Self-Regulatory Organizations; Nasdaq PHLX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Pricing Schedule at Options 7, 22283-22286 [2021-08673]

Download as PDF Federal Register / Vol. 86, No. 79 / Tuesday, April 27, 2021 / Notices Interference, and Import into the USA. The permit holder and agents may conduct activities associated with longterm studies of seabird ecology including diets, breeding success, growth rates, survival, recruitment, behavior, population trends, foraging success, and seasonal dispersal as detailed in the attached permit application. Study species include Adelie, Chinstrap, and Gentoo Penguins; Brown and South Polar Skua; Southern Giant Petrel; Blue-eyed Shag; Kelp Gull; and Snowy Sheathbill. Specimens from these and other species may be salvaged from birds that have died of natural causes. Now the permit holder proposes a permit modification to deploy three time-lapse cameras, two on Torgersen Island and one on Humble Island (Restricted Zones within ASMA 7, Southwest Anvers Island and Palmer Basin), to monitor Adelie penguin occupation patterns in relation to the Palmer Station pier construction. The two islands of interest are where Ade´lie penguin foraging behavior, diet, and phenology have been routinely studied and are the largest Ade´lie colonies near Palmer Station. The equipment would consist of a small camera attached to a steel pole with a square base that is anchored under rocks. The cameras would be deployed at the end of May 2021 by permit agents (if there are any delays, the cameras would be installed during October 2021). The equipment would be hand carried in pieces to the sites of interest and assembled in the field. The cameras would remain in place for at least two years to obtain information during the pier construction and the year after construction. The Environmental Officer has reviewed the modification request and has determined that the amendment is not a material change to the permit, and it will have a less than a minor or transitory impact. Dates of permitted activities: April 21, 2021 to September 30, 2023. The permit modification was issued on April 21, 2021. Erika N. Davis, Program Specialist, Office of Polar Programs. jbell on DSKJLSW7X2PROD with NOTICES [FR Doc. 2021–08665 Filed 4–26–21; 8:45 am] SECURITIES AND EXCHANGE COMMISSION [Release No. 34–91625; File No. SR–Phlx– 2021–22] Self-Regulatory Organizations; Nasdaq PHLX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange’s Pricing Schedule at Options 7 April 21, 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 April 13, 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 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 the Exchange’s Pricing Schedule at Options 7, as described further below. 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 The purpose of the proposed rule change is to amend the Exchange’s Pricing Schedule at Options 7. First, the BILLING CODE 7555–01–P 1 15 2 17 VerDate Sep<11>2014 18:52 Apr 26, 2021 Jkt 253001 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00154 Fmt 4703 Sfmt 4703 22283 Exchange proposes to amend the routing fees to Nasdaq BX Options (‘‘BX’’), which are set forth in Options 7, Section 7. Second, the Exchange proposes a non-substantive change in Options 7, Section 4 to add rule text that will make clear applicable pricing. BX Routing Fees Options 7, Section 7 sets forth the fees for routing contracts to markets other than Phlx. The Exchange proposes to amend the BX Routing Fee. Currently, Non-Customers 3 are assessed a $0.99 per contract Routing Fee to any options exchange. Customers 4 are currently assessed a Routing Fee to The Nasdaq Options Market (‘‘NOM’’) of $0.13 per contract (‘‘Fixed Fee’’) in addition to the actual transaction fee assessed. Customers are also currently assessed a Routing Fee to BX of $0.13 per contract. In addition, as it relates to all other options exchanges, Customers are currently assessed a Routing Fee of $0.23 per contract (‘‘Fixed Fee’’) in addition to the actual transaction fee assessed. If the away market pays a rebate, the Routing Fee is $0.13 per contract. Finally, the Exchange currently pays a credit (equal to the applicable Fixed Fee plus $0.01 per contract) 5 to a member organization that qualifies for a Tier 2, 3, 4, or 5 rebate in the Customer Rebate Program in Section B of the Pricing Schedule, and routes away more than 5,000 Customer contracts per day in a given month to an away market. The Exchange now proposes to amend the BX Routing Fee to include the actual transaction fee assessed in addition to the ‘‘Fixed Fee’’ of $0.13 per contract. The proposed changes will align BX’s Routing Fee with the current NOM Routing Fee. The Exchange is proposing to recoup the actual transaction fee (in addition to the Fixed Fee) that is incurred by the Exchange in connection with routing orders, on behalf of its member organizations, to BX. Previously, the 3 The term ‘‘Non-Customer’’ applies to transactions for the accounts of Lead Market Makers, Market Makers, Firms, Professionals, Broker-Dealers and JBOs. 4 The term ‘‘Customer’’ applies to any transaction that is identified by a member or member organization for clearing in the Customer range at The Options Clearing Corporation (‘‘OCC’’) which is not for the account of a broker or dealer or for the account of a ‘‘Professional’’ (as that term is defined in Options 1, Section 1(b)(45)). 5 If the away market transaction fee is $0.00 or the away market pays a rebate, then the Exchange provides the member organization with a credit equal to the applicable Fixed Fee only. Member and member organizations under Common Ownership may aggregate their Customer volume routed away for purposes of calculating discount thresholds and receiving discounted routing fees. E:\FR\FM\27APN1.SGM 27APN1 22284 Federal Register / Vol. 86, No. 79 / Tuesday, April 27, 2021 / Notices jbell on DSKJLSW7X2PROD with NOTICES Exchange retained the rebates paid by BX to recover the costs associated with providing its routing services, did not assess the actual transaction fees charged by BX for Customer orders, and only assessed such orders the $0.13 per contract Fixed Fee. This is because when orders are routed to BX, such orders are considered as removing liquidity on BX, and BX previously assessed rebates to Customer orders for removing liquidity. In particular, prior to the Recent Rule Change,6 Customer orders executed on BX received Penny Symbol Rebates to Remove Liquidity when trading against a Non-Customer, Lead Market Maker, BX Options Market Maker, Customer or Firm that ranged from $0.00 to $0.35 per contract,7 depending on the volume tier achieved. Customers also previously received Non-Penny Rebates to Remove Liquidity of $0.80 per contract, regardless of tier and contra-party. As part of the Recent Rule Change, the aforementioned rebates were removed from the BX Pricing Schedule and replaced with a maker/taker fee structure where market participants are assessed a rebate or fee for adding liquidity to the market, or charged a fee for removing liquidity from the market.8 With this recent change in the structure of BX’s Pricing Schedule, the Exchange proposes to align the Routing Fees to BX with the current Routing Fees to NOM. With this proposal, the Exchange will no longer retain rebates paid by BX as BX no longer provides rebates for Customer orders removing liquidity on BX and instead charges a taker fee for such orders. The Exchange will continue to assess the $0.13 per contract Fixed Fee for routing Customer orders to BX, and will propose to also charge the actual transaction fee assessed by BX. Finally, the Exchange will continue to provide the routing credit described above to orders that are routed away to BX if the member organization qualifies for a Tier 2, 3, 4 or 5 rebate in the Customer Rebate Program in Section B of the Pricing Schedule, and routes 6 See Securities Exchange Act Release No. 91473 (April 5, 2021), 86 FR 18562 (April 9, 2021) (SR– BX–2021–009) (‘‘Recent Rule Change’’). 7 Participants that execute less than 0.05% of total industry customer equity and ETF option ADV contracts per month would receive no Penny Symbol Rebate to Remove Liquidity in Tier 1. Participants that execute 0.05% to less than 0.15% of total industry customer equity and ETF option ADV contracts per month would receive a $0.25 per contract Penny Symbol Rebate to Remove Liquidity in Tier 2. Participants that execute 0.15% or more of total industry customer equity and ETF option ADV contracts per month would receive a $0.35 per contract Penny Symbol Rebate to Remove Liquidity in Tier 3. 8 See note 6 above. VerDate Sep<11>2014 18:52 Apr 26, 2021 Jkt 253001 away more than 5,000 Customer contracts per day in a given month. The routing credit will equal the $0.13 per contract Fixed Fee plus $0.01 per contract, unless the away market transaction fee is $0.00 or the away market pays a rebate, in which case the member organization will be entitled to receive a credit equal to the $0.13 per contract Fixed Fee. Accordingly, the application of the routing credit for BX under this proposal will continue to remain the same as today. For example, if Phlx routes a Customer order in a Non-Penny Symbol for execution on BX, Phlx would charge the member organization for the Customer order the $0.13 per contract Fixed Fee plus the $0.65 per contract taker fee, which is the actual transaction fee assessed by BX today for Customer orders taking liquidity, for a total of $0.78 per contract. Further, if the Phlx member organization meets the qualifications for the routing credit (i.e., qualifies for a Tier 2, 3, 4 or 5 rebate in the Customer Rebate Program, and routes away more than 5,000 Customer contracts per day in a given month), Phlx would provide the member organization a routing credit of $0.14 per contract (i.e., the $0.13 Fixed Fee plus $0.01 per contract) instead of charging the $0.78 per contract Routing Fee for the Customer order. Technical Amendment The Exchange proposes a nonsubstantive, technical amendment to Options 7, Section 4, currently titled ‘‘Multiply Listed Options Fees (Includes options overlying equities, ETFs, ETNs and indexes which are Multiply Listed).’’ The Exchange now proposes to add a parenthetical that makes clear that SPY pricing is excluded from Section 4 pricing as it is set forth separately in Options 7, Section 3. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,9 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,10 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 9 15 U.S.C. 78f(b). U.S.C. 78f(b)(4) and (5). 10 15 PO 00000 Frm 00155 Fmt 4703 Sfmt 4703 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’. . . .’’ 11 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.’’ 12 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 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. The Exchange’s proposal to amend the BX Customer Routing Fee within Options 7, Section 7 to start charging the actual transaction fee assessed by BX in addition to the current $0.13 per contract Fixed Fee is reasonable. As a general matter, the Exchange notes that 11 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) (quoting Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770, 74782– 83 (December 9, 2008) (SR–NYSEArca–2006–21)). 12 Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (‘‘Regulation NMS Adopting Release’’). E:\FR\FM\27APN1.SGM 27APN1 Federal Register / Vol. 86, No. 79 / Tuesday, April 27, 2021 / Notices jbell on DSKJLSW7X2PROD with NOTICES use of the Exchange’s routing services is completely voluntary. In the alternative, member organizations may submit orders to the Exchange as ineligible for routing or ‘‘DNR’’ to avoid Routing Fees.13 Furthermore, the Exchange operates in a highly competitive market in which market participants can readily select between various providers of routing services with different pricing. In this instance, proposing to assess the actual transaction fee, in addition to the current Fixed Fee of $0.13 per contract, is reasonable in light of the Recent Rule Change described above where BX no longer provides rebates to Customer orders that are routed to and executed on BX, and instead charges them a taker fee.14 As proposed, the Exchange would recoup the actual transaction cost it incurs when routing Customer orders to BX in lieu of collecting any rebate paid by BX. Today, the Exchange similarly assesses orders routed to NOM a Fixed Fee of $0.13 per contract plus the actual transaction fee. As such, the proposal would align the BX Routing Fee with the NOM Routing Fee. The Exchange’s proposal to amend the BX Customer Routing Fee within Options 7, Section 7 is equitable and not unfairly discriminatory because the Exchange would uniformly assess the same transaction fee assessed by BX for the Customer order routed to BX plus the current Fixed Fee of $0.13 per contract. Lastly, the Exchange believes that its proposal to add the parenthetical to the Options 7, Section 4 header to exclude SPY from Section 4 pricing is reasonable, equitable, and not unfairly discriminatory. The proposed rule change is a non-substantive, technical amendment that will make clear that SPY pricing is set forth separately in the Pricing Schedule. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. In terms of inter-market competition, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees to remain competitive with other options 13 See 14 See Options 5, Section 4(a)(iii)(A). note 6 above. VerDate Sep<11>2014 18:52 Apr 26, 2021 Jkt 253001 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. In this instance, the Exchange is proposing to charge Customer orders that are routed to BX the actual transaction fee assessed by BX in addition to the current Fixed Fee of $0.13 per contract in light of the fee changes under the Recent Rule Change described above where BX no longer provides rebates to Customer orders that are routed to and executed on BX, and instead charges them a taker fee.15 The proposed changes reflect the need to recover the Exchange’s costs associated with providing its routing services. Furthermore, as noted above, the use of the Exchange’s routing services is completely voluntary and optional, and the Exchange operates in a highly competitive market in which market participants can readily select between various providers of routing services with different pricing. As such, it is likely that the Exchange will lose market share as a result of the changes proposed herein if they are unattractive to market participants. The Exchange also does not believe its proposal will impose an undue burden on intra-market competition. As discussed above, the Exchange would uniformly assess the same transaction fee assessed by BX for the Customer order routed to BX plus a Fixed Fee of $0.13 per contract. Under this proposal, Non-Customer orders would continue to be assessed the $0.99 per contract routing fee and not be assessed the actual BX transaction fee. The Exchange does not believe its pricing proposal will place any market participant at a relative disadvantage compared to other market participants because the proposed routing fee for Customer orders will actually narrow the difference between the routing fees assessed to Customer and Non-Customer orders routed to BX, as illustrated in the example above. 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 16 and paragraph (f) of Rule 19b–4 thereunder.17 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–2021–22 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–2021–22. 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 16 15 15 See PO 00000 note 6 above. Frm 00156 Fmt 4703 17 17 Sfmt 4703 22285 E:\FR\FM\27APN1.SGM U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(2). 27APN1 22286 Federal Register / Vol. 86, No. 79 / Tuesday, April 27, 2021 / Notices 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–2021–22 and should be submitted on or before May 18, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–08673 Filed 4–26–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [SEC File No 270–600, OMB Control No. 3235–0656] Proposed Collection; Comment Request Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549–2736 jbell on DSKJLSW7X2PROD with NOTICES Extension: Rule 17g–7 1 See CFR 200.30–3(a)(12). 17 CFR 240.17g–1 and 17 CFR 249b.300. VerDate Sep<11>2014 Dated: April 22, 2021. J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–08728 Filed 4–26–21; 8:45 am] Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) is soliciting comments on the existing collection of information provided for in Rule 17g-7 under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.).1 The Commission plans to submit this existing collection of information to the Office of Management and Budget for extension and approval. Rule 17g–7 contains disclosure requirements for Nationally Recognized Statistical Rating Organizations (‘‘NRSROs’’) including certain information to be published when taking a rating action with respect to a credit rating. Currently, there are 9 credit rating agencies registered as NRSROs with the Commission. The Commission estimates that the total 18 17 burden for respondents to comply with Rule 17g–7 is 626,262. Written comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission’s estimates of the burden of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information on respondents; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication. The Commission may not conduct or sponsor a collection of information unless it displays a currently valid control number. No person shall be subject to any penalty for failing to comply with a collection of information subject to the PRA that does not display a valid Office of Management and Budget (OMB) control number. Please direct your written comments to: Dave Bottom, Director/Chief Information Officer, Securities and Exchange Commission, c/o Cynthia Roscoe, 100 F St NE, Washington, DC 20549 or send an email to: PRA_ Mailbox@sec.gov. 18:52 Apr 26, 2021 Jkt 253001 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [SEC File No 270–645, OMB Control No. 3235–0693] Proposed Collection; Comment Request Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549–2736 Extension: Rule 17g–8 & 9 Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) is soliciting comments on the existing collection of information provided for in Rule 17g–8 and 17g–9 under the Securities Exchange Act of PO 00000 Frm 00157 Fmt 4703 Sfmt 4703 1934 (15 U.S.C. 78a et seq.).1 The Commission plans to submit this existing collection of information to the Office of Management and Budget for extension and approval. Rule 17g–8 contains certain requirements for Nationally Recognized Statistical Rating Organizations (‘‘NRSROs’’) to have policies and procedures with respect to the procedures and methodologies the NRSRO uses to determine credit ratings, with respect to the symbols, numbers, or scores it uses to denote credit ratings, to address instances in which a look-back review determines that a conflict of interest influenced a credit rating, and to consider certain prescribed factors for an effective internal structure. Rule 17g– 9 contains requirements for NRSROs to ensure that any person employed by an NRSRO to determine credit ratings meets standards necessary to produce accurate ratings. Currently, there are 9 credit rating agencies registered as NRSROs with the Commission. The Commission estimates that the total burden for respondents to comply with Rule 17g–8 is 1,305 hours and to comply with Rule 17g–9 is 22,504 hours. Written comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission’s estimates of the burden of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information on respondents; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication. The Commission may not conduct or sponsor a collection of information unless it displays a currently valid control number. No person shall be subject to any penalty for failing to comply with a collection of information subject to the PRA that does not display a valid Office of Management and Budget (OMB) control number. Please direct your written comments to: Dave Bottom, Director/Chief Information Officer, Securities and Exchange Commission, c/o Cynthia Roscoe, 100 F St NE, Washington, DC 20549 or send an email to: PRA_ Mailbox@sec.gov. 1 See E:\FR\FM\27APN1.SGM 17 CFR 240.17g–1 and 17 CFR 249b.300. 27APN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 86, Number 79 (Tuesday, April 27, 2021)]
[Notices]
[Pages 22283-22286]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-08673]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91625; File No. SR-Phlx-2021-22]


Self-Regulatory Organizations; Nasdaq PHLX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Exchange's Pricing Schedule at Options 7

April 21, 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 April 13, 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 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 the Exchange's Pricing Schedule at 
Options 7, as described further below.
    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
    The purpose of the proposed rule change is to amend the Exchange's 
Pricing Schedule at Options 7. First, the Exchange proposes to amend 
the routing fees to Nasdaq BX Options (``BX''), which are set forth in 
Options 7, Section 7. Second, the Exchange proposes a non-substantive 
change in Options 7, Section 4 to add rule text that will make clear 
applicable pricing.
BX Routing Fees
    Options 7, Section 7 sets forth the fees for routing contracts to 
markets other than Phlx. The Exchange proposes to amend the BX Routing 
Fee.
    Currently, Non-Customers \3\ are assessed a $0.99 per contract 
Routing Fee to any options exchange. Customers \4\ are currently 
assessed a Routing Fee to The Nasdaq Options Market (``NOM'') of $0.13 
per contract (``Fixed Fee'') in addition to the actual transaction fee 
assessed. Customers are also currently assessed a Routing Fee to BX of 
$0.13 per contract. In addition, as it relates to all other options 
exchanges, Customers are currently assessed a Routing Fee of $0.23 per 
contract (``Fixed Fee'') in addition to the actual transaction fee 
assessed. If the away market pays a rebate, the Routing Fee is $0.13 
per contract. Finally, the Exchange currently pays a credit (equal to 
the applicable Fixed Fee plus $0.01 per contract) \5\ to a member 
organization that qualifies for a Tier 2, 3, 4, or 5 rebate in the 
Customer Rebate Program in Section B of the Pricing Schedule, and 
routes away more than 5,000 Customer contracts per day in a given month 
to an away market.
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    \3\ The term ``Non-Customer'' applies to transactions for the 
accounts of Lead Market Makers, Market Makers, Firms, Professionals, 
Broker-Dealers and JBOs.
    \4\ The term ``Customer'' applies to any transaction that is 
identified by a member or member organization for clearing in the 
Customer range at The Options Clearing Corporation (``OCC'') which 
is not for the account of a broker or dealer or for the account of a 
``Professional'' (as that term is defined in Options 1, Section 
1(b)(45)).
    \5\ If the away market transaction fee is $0.00 or the away 
market pays a rebate, then the Exchange provides the member 
organization with a credit equal to the applicable Fixed Fee only. 
Member and member organizations under Common Ownership may aggregate 
their Customer volume routed away for purposes of calculating 
discount thresholds and receiving discounted routing fees.
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    The Exchange now proposes to amend the BX Routing Fee to include 
the actual transaction fee assessed in addition to the ``Fixed Fee'' of 
$0.13 per contract. The proposed changes will align BX's Routing Fee 
with the current NOM Routing Fee.
    The Exchange is proposing to recoup the actual transaction fee (in 
addition to the Fixed Fee) that is incurred by the Exchange in 
connection with routing orders, on behalf of its member organizations, 
to BX. Previously, the

[[Page 22284]]

Exchange retained the rebates paid by BX to recover the costs 
associated with providing its routing services, did not assess the 
actual transaction fees charged by BX for Customer orders, and only 
assessed such orders the $0.13 per contract Fixed Fee. This is because 
when orders are routed to BX, such orders are considered as removing 
liquidity on BX, and BX previously assessed rebates to Customer orders 
for removing liquidity. In particular, prior to the Recent Rule 
Change,\6\ Customer orders executed on BX received Penny Symbol Rebates 
to Remove Liquidity when trading against a Non-Customer, Lead Market 
Maker, BX Options Market Maker, Customer or Firm that ranged from $0.00 
to $0.35 per contract,\7\ depending on the volume tier achieved. 
Customers also previously received Non-Penny Rebates to Remove 
Liquidity of $0.80 per contract, regardless of tier and contra-party. 
As part of the Recent Rule Change, the aforementioned rebates were 
removed from the BX Pricing Schedule and replaced with a maker/taker 
fee structure where market participants are assessed a rebate or fee 
for adding liquidity to the market, or charged a fee for removing 
liquidity from the market.\8\
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    \6\ See Securities Exchange Act Release No. 91473 (April 5, 
2021), 86 FR 18562 (April 9, 2021) (SR-BX-2021-009) (``Recent Rule 
Change'').
    \7\ Participants that execute less than 0.05% of total industry 
customer equity and ETF option ADV contracts per month would receive 
no Penny Symbol Rebate to Remove Liquidity in Tier 1. Participants 
that execute 0.05% to less than 0.15% of total industry customer 
equity and ETF option ADV contracts per month would receive a $0.25 
per contract Penny Symbol Rebate to Remove Liquidity in Tier 2. 
Participants that execute 0.15% or more of total industry customer 
equity and ETF option ADV contracts per month would receive a $0.35 
per contract Penny Symbol Rebate to Remove Liquidity in Tier 3.
    \8\ See note 6 above.
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    With this recent change in the structure of BX's Pricing Schedule, 
the Exchange proposes to align the Routing Fees to BX with the current 
Routing Fees to NOM. With this proposal, the Exchange will no longer 
retain rebates paid by BX as BX no longer provides rebates for Customer 
orders removing liquidity on BX and instead charges a taker fee for 
such orders. The Exchange will continue to assess the $0.13 per 
contract Fixed Fee for routing Customer orders to BX, and will propose 
to also charge the actual transaction fee assessed by BX.
    Finally, the Exchange will continue to provide the routing credit 
described above to orders that are routed away to BX if the member 
organization qualifies for a Tier 2, 3, 4 or 5 rebate in the Customer 
Rebate Program in Section B of the Pricing Schedule, and routes away 
more than 5,000 Customer contracts per day in a given month. The 
routing credit will equal the $0.13 per contract Fixed Fee plus $0.01 
per contract, unless the away market transaction fee is $0.00 or the 
away market pays a rebate, in which case the member organization will 
be entitled to receive a credit equal to the $0.13 per contract Fixed 
Fee. Accordingly, the application of the routing credit for BX under 
this proposal will continue to remain the same as today. For example, 
if Phlx routes a Customer order in a Non-Penny Symbol for execution on 
BX, Phlx would charge the member organization for the Customer order 
the $0.13 per contract Fixed Fee plus the $0.65 per contract taker fee, 
which is the actual transaction fee assessed by BX today for Customer 
orders taking liquidity, for a total of $0.78 per contract. Further, if 
the Phlx member organization meets the qualifications for the routing 
credit (i.e., qualifies for a Tier 2, 3, 4 or 5 rebate in the Customer 
Rebate Program, and routes away more than 5,000 Customer contracts per 
day in a given month), Phlx would provide the member organization a 
routing credit of $0.14 per contract (i.e., the $0.13 Fixed Fee plus 
$0.01 per contract) instead of charging the $0.78 per contract Routing 
Fee for the Customer order.
Technical Amendment
    The Exchange proposes a non-substantive, technical amendment to 
Options 7, Section 4, currently titled ``Multiply Listed Options Fees 
(Includes options overlying equities, ETFs, ETNs and indexes which are 
Multiply Listed).'' The Exchange now proposes to add a parenthetical 
that makes clear that SPY pricing is excluded from Section 4 pricing as 
it is set forth separately in Options 7, Section 3.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\9\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\10\ 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.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 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'. . . .'' \11\
---------------------------------------------------------------------------

    \11\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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    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.'' \12\
---------------------------------------------------------------------------

    \12\ 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 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.
    The Exchange's proposal to amend the BX Customer Routing Fee within 
Options 7, Section 7 to start charging the actual transaction fee 
assessed by BX in addition to the current $0.13 per contract Fixed Fee 
is reasonable. As a general matter, the Exchange notes that

[[Page 22285]]

use of the Exchange's routing services is completely voluntary. In the 
alternative, member organizations may submit orders to the Exchange as 
ineligible for routing or ``DNR'' to avoid Routing Fees.\13\ 
Furthermore, the Exchange operates in a highly competitive market in 
which market participants can readily select between various providers 
of routing services with different pricing. In this instance, proposing 
to assess the actual transaction fee, in addition to the current Fixed 
Fee of $0.13 per contract, is reasonable in light of the Recent Rule 
Change described above where BX no longer provides rebates to Customer 
orders that are routed to and executed on BX, and instead charges them 
a taker fee.\14\ As proposed, the Exchange would recoup the actual 
transaction cost it incurs when routing Customer orders to BX in lieu 
of collecting any rebate paid by BX. Today, the Exchange similarly 
assesses orders routed to NOM a Fixed Fee of $0.13 per contract plus 
the actual transaction fee. As such, the proposal would align the BX 
Routing Fee with the NOM Routing Fee. The Exchange's proposal to amend 
the BX Customer Routing Fee within Options 7, Section 7 is equitable 
and not unfairly discriminatory because the Exchange would uniformly 
assess the same transaction fee assessed by BX for the Customer order 
routed to BX plus the current Fixed Fee of $0.13 per contract.
---------------------------------------------------------------------------

    \13\ See Options 5, Section 4(a)(iii)(A).
    \14\ See note 6 above.
---------------------------------------------------------------------------

    Lastly, the Exchange believes that its proposal to add the 
parenthetical to the Options 7, Section 4 header to exclude SPY from 
Section 4 pricing is reasonable, equitable, and not unfairly 
discriminatory. The proposed rule change is a non-substantive, 
technical amendment that will make clear that SPY pricing is set forth 
separately in the Pricing Schedule.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. In terms of inter-market 
competition, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem fee levels at a particular venue to be 
excessive, or rebate opportunities available at other venues to be more 
favorable. In such an environment, the Exchange must continually adjust 
its fees to remain competitive with other options 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. In 
this instance, the Exchange is proposing to charge Customer orders that 
are routed to BX the actual transaction fee assessed by BX in addition 
to the current Fixed Fee of $0.13 per contract in light of the fee 
changes under the Recent Rule Change described above where BX no longer 
provides rebates to Customer orders that are routed to and executed on 
BX, and instead charges them a taker fee.\15\ The proposed changes 
reflect the need to recover the Exchange's costs associated with 
providing its routing services. Furthermore, as noted above, the use of 
the Exchange's routing services is completely voluntary and optional, 
and the Exchange operates in a highly competitive market in which 
market participants can readily select between various providers of 
routing services with different pricing. As such, it is likely that the 
Exchange will lose market share as a result of the changes proposed 
herein if they are unattractive to market participants.
---------------------------------------------------------------------------

    \15\ See note 6 above.
---------------------------------------------------------------------------

    The Exchange also does not believe its proposal will impose an 
undue burden on intra-market competition. As discussed above, the 
Exchange would uniformly assess the same transaction fee assessed by BX 
for the Customer order routed to BX plus a Fixed Fee of $0.13 per 
contract. Under this proposal, Non-Customer orders would continue to be 
assessed the $0.99 per contract routing fee and not be assessed the 
actual BX transaction fee. The Exchange does not believe its pricing 
proposal will place any market participant at a relative disadvantage 
compared to other market participants because the proposed routing fee 
for Customer orders will actually narrow the difference between the 
routing fees assessed to Customer and Non-Customer orders routed to BX, 
as illustrated in the example above.

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 \16\ and paragraph (f) of Rule 19b-4 
thereunder.\17\
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \17\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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-2021-22 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-2021-22. 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

[[Page 22286]]

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-2021-22 and should be 
submitted on or before May 18, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-08673 Filed 4-26-21; 8:45 am]
BILLING CODE 8011-01-P

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