5,000
TCV contracts which add liquidity in SPY.
18 See Options 2, Section 5.
19 See Options 2, Section 4.
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Federal Register / Vol. 86, No. 48 / Monday, March 15, 2021 / Notices
fees to remain competitive with other
exchanges 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.
Intra-Market Competition
Fee for Removing Liquidity
The Exchange’s proposal to decrease
the current $0.42 per contract Customer
Fee for Removing Liquidity in SPY to
$0.38 per contract for Simple Orders
does not impose an undue burden on
competition. Customers would continue
to receive favorable pricing as compared
to other market participants because
Customer liquidity enhances liquidity
on the Exchange for the benefit of all
market participants. Specifically,
Customer liquidity benefits all market
participants by providing more trading
opportunities which attracts market
makers. An increase in the activity of
these market participants (particularly
in response to pricing) in turn facilitates
tighter spreads which may cause an
additional corresponding increase in
order flow from other market
participants.
khammond on DSKJM1Z7X2PROD with NOTICES
Rebate for Adding Liquidity
The Exchange’s proposal to amend
the current tier schedule to remove
average daily volume as a tier qualifier
for a Lead Market Maker or Market
Maker Simple Order Rebate to Add
Liquidity when adding liquidity in SPY
and instead utilize a percentage of all
cleared customer volume at The Options
Clearing Corporation in Multiply Listed
Equity Options and Exchange-Traded
Products or ‘‘TCV’’ does not impose an
undue burden on competition. The
Exchange’s proposal is intended to
provide a measure for the amount of
contracts that would be eligible to
qualify a market participant submitting
electronically executed Lead Market
Maker and Market Maker Simple Order
contracts per day in a month which add
liquidity in SPY for a certain rebate. The
greater the amount of contracts
submitted by the member, the larger the
Lead Market Maker or Market Maker
Simple Order Rebate to Add Liquidity
in SPY. The Exchange believes that
measuring the contracts as a percentage
of TCV is a fair and equitable method
for calculating Customer volume
executed on Phlx when adding liquidity
in SPY. The Exchange would uniformly
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16:36 Mar 12, 2021
Jkt 253001
apply this measure to all eligible
members to determine the
corresponding rebate. Lead Market
Makers and Market Makers will be paid
per the highest tier achieved.
The Exchange’s proposal to amend
the tier qualifications for Lead Market
Maker or Market Maker Simple Order
Rebates to Add Liquidity in SPY does
not impose an undue burden on
competition. Phlx Lead Market Makers
and Market Makers add value through
continuous quoting 20 and are subject to
additional requirements and
obligations 21 that other market
participants are not. Incentivizing Lead
Market Makers and Market Makers to
provide greater liquidity benefits all
market participants through the quality
of order interaction.
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.22
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 rule-comments@
sec.gov. Please include File Number SR–
PHLX–2021–12 on the subject line.
20 See
Options 2, Section 5.
Options 2, Section 4.
22 15 U.S.C. 78s(b)(3)(A)(ii).
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–2021–12. 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–2021–12 and should
be submitted on or before April 5, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–05240 Filed 3–12–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meetings
Notice is hereby given,
pursuant to the provisions of the
Government in the Sunshine Act, Public
Law 94–409, that the Securities and
Exchange Commission Asset
Management Advisory Committee
TIME AND DATE:
21 See
PO 00000
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CFR 200.30–3(a)(12).
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]]>Agencies
[Federal Register Volume 86, Number 48 (Monday, March 15, 2021)]
[Notices]
[Pages 14352-14355]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-05240]
[[Page 14352]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91285; File No. SR-Phlx-2021-12)
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change to Proposed Rule
Change To Amend Options 7, Section 3, ``Rebates and Fees for Adding and
Removing Liquidity in SPY''
March 9, 2021.
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 1, 2021, 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 the
Substance of the Proposed Rule Change
The Exchange proposes to amend Phlx's Pricing Schedule at Options
7, Section 3, ``Rebates and Fees for Adding and Removing Liquidity in
SPY.''
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/phlx/rules, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Phlx proposes to amend its pricing within Options 7, Section 3,
``Rebates and Fees for Adding and Removing Liquidity in SPY.''
Specifically, the Exchange proposes to amend Options 7, Section 3, Part
A, Simple Orders to: (1) Decrease the SPY Simple Order Customer Fee for
Removing Liquidity; and (2) amend the SPY Lead Market Maker and Market
Maker tier qualifications to earn a Simple Order Rebate for Adding
Liquidity. Each change will be described below.
Fee for Removing Liquidity
The Exchange proposes to decrease the current $0.42 per contract
Customer Fee for Removing Liquidity in SPY to $0.38 per contract for
Simple Orders. The Exchange believes decreasing this fee will
incentivize market participants to send additional Customer Simple
Orders to Phlx in SPY.
The Exchange is not amending any other Fees for Removing Liquidity
\3\ in SPY for Simple Orders. Customers will continue to pay the lowest
Simple Order Fee for Removing Liquidity in SPY.
---------------------------------------------------------------------------
\3\ Today, all non-Customers pay a $0.48 per contract Fee for
Removing Liquidity in SPY.
---------------------------------------------------------------------------
Rebate for Adding Liquidity
Today, Lead Market Makers and Market Makers are paid Simple Order
Rebates for Adding Liquidity on electronically executed Simple Order
contracts per day in a month when adding liquidity in SPY. The Simple
Order Rebate for Adding Liquidity is determined by calculating the
average daily volume of electronically executed Lead Market Maker and
Market Maker Simple Order contracts per day in a month in SPY.\4\
Today, the applicable tier schedule is as follows:
---------------------------------------------------------------------------
\4\ This would include Lead Market Maker or Market Maker quotes
or orders that were executed.
------------------------------------------------------------------------
Rebate for
Tiers Average daily volume ``ADV'' adding
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
------------------------------------------------------------------------
The Exchange proposes to amend the current tier schedule. Instead
of utilizing average daily volume to qualify for a Lead Market Maker or
Market Maker Simple Order Rebate to Add Liquidity when adding liquidity
in SPY, the Exchange proposes to utilize a percentage of all cleared
customer volume at The Options Clearing Corporation in Multiply Listed
Equity Options and Exchange-Traded Products (``TCV''). Simple Order
Rebates to Add Liquidity will continue to be paid on electronically
executed Lead Market Maker and Market Maker Simple Order contracts per
day in a month which add liquidity in SPY. The Exchange is not amending
the Rebates for Adding Liquidity that are paid to Lead Market Makers
and Market Makers for transacting Simple Orders in SPY. Lead Market
Makers and Market Makers will be paid per the highest tier achieved
pursuant to the below tier schedule:
------------------------------------------------------------------------
Rebate for
Tiers Adds liquidity in SPY as a adding
percentage of TCV liquidity
------------------------------------------------------------------------
1......................... up to 0.02%................. $0.12
2......................... up to 0.04%................. 0.15
3......................... up to 0.10%................. 0.18
4......................... up to 0.20%................. 0.24
5......................... up to 0.40%................. 0.27
6......................... greater than 0.40%.......... 0.32
------------------------------------------------------------------------
Specifically, the Exchange would pay a $0.12 per contract Lead
Market Maker or Market Maker Simple Order Rebate to Add Liquidity for
TCV up to 0.02% \5\ which adds [sic] in SPY. Today, the Exchange pays a
$0.12 per contract Lead Market Maker or Market Maker Simple Order
Rebate to Add Liquidity for average daily volume up to 2,499 contracts
per day in a month which add liquidity in SPY.
---------------------------------------------------------------------------
\5\ 0.02% TCV is representative of approximately 5,000 contracts
per day when TCV is 25,000,000 contracts per day.
---------------------------------------------------------------------------
The Exchange proposes to pay a $0.15 per contract Lead Market Maker
or Market Maker Simple Order Rebate to Add Liquidity for TCV up to
0.04% \6\ which adds liquidity in SPY. Today, the Exchange pays a $0.15
per contract Lead Market Maker or Market Maker Simple Order Rebate to
Add Liquidity for average daily volume from 2,500 to 4,999 contracts
per day in a month which adds liquidity in SPY.
---------------------------------------------------------------------------
\6\ 0.04% TCV is representative of approximately 10,000
contracts per day when TCV is 25,000,000 contracts per day.
---------------------------------------------------------------------------
The Exchange proposes to pay a $0.18 per contract Lead Market Maker
or Market Maker Simple Order Rebate to Add Liquidity for TCV up to
0.10% \7\ which adds liquidity in SPY. Today, the Exchange pays a $0.18
per contract Lead Market Maker or Market Maker Simple Order Rebate to
Add Liquidity for average daily volume from 5,000 to
[[Page 14353]]
19,999 contracts per day in a month which adds liquidity in SPY.
---------------------------------------------------------------------------
\7\ 0.10% TCV is representative of approximately 25,000
contracts per day when TCV is 25,000,000 contracts per day.
---------------------------------------------------------------------------
The Exchange proposes to pay a $0.24 per contract Lead Market Maker
or Market Maker Simple Order Rebate to Add Liquidity for TCV up to
0.20% \8\ which adds liquidity in SPY. Today, the Exchange pays a $0.24
per contract Lead Market Maker or Market Maker Simple Order Rebate to
Add Liquidity for average daily volume from 20,000 to 34,999 contracts
per day in a month which adds liquidity in SPY.
---------------------------------------------------------------------------
\8\ 0.20% TCV is representative of approximately 50,000
contracts per day when TCV is 25,000,000 contracts per day.
---------------------------------------------------------------------------
The Exchange proposes to pay a $0.27 per contract Lead Market Maker
or Market Maker Simple Order Rebate to Add Liquidity for TCV up to
0.40% \9\ which adds liquidity in SPY. Today, the Exchange pays a $0.27
per contract Lead Market Maker or Market Maker Simple Order Rebate to
Add Liquidity for average daily volume from 35,000 to 49,999 contracts
per day in a month which adds liquidity in SPY.
---------------------------------------------------------------------------
\9\ 0.40% TCV is representative of approximately 100,000
contracts per day when TCV is 25,000,000 contracts per day.
---------------------------------------------------------------------------
The Exchange proposes to pay a $0.32 per contract Lead Market Maker
or Market Maker Simple Order Rebate to Add Liquidity for TCV greater
than 0.40% which adds liquidity in SPY. Today, the Exchange pays a
$0.32 per contract Lead Market Maker or Market Maker Simple Order
Rebate to Add Liquidity for average daily volume greater than 49,999
contracts per day in a month which adds liquidity in SPY.
As proposed, Lead Market Maker and Market Maker Simple Order
Rebates to Add Liquidity in SPY would require an increased amount of
electronically executed Lead Market Maker and Market Maker Simple Order
contracts per day in a month which adds liquidity in SPY to qualify for
the same tiers as members qualified in the past. For example, with this
proposal, the Tier 1 Simple Order Rebate to Add Liquidity will continue
to pay a $0.12 per contract Simple Order Lead Market Maker and Market
Maker Rebates to Add Liquidity in SPY; however, instead of executing
contracts which adds liquidity from 1 to 2,499 ADV to qualify for a
Tier 1 rebate, a Participant that executes from 1 to approximately
5,000 contracts in a day (which is the percentage of all cleared
customer volume at The Options Clearing Corporation in Multiply Listed
Equity Options and Exchange-Traded Products or ``TCV''), which adds
liquidity, would now qualify for the Tier 1 $0.12 Simple Order Lead
Market Maker and Market Maker Rebate to Add Liquidity in SPY. Today,
Participants that execute 2,500 to 4,999 ADV of Simple Order Lead
Market Maker and Market Maker contracts, which adds liquidity, would
qualify for the Tier 2 Simple Order Lead Market Maker and Market Maker
Rebate to Add Liquidity in SPY which pays $0.15 per contract. With this
proposal, those Participants that previously qualified for the Tier 2
rebate would now qualify for the Tier 1 Simple Order Lead Market Maker
and Market Maker Rebate to Add Liquidity. Likewise, with this proposal
the Tier 2 Simple Order Rebate to Add Liquidity will continue to pay a
$0.15 per contract Simple Order Lead Market Maker and Market Maker
Rebate to Add Liquidity in SPY; however, instead of executing contracts
from 2,500 to 4,999 ADV, which adds liquidity, to qualify for a Tier 2
rebate, a Participant that executes up to approximately 10,000
contracts TCV in a day, which adds liquidity, would now qualify for the
Tier 2 Simple Order Lead Market Maker and Market Maker Rebate to Add
Liquidity which pays $0.15 per contract. Today, Participants who
executed 5,000 to 19,999 ADV qualify for the higher Tier 3 Simple Order
Lead Market Maker and Market Maker Rebate to Add Liquidity of $0.18 per
contract. Each tier requirement has been increased and therefore
Participants in Tiers 2-6 would have to execute a greater amount of
Simple Order Lead Market Maker and Market Maker contracts which adds
liquidity in SPY to earn the same rebate as they previously earned.
With this proposal, all Simple Order Rebate to Add Liquidity tiers
require a greater amount of executed contracts which add liquidity in
SPY to qualify for the same tier, except for those Participants that
today qualify for Tier 1.\10\ Phlx believes its proposal will continue
to incentivize the submission of Lead Market Maker and Market Maker
Simple Orders by continuing to offer rebates for the submission of
these orders which add liquidity in SPY. Today, the Exchange only pays
Simple Order Rebates to Add Liquidity in SPY for Lead Market Maker and
Market Maker Simple Orders which add liquidity in SPY and this will
remain the case.
---------------------------------------------------------------------------
\10\ Tier 1 continues to pay the same $0.12 per contract Simple
Order Lead Market Maker and Market Maker Rebate to Add Liquidity for
Participants who submit up to approximately 5,000 TCV contracts
which add liquidity in SPY.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\11\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\12\ 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.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Exchange's proposed changes to its Pricing Schedule are
reasonable in several respects. As a threshold matter, the Exchange is
subject to significant competitive forces in the market for options
securities 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'. . . .'' \13\
---------------------------------------------------------------------------
\13\ 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)).
---------------------------------------------------------------------------
The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \14\
---------------------------------------------------------------------------
\14\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
---------------------------------------------------------------------------
Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
options security transaction services. The Exchange is only one of
sixteen options exchanges to which market participants may direct their
order flow. Within this environment, market participants can freely and
often do shift their order flow among the Exchange and competing
[[Page 14354]]
venues in response to changes in their respective pricing schedules. As
such, the proposal represents a reasonable attempt by the Exchange to
increase its liquidity and market share relative to its competitors.
Fee for Removing Liquidity
The Exchange's proposal to decrease the current $0.42 per contract
Customer Fee for Removing Liquidity in SPY to $0.38 per contract for
Simple Orders is reasonable. Decreasing the Simple Order Customer Fee
for Removing Liquidity in SPY will incentivize market participants to
send additional Customer SPY Simple Orders to Phlx. Customers will
continue to pay the lowest Simple Order Fee for Removing Liquidity in
SPY as compared to other market participants.\15\
---------------------------------------------------------------------------
\15\ See note 3 above.
---------------------------------------------------------------------------
The Exchange's proposal to decrease the current $0.42 per contract
Customer Fee for Removing Liquidity in SPY to $0.38 per contract for
Simple Orders is equitable and not unfairly discriminatory. Customers
would continue to receive favorable pricing as compared to other market
participants because Customer liquidity enhances liquidity on the
Exchange for the benefit of all market participants. Specifically,
Customer liquidity benefits all market participants by providing more
trading opportunities which attracts market makers. An increase in the
activity of these market participants (particularly in response to
pricing) in turn facilitates tighter spreads which may cause an
additional corresponding increase in order flow from other market
participants.
Rebate for Adding Liquidity
The Exchange's proposal to amend the current tier schedule to
remove average daily volume as a tier qualifier for a Lead Market Maker
or Market Maker Simple Order Rebate to Add Liquidity when adding
liquidity in SPY and instead utilize a percentage of all cleared
customer volume at The Options Clearing Corporation in Multiply Listed
Equity Options and Exchange-Traded Products or ``TCV'' is reasonable,
equitable and not unfairly discriminatory. The Exchange's proposal is
intended to provide a measure for the amount of contracts that would be
eligible to qualify a market participant submitting electronically
executed Lead Market Maker and Market Maker Simple Order contracts per
day in a month which add liquidity in SPY for a certain rebate. The
greater the amount of contracts submitted by the member, the larger the
Lead Market Maker or Market Maker Simple Order Rebate to Add Liquidity
when adding liquidity in SPY. The Exchange believes that measuring the
contracts as a percentage of TCV is a fair and equitable method for
calculating Simple Order Customer volume executed on Phlx when adding
liquidity in SPY. The Exchange would uniformly apply this measure to
all eligible members to determine the corresponding rebate. Lead Market
Makers and Market Makers will be paid per the highest tier achieved.
The Exchange's proposal to amend the tier qualifications for Lead
Market Maker or Market Maker Simple Order Rebates to Add Liquidity when
adding liquidity in SPY is reasonable.\16\ As proposed, an increased
amount of electronically executed Lead Market Maker and Market Maker
Simple Order contracts per day in a month which add liquidity in SPY
would need to be submitted to qualify for the same tiers as members
qualified in the past with the exception of Tier 1.\17\ With this
proposal, all Simple Order Rebate to Add Liquidity tiers require a
greater amount of executed contracts which add liquidity in SPY to
qualify for the same rebate as the Participant had previously qualified
for prior to this proposal. Despite the increased volume
qualifications, Phlx believes its proposal will continue to incentivize
the submission of Lead Market Maker and Market Maker Simple Orders by
continuing to offer rebates for the submission of these orders which
add liquidity in SPY. Today, the Exchange only pays Simple Order
Rebates to Add Liquidity in SPY for Lead Market Maker and Market Maker
Simple Orders and this will remain the case. Lead Market Makers and
Market Makers will be paid per the highest tier achieved.
---------------------------------------------------------------------------
\16\ With this proposal, Phlx would pay a $0.12 per contract
Lead Market Maker or Market Maker Simple Order Rebate to Add
Liquidity for TCV up to 0.02% which adds liquidity in SPY. Today,
the Exchange pays a $0.12 per contract Lead Market Maker or Market
Maker Simple Order Rebate to Add Liquidity for average daily volume
up to 2,499 contracts per day in a month which adds liquidity in
SPY. The Exchange proposes to pay a $0.15 per contract Lead Market
Maker or Market Maker Simple Order Rebate to Add Liquidity for TCV
up to 0.04% which adds liquidity in SPY. Today, the Exchange pays a
$0.15 per contract Lead Market Maker or Market Maker Simple Order
Rebate to Add Liquidity for average daily volume from 2,500 to 4,999
contracts per day in a month which adds liquidity in SPY. The
Exchange proposes to pay a $0.18 per contract Lead Market Maker or
Market Maker Simple Order Rebate to Add Liquidity for TCV up to
0.10% which adds in SPY. Today, the Exchange pays a $0.18 per
contract Lead Market Maker or Market Maker Simple Order Rebate to
Add Liquidity for average daily volume from 5,000 to 19,999
contracts per day in a month which adds liquidity in SPY. The
Exchange proposes to pay a $0.24 per contract Lead Market Maker or
Market Maker Simple Order Rebate to Add Liquidity for TCV up to
0.20% which adds liquidity in SPY. Today, the Exchange pays a $0.24
per contract Lead Market Maker or Market Maker Simple Order Rebate
to Add Liquidity for average daily volume from 20,000 to 34,999
contracts per day in a month which adds liquidity in SPY. The
Exchange proposes to pay a $0.27 per contract Lead Market Maker or
Market Maker Simple Order Rebate to Add Liquidity for TCV up to
0.40% which adds liquidity in SPY. Today, the Exchange pays a $0.27
per contract Lead Market Maker or Market Maker Simple Order Rebate
to Add Liquidity for average daily volume from 35,000 to 49,999
contracts per day in a month which adds liquidity in SPY.
The Exchange proposes to pay a $0.32 per contract Lead Market
Maker or Market Maker Simple Order Rebate to Add Liquidity for TCV
greater than 0.40% which adds liquidity in SPY. Today, the Exchange
pays a $0.32 per contract Lead Market Maker or Market Maker Simple
Order Rebate to Add Liquidity for average daily volume greater than
49,999 contracts per day in a month which adds liquidity in SPY.
\17\ Tier 1 continues to pay the same $0.12 per contract Simple
Order Lead Market Maker and Market Maker Rebate to Add Liquidity for
Participants who submit up to approximately 5,000 TCV contracts
which add liquidity in SPY.
---------------------------------------------------------------------------
The Exchange's proposal to amend the tier qualifications for Lead
Market Maker or Market Maker Simple Order Rebates to Add Liquidity in
SPY is equitable and not unfairly discriminatory. Phlx Lead Market
Makers and Market Makers add value through continuous quoting \18\ and
are subject to additional requirements and obligations \19\ that other
market participants are not. Incentivizing Lead Market Makers and
Market Makers to provide greater liquidity benefits all market
participants through the quality of order interaction.
---------------------------------------------------------------------------
\18\ See Options 2, Section 5.
\19\ See Options 2, Section 4.
---------------------------------------------------------------------------
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 intermarket
competition. The Exchange believes its proposal remains competitive
with other options markets and will offer market participants with
another choice of where to transact options. 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
[[Page 14355]]
fees to remain competitive with other exchanges 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.
Intra-Market Competition
Fee for Removing Liquidity
The Exchange's proposal to decrease the current $0.42 per contract
Customer Fee for Removing Liquidity in SPY to $0.38 per contract for
Simple Orders does not impose an undue burden on competition. Customers
would continue to receive favorable pricing as compared to other market
participants because Customer liquidity enhances liquidity on the
Exchange for the benefit of all market participants. Specifically,
Customer liquidity benefits all market participants by providing more
trading opportunities which attracts market makers. An increase in the
activity of these market participants (particularly in response to
pricing) in turn facilitates tighter spreads which may cause an
additional corresponding increase in order flow from other market
participants.
Rebate for Adding Liquidity
The Exchange's proposal to amend the current tier schedule to
remove average daily volume as a tier qualifier for a Lead Market Maker
or Market Maker Simple Order Rebate to Add Liquidity when adding
liquidity in SPY and instead utilize a percentage of all cleared
customer volume at The Options Clearing Corporation in Multiply Listed
Equity Options and Exchange-Traded Products or ``TCV'' does not impose
an undue burden on competition. The Exchange's proposal is intended to
provide a measure for the amount of contracts that would be eligible to
qualify a market participant submitting electronically executed Lead
Market Maker and Market Maker Simple Order contracts per day in a month
which add liquidity in SPY for a certain rebate. The greater the amount
of contracts submitted by the member, the larger the Lead Market Maker
or Market Maker Simple Order Rebate to Add Liquidity in SPY. The
Exchange believes that measuring the contracts as a percentage of TCV
is a fair and equitable method for calculating Customer volume executed
on Phlx when adding liquidity in SPY. The Exchange would uniformly
apply this measure to all eligible members to determine the
corresponding rebate. Lead Market Makers and Market Makers will be paid
per the highest tier achieved.
The Exchange's proposal to amend the tier qualifications for Lead
Market Maker or Market Maker Simple Order Rebates to Add Liquidity in
SPY does not impose an undue burden on competition. Phlx Lead Market
Makers and Market Makers add value through continuous quoting \20\ and
are subject to additional requirements and obligations \21\ that other
market participants are not. Incentivizing Lead Market Makers and
Market Makers to provide greater liquidity benefits all market
participants through the quality of order interaction.
---------------------------------------------------------------------------
\20\ See Options 2, Section 5.
\21\ See Options 2, Section 4.
---------------------------------------------------------------------------
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.\22\
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-PHLX-2021-12 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-2021-12. 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-2021-12 and should be submitted on
or before April 5, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
---------------------------------------------------------------------------
\23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-05240 Filed 3-12-21; 8:45 am]
BILLING CODE 8011-01-P
