Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to the Exchange's Pricing Schedule at Options 7 To Adopt Pricing for Index Options on the Nasdaq 100 Micro Index, 24109-24114 [2021-09281]
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Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Notices
hereby waives the 30-day operative
delay and designates the proposal
operative upon filing.26
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
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–
MIAX–2021–13 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–MIAX–2021–13. 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
26 For
purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule change’s impact on efficiency,
competition, and capital formation. See 15 U.S.C.
78c(f).
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business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
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–MIAX–2021–13 and should
be submitted on or before May 26, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–09433 Filed 5–4–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91696; File No. SR–Phlx–
2021–24]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change to the Exchange’s Pricing
Schedule at Options 7 To Adopt
Pricing for Index Options on the
Nasdaq 100 Micro Index
April 28, 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 15,
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 Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Exchange’s Pricing Schedule at Options
7 to adopt pricing for index options on
the Nasdaq 100 Micro Index, 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
27 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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24109
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange recently received
approval to list index options on the
Nasdaq 100 Micro Index (‘‘XND’’) on a
pilot basis.3 XND will be same in all
respects as the current Nasdaq 100
Index options contract (‘‘NDX’’) listed
on the Exchange, except it will be based
on 1/100th of the value of Nasdaq 100
Index, and will be P.M. settled with an
exercise settlement value based on the
closing index value of Nasdaq 100 Index
on the day of expiration.4 The Exchange
will begin to list XND on April 15, 2021.
The Exchange now proposes to amend
its Pricing Schedule to adopt pricing for
XND. By way of background, certain
proprietary products such as NDX and
NDXP are commonly excluded from a
variety of fee programs. The Exchange
notes that the reason for such exclusion
is because the Exchange has expended
considerable resources developing and
maintaining its proprietary products.
Similar to NDX and NDXP, XND is a
proprietary product. As such, the
Exchange proposes to establish
transaction fees for XND that are
similarly structured to the transaction
fees for NDX and NDXP with some
differences as noted below. The
Exchange also proposes to exclude XND
from several pricing programs in the
same manner as which NDX and NDXP
are excluded today.
3 See Securities Exchange Act Release No. 91524
(April 9, 2021) (SR–Phlx–2021–07).
4 Id. The Exchange notes that similar features are
available with other index options contracts listed
on the Exchange, including P.M. settled options on
the full value of the Nasdaq-100 Index (‘‘NDXP’’).
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Options 7, Section 1.B
Today, the Customer 5 Rebates in
Section 1.B of the Pricing Schedule are
not paid on NDX or NDXP in any rebate
category. However, NDX or NDXP
contracts count toward the volume
requirement to qualify for a Customer
Rebate Tier. The Exchange proposes to
apply the Customer Rebate program in
the same manner for XND.
Options 7, Section 4
Options Transaction Charges and
Surcharges
Today, as set forth in Options 7,
Section 4, electronic (both simple and
complex orders) and floor Options
Transaction Charges for NDX and NDXP
are $0.75 per contract for all NonCustomers.6 No Options Transaction
Charges for NDX and NDXP apply to
Customers. Furthermore, a $0.25 per
contract surcharge is assessed to NonCustomers in NDX and NDXP.
The Exchange now proposes to
establish a similar pricing structure for
XND where all Non-Customers will be
assessed a uniform Options Transaction
Charge for electronic (simple and
complex orders) and floor transactions,
and Customers will not be assessed any
Options Transaction Charges.
Specifically, the Exchange proposes to
assess Non-Customers a uniform
electronic and floor Options Transaction
Charge of $0.10 per contract in XND. As
noted above, Customers will receive free
executions in XND. The Exchange also
proposes to assess Non-Customers a
surcharge of $0.10 per contract in XND.
The Exchange is proposing to assess a
lower Options Transaction Charge and
surcharge for XND as compared to NDX
and NDXP because XND is based on 1/
100 of the value of the Nasdaq 100
Index whereas both NDX and NDXP are
based on the full value of the Nasdaq
100 Index. The Exchange therefore seeks
to assess corresponding reduced fees for
XND.
Fee Programs
Today, NDX and NDXP are excluded
from a variety of fee programs in
Options 7, Section 4. The Exchange
proposes to update Options 7, Section 4
to similarly exclude XND from these fee
programs.
5 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)).
6 The term ‘‘Non-Customer’’ applies to
transactions for the accounts of Lead Market
Makers, Market Makers, Firms, Professionals,
Broker-Dealers and JBOs.
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NDX and NDXP are currently
excluded from the $0.12 per contract
surcharge assessed to electronic
Complex Orders that remove liquidity
from the Complex Order Book and
auctions, excluding PIXL, in Non-Penny
Symbols.7 The Exchange proposes to
extend this exclusion to XND.
Today, Lead Market Makers 8 and
Market Makers 9 are subject to a
‘‘Monthly Market Maker Cap’’ of
$500,000 for: (i) Electronic Option
Transaction Charges, excluding
surcharges and excluding options
overlying NDX and NDXP; and (ii) QCC
Transaction Fees (as defined in
Exchange Options 3, Section 12 and
Floor QCC Orders, as defined in Options
8, Section 30(e)). The Exchange
proposes to similarly exclude XND from
the Monthly Market Maker Cap.
Today, Firms 10 are subject to a
maximum fee of $75,000 (‘‘Monthly
Firm Fee Cap’’) where Firm Floor
Option Transaction Charges and QCC
Transaction Fees, in the aggregate, for
one billing month will not exceed the
Monthly Firm Fee Cap per member
organization when such members are
trading in their own proprietary
account. NDX and NDXP transactions
are currently excluded from the
Monthly Firm Fee Cap. The Exchange
proposes to likewise exclude XND
transactions from the Monthly Firm Fee
Cap.
Today, the Exchange waives the Firm
Floor Options Transaction Charges in
Options 7, Section 4 for members
executing facilitation orders pursuant to
Options 8, Section 30 when such
members are trading in their own
proprietary account (including Cabinet
Options Transaction Charges). The Firm
Floor Options Transaction Charges will
be waived for the buy side of a
transaction if the same member or its
affiliates under Common Ownership 11
represents both sides of a Firm
transaction when such members are
trading in their own proprietary
account. In addition, the BrokerDealer 12 Floor Options Transaction
7 See Options 7, Section 4, note 7. The Exchange
notes that XND, like NDX and NDXP, is a NonPenny Symbol.
8 The term ‘‘Lead Market Maker’’ applies to
transactions for the account of a Lead Market Maker
(as defined in Options 2, Section 12(a)).
9 The term ‘‘Market Maker’’ is defined in Options
1, Section 1(b)(28) as a member of the Exchange
who is registered as an options Market Maker
pursuant to Options 2, Section 12(a).
10 The term ‘‘Firm’’ applies to any transaction that
is identified by a member or member organization
for clearing in the Firm range at OCC.
11 The term ‘‘Common Ownership’’ shall mean
members or member organizations under 75%
common ownership or control.
12 The term ‘‘Broker-Dealer’’ applies to any
transaction which is not subject to any of the other
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Charge (including Cabinet Options
Transaction Charges) will be waived for
members executing facilitation orders
pursuant to Options 8, Section 30 when
such members would otherwise incur
this charge for trading in their own
proprietary account contra to a
Customer (‘‘BD-Customer Facilitation’’),
if the member’s BD-Customer
Facilitation average daily volume
(including both FLEX and non-FLEX
transactions) exceeds 10,000 contracts
per day in a given month.13 NDX and
NDXP transactions are currently
excluded from each of the waivers set
forth in the above paragraph. The
Exchange proposes to likewise exclude
XND transactions from the foregoing
waivers.
Today, transactions in NDX and
NDXP are excluded from the ‘‘Strategy
Caps’’ in Options 7, Section 4. Strategy
Caps limit the fees that otherwise apply
to certain categories of market
participants when they engage in floor
options transactions while employing
strategies set forth in the Pricing
Schedule, namely dividend, merger,
short stock interest, reversal and
conversion, jelly roll, or box spread
strategies. The Exchange proposes to
likewise exclude transactions in XND
from Strategy Caps.
Today, no Marketing Fees are
assessed on transactions in NDX or
NDXP. The Exchange proposes to
likewise exclude XND transactions from
the Marketing Fees.
Options 7, Section 6
PIXL Pricing
Today, options overlying NDX and
NDXP are not subject to Options 7,
Section 6.A. PIXL Pricing.14 The
Exchange proposes to likewise exclude
XND from PIXL Pricing in Options 7,
Section 6.A. Like NDX and NDXP
transactions, XND transactions in PIXL
will be subject to Options 7, Section 5.A
pricing.15
FLEX Transaction Fees
Today, FLEX options are assessed the
transaction fees set forth in Options 7,
transaction fees applicable within a particular
category.
13 The Exchange will correct the typo in the rule
text from ‘‘BDCustomer Facilitation’’ to ‘‘BDCustomer Facilitation.’’
14 The Exchange will remove the stray comma
from the rule text.
15 As discussed later in this filing, the Exchange
is also proposing to relocate NDX and NDXP pricing
from Options 7, Section 4 into a separate schedule
with XND pricing within Options 7, Section 5.A.
Accordingly, the current reference to Options 7,
Section 4 NDX and NDXP pricing within the PIXL
pricing schedule will be updated to Options 7,
Section 5.A.
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Section 6.B.16 Pursuant to this Section
6.B, the NDX and NDXP options
surcharge of $0.25 per contract applies
to FLEX NDX and NDXP options for all
Non-Customers.17 Furthermore, the
NDX and NDXP Options Transaction
Charges of $0.75 per contract (NonCustomer) and $0.00 per contract
(Customer) currently within Options 7,
Section 4 apply to FLEX NDX and
NDXP options.18
The Exchange proposes to charge
FLEX XND options in a similar manner.
Specifically, the Exchange will apply
the proposed XND options surcharge of
$0.10 per contract to Non-Customers in
FLEX XND options. Further, the
Exchange will apply the proposed XND
Options Transaction Charges of $0.10
per contract (Non-Customer) and $0.00
per contract (Customer) to FLEX XND
options.
Market Access and Routing Subsidy
(‘‘MARS’’)
Today, as set forth in Options 7,
Section 6.E, the Exchange provides
MARS Payments to Phlx members that
have System Eligibility 19 and have
routed the requisite number of Eligible
Contracts 20 daily in a month, which
were executed on Phlx. Currently, NDX
and NDXP are not considered Eligible
Contracts. Under this proposal, XND
will likewise be excluded from Eligible
Contracts.
Options 7, Section 5
Exchange proposes to relocate the
pricing for NDX and NDXP and related
notes presently set forth in Options 7,
Section 4 regarding the Options
Transaction Charges and the NonCustomer surcharge, and to group them
with the proposed Options Transaction
Charges and proposed Non-Customer
surcharge for XND.21 The Exchange
proposes to set forth the foregoing fees
in new Section 5.A of Options 7, and
title this section ‘‘Broad-Based Index
Options.’’ As proposed, the pricing
schedule in Options 7, Section 5.A,
which will apply to electronic (simple
and complex orders) and floor
transactions, will be as follows:
In connection with the foregoing
changes to adopt pricing for XND, the
OPTIONS TRANSACTION CHARGES
Symbol
Customer
NDX 1 ...................................................................................
NDXP 1 .................................................................................
XND 2 ...................................................................................
Professional
$0.00
0.00
0.00
Lead market
maker and
market maker
$0.75
0.75
0.10
$0.75
0.75
0.10
Broker-dealer
$0.75
0.75
0.10
Firm
$0.75
0.75
0.10
• These fees are per contract.
• Floor transaction fees will apply to any ‘‘as of’’ or ‘‘reversal’’ adjustments for manually processed trades originally submitted electronically or
through FBMS.
1 A surcharge for NDX and NDXP of $0.25 per contract will be assessed to Non-Customers.
2 A surcharge for XND of $0.10 per contract will be assessed to Non-Customers.
As shown above, the rates for NDX
and NDXP are not changing; rather, the
existing Options Transaction Charges
and Non-Customer surcharges in
Options 7, Section 4 are being relocated
into Options 7, Section 5.A and grouped
together with the proposed pricing for
XND. The Exchange considers it
appropriate to separate out NDX, NDXP,
and XND pricing in the manner
described above so that Phlx’s pricing
for these index options may be easily
located within its Pricing Schedule. For
the sake of clarity, the Exchange also
proposes to amend the Options
Transaction Charge header for NonPenny Symbols in Options 7, Section 4,
which already excludes NDX and
NDXP, to add XND to the list of
excluded Non-Penny Symbols that will
not be subject to this fee. The Exchange
further proposes to amend its Pricing
Schedule to update all current
references to Options 7, Section 4 NDX
and NDXP pricing to Options 7, Section
5.A.22
The Exchange also proposes nonsubstantive, clean-up changes in
Options 7, Section 5 to restructure the
existing rule text. With the changes
proposed above to add new Section 5.A
of Options 7 to set forth NDX, NDXP,
and XND pricing, the Exchange
proposes to set forth Singly Listed
Options pricing in new Section 5.B. The
Exchange also proposes to set forth FX
Options pricing in new Section 5.C, and
further proposes to relocate the language
regarding U.S. dollar-settled foreign
currency options into the new Section
5.C header. Accordingly, new Section
5.C will be titled, ‘‘FX Options: U.S.
dollar-settled foreign currency options
include XDB, XDE, XDN, XDS, XDA,
XDZ and XDC.’’ The Exchange is not
amending any of the existing rates for
Singly Listed Options or FX Options
with this proposal. Lastly, the Exchange
proposes to retitle Options 7, Section 5
as ‘‘Index and Singly Listed Options
(Includes options overlying FX Options,
equities, ETFs, ETNs, and indexes not
listed on another exchange).’’
16 The characteristics of a FLEX option are
described in Options 8, Section 34.
17 The Exchange will correct the typo in the rule
text from ‘‘Section 6, B’’ to ‘‘Section 6.B.’’
18 See supra note 15. All current references to
Options 7, Section 4 NDX and NDXP pricing within
the FLEX transaction fees schedule will be updated
to Options 7, Section 5.A.
19 To qualify for MARS, a Phlx member’s routing
system (‘‘hereinafter System’’) would be required to:
(1) Enable the electronic routing of orders to all of
the U.S. options exchanges, including Phlx; (2)
provide current consolidated market data from the
U.S. options exchanges; and (3) be capable of
interfacing with Phlx’s API to access current Phlx
match engine functionality. Further, the member’s
System would also need to cause Phlx to be the one
of the top five default destination exchanges for
individually executed marketable orders if Phlx is
at the national best bid or offer (‘‘NBBO’’),
regardless of size or time, but allow any user to
manually override Phlx as a default destination on
an order-by-order basis. Notwithstanding the above,
with respect to Complex Orders a Phlx member’s
routing system would not be required to enable the
electronic routing of orders to all of the U.S. options
exchanges or provide current consolidated market
data from the U.S. options exchanges. Any Phlx
member would be permitted to avail itself of this
arrangement, provided that its order routing
functionality incorporates the features described
above and satisfies Phlx that it appears to be robust
and reliable. The member remains solely
responsible for implementing and operating its
system.
20 For the purpose of qualifying for the MARS
Payment, Eligible Contracts include the following:
Firm, Broker-Dealer, Joint Back Office or ‘‘JBO’’ or
Professional equity option orders that are
electronically delivered and executed. Eligible
Contracts do not include floor-based orders,
qualified contingent cross or ‘‘QCC’’ orders, price
improvement or ‘‘PIXL’’ orders, or Singly Listed
Orders.
21 In particular, note 5 will be deleted in Options
7, Section 4 and relocated into new note 1 in
Options 7, Section 5.A. Further, the note 8 language
in Options 7, Section 4 will be copied into a new
bullet point in Options 7, Section 5.A.
22 In particular, the Exchange will update
references within Options 7, Sections 6.A and 6.B.
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2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,23 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,24 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.
Options 7, Section 1.B
The Exchange’s proposal to not pay
the Customer Rebates in Options 7,
Section 1.B on XND, but to count XND
volume toward qualifying for a
Customer Rebate Tier, similar to NDX
and NDXP, is reasonable because the
Exchange seeks to treat XND in the same
manner as NDX and NDXP under this
rebate program. NDX, NDXP, and XND
represent similar options on the same
underlying Nasdaq 100 Index. Further,
it is reasonable to not pay Customer
Rebates on XND in any rebate category
because this index option will be
exclusively listed on Phlx only. The
original intent of the Customer Rebate
Program was to pay rebates on
electronically-delivered multiply-listed
options. By definition, XND will not be
a multiply-listed option, and the
Exchange does not desire to pay rebates
on XND because of the exclusivity of
this option. While the Exchange will not
pay any Customer Rebates on XND
transactions, the Exchange also believes
it is reasonable to count XND in the
total volume to qualify a market
participant for these rebates as market
participants would be incentivized to
transact in XND to qualify for the
Customer Rebate Tiers.
The Exchange believes that its
proposal to not pay Customer Rebates
on XND, but to count XND volume
toward the volume requirement to
qualify for a rebate tier is equitable and
not unfairly discriminatory because the
Exchange would apply the rebate
program as described uniformly for all
market participants. Any market
participant is eligible to earn a Customer
Rebate.
Options 7, Section 4
Options Transaction Charges and
Surcharges
The Exchange believes it is reasonable
to assess the proposed Options
Transaction Charge and Non-Customer
surcharge as discussed above for XND
23 15
24 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
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because the proposed pricing reflects
the exclusive and proprietary nature of
this product. Similar to NDX and NDXP,
the Exchange seeks to recoup the
operational costs for listing proprietary
products.25 Also, pricing by symbol is a
common practice on many U.S. options
exchanges as a means to incentivize
order flow to be sent to an exchange for
execution in particular products. Other
options exchanges price by symbol.26
Further, the Exchange notes that with its
products, market participants are
offered an opportunity to transact in
NDX, NDXP, or XND, or separately
execute options overlying PowerShares
QQQ Trust (‘‘QQQ’’).27 Offering such
proprietary products provides market
participants with a variety of choices in
selecting the product they desire to
utilize in order to transact in the Nasdaq
100 Index. When exchanges are able to
recoup costs associated with offering
proprietary products, it incentivizes
growth and competition for the
innovation of additional products.
Further, the Exchange believes that
the proposed rates for XND are
reasonable because they are well within
the range of fees assessed for the
Exchange’s other proprietary products,
namely NDX and NDXP.28 The
Exchange believes it is reasonable to
charge lower rates for XND compared to
NDX and NDXP because XND is based
on 1/100 of the value of the Nasdaq 100
Index while both NDX and NDXP are
based on the full value of the Nasdaq
100 Index. The Exchange therefore seeks
to assess corresponding reduced fees for
this product.
The Exchange’s proposal to assess the
$0.10 per contract Options Transaction
Charge in XND is equitable and not
unfairly discriminatory because the
Exchange will assess this fee uniformly
to all Non-Customers. The Exchange
similarly believes that the proposed
$0.10 per contract XND surcharge is
25 By way of example, in analyzing an obvious
error, the Exchange would have additional data
points available in establishing a theoretical price
for a multiply listed option as compared to a
proprietary product, which requires additional
analysis and administrative time to comply with
Exchange rules to resolve an obvious error.
26 See pricing for the Mini-RUT Index options
(‘‘MRUT’’) on Cboe Exchange, Inc.’s Fees Schedule.
27 QQQ is an exchange-traded fund based on the
same Nasdaq 100 Index as NDX, NDXP, and XND.
28 Specifically, the Exchange is proposing to
assess Non-Customers an Options Transaction
Charge of $0.10 per contract in XND while
Customers will receive free executions. Today, the
Exchange assesses Non-Customers an Options
Transaction Charge of $0.75 per contract for both
NDX and NDXP, and does not assess Customers an
Options Transaction Charge. Additionally, the
Exchange is proposing to assess Non-Customers a
surcharge of $0.10 per contract for XND whereas
today, Non-Customers are assessed a surcharge of
$0.25 per contract for NDX and NDXP.
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equitable and not unfairly
discriminatory because it will apply
uniformly to all Non-Customers. The
Exchange believes it is equitable and not
unfairly discriminatory to assess no
transaction fees to Customers for XND
because Customer orders bring valuable
liquidity to the market, which liquidity
benefits other market participants.
Customer liquidity benefits all market
participants by providing more trading
opportunities, which attracts Lead
Market Makers and Market Makers. An
increase in the activity of these market
participants in turn facilitates tighter
spreads, which may cause an additional
corresponding increase in order flow
from other market participants.
Fee Programs
The Exchange believes that the
proposed updates in Options 7, Section
4 in connection with the application of
certain fee programs to XND are
reasonable, equitable, and not unfairly
discriminatory. Particularly, the
Exchange believes that it is reasonable
to exclude XND from the Non-Penny
complex surcharge in note 7 of Options
7, Section 4, Monthly Market Maker
Cap, Monthly Firm Fee Cap, Floor
Options Transaction Charge waivers,
Strategy Caps, and Marketing Fees in
the same manner in which NDX and
NDXP are currently excluded from the
same programs today. The Exchange
believes it is appropriate to update these
fee programs in a manner that similarly
situates XND with NDX and NDXP as
these are all proprietary products that
are based on the Nasdaq 100 Index. In
addition, similar to NDX and NDXP, the
Exchange seeks to recoup the
operational costs for listing proprietary
products by excluding XND from
programs that cap or waive transaction
fees for market participants. As it relates
to the Marketing Fee, the Exchange
believes it is reasonable to exclude XND
from this fee, similar to NDX and NDXP
today, because the purpose of the
Marketing Fee is to generate more
Customer order flow to the Exchange.
Because XND will be an exclusively
listed product on Phlx, the Exchange
does not believe that applying a
marketing fee is necessary for this
product.
The Exchange’s proposal to exclude
XND from the various fee programs in
Options 7, Section 4 as discussed above
is equitable and not unfairly
discriminatory because the programs
will equally exclude in the same
manner all market participants’ orders
in XND. The Exchange notes that its
proposal does not alter any of the
existing fee programs, but instead
merely proposes to exclude XND in
E:\FR\FM\05MYN1.SGM
05MYN1
Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Notices
those programs in the same way that
NDX and NDXP are currently excluded.
Options 7, Section 6
PIXL Pricing
The Exchange’s proposal to exclude
XND from PIXL pricing in Options 7,
Section 6.A, and instead assess XND
transactions in PIXL the proposed
Options 7, Section 5.A pricing is
reasonable because the Exchange
intends to assess the same fees across
the board for XND transactions (i.e.,
$0.10 per contract for Non-Customers
and free executions for Customers). This
will align the pricing structure for XND
with NDX and NDXP, which are
currently assessed the same $0.75 per
contract Non-Customer fee across the
board while Customers receive free
executions.
The proposed changes are equitable
and not unfairly discriminatory because
the Exchange will uniformly exclude
NDXP from PIXL pricing for all market
participants, and instead uniformly
charge them the Options 7, Section 5.A
pricing.
FLEX Transaction Fees
The Exchange believes that its
proposal to assess FLEX XND options
the Options Transaction Charge and
Non-Customer options surcharge in
Options 7, Section 5.A is reasonable
because the Exchange intends to assess
the same fees across the board for XND
transactions. Specifically, the Exchange
will apply the proposed XND options
surcharge of $0.10 per contract to NonCustomers in FLEX XND options.
Further, the Exchange will apply the
proposed XND Options Transaction
Charges of $0.10 per contract (NonCustomer) and $0.00 per contract
(Customer) to FLEX XND options. FLEX
NDX and NDXP options are likewise
assessed the same Options Transaction
Charge and Non-Customer options
surcharge that NDX and NDXP options
are assessed today. The Exchange’s
proposal is equitable and not unfairly
discriminatory because the Exchange
will uniformly apply these fees to FLEX
NDX and NDXP options to all similarly
situated market participants.
MARS
The Exchange believes it is reasonable
to exclude XND from Eligible Contracts
for purposes of qualifying for a MARS
Payment in the same manner in which
NDX and NDXP are currently excluded
today. The Exchange believes it is
appropriate to update its MARS
program in a manner that similarly
situates XND with its other proprietary
products, NDX and NDXP, which are all
based on the Nasdaq 100 Index.
VerDate Sep<11>2014
23:06 May 04, 2021
Jkt 253001
The Exchange believes that its
proposal is equitable and not unfairly
discriminatory because the Exchange
will uniformly exclude XND from
MARS for all market participants.
Options 7, Section 5
The Exchange believes that the
proposed changes to relocate and group
the transaction fees for NDX, NDXP, and
XND within Options 7, Section 5.A, and
all of the non-substantive changes
related to the relocation, each as
discussed above, are reasonable,
equitable, and not unfairly
discriminatory. The proposed changes
are all intended to bring greater clarity,
and will ensure that the Exchange’s
pricing for NDX, NDXP, and XND may
be easily located within its Pricing
Schedule. The Exchange further
believes that the proposed nonsubstantive changes in Options 7,
Section 5 to restructure the existing rule
text and retitle various section headers
are reasonable, equitable, and not
unfairly discriminatory as they will
facilitate the use of the Pricing Schedule
by market participants.
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. The
Exchange notes that with its products,
market participants are offered an
opportunity to transact in NDX, NDXP,
or XND, or separately execute options
overlying QQQ. Offering these products
provides market participants with a
variety of choices in selecting the
product they desire to utilize to transact
in the Nasdaq 100 Index.
Further, the Exchange does not
believe that the proposed rule change
will impose any burden on intra-market
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act because the
proposed XND pricing will apply
uniformly to all similarly situated
market participants. Specifically, all
Non-Customers will be assessed a
uniform Options Transaction Charge
and options surcharge while Customers
receive free executions. As discussed
above, Customer liquidity benefits all
market participants by providing more
PO 00000
Frm 00200
Fmt 4703
Sfmt 4703
24113
trading opportunities, which attracts
other market participants, thus
facilitating tighter spreads and increased
order flow.
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.29
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–2021–24 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–2021–24. 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
29 15
E:\FR\FM\05MYN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
05MYN1
24114
Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Notices
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–2021–24 and should
be submitted on or before May 26, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–09281 Filed 5–4–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91710; File No. SR–
PEARL–2021–18]
Self-Regulatory Organizations; MIAX
PEARL, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Interpretation
and Policy .13 (Temporary Extension
of the Limited Period for Registered
Persons To Function as Principals) to
Exchange Rule 3100, Registration
Requirements, To Extend The
Expiration Date of The Temporary
Amendment Set Forth in SR–PEARL–
2020–36 from April 30, 2021 to June 30,
2021
April 29, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (‘‘Act’’
or ‘‘Exchange Act’’) 1 and Rule 19b–4
thereunder,2 notice is hereby given that
on April 21, 2021, MIAX PEARL, LLC
(‘‘MIAX Pearl’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
30 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
23:06 May 04, 2021
Jkt 253001
in Items I and II below, which Items
have been substantially prepared by the
self-regulatory organization. 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 is filing a proposal to
amend Interpretation and Policy .13
(Temporary Extension of the Limited
Period for Registered Persons to
Function as Principals) to Exchange
Rule 3100, Registration Requirements,
to extend the expiration date of the
temporary amendment set forth in SR–
PEARL–2020–36 from April 30, 2021 to
June 30, 2021. The Exchange does not
anticipate providing any further
extensions to the temporary amendment
identified in this proposed rule change
beyond June 30, 2021.
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings/pearl, at MIAX Pearl’s principal
office, and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Interpretation and Policy .13
(Temporary Extension of the Limited
Period for Registered Persons to
Function as Principals) to Exchange
Rule 3100, Registration Requirements,
to extend the expiration date of the
temporary amendment set forth in SR–
PEARL–2020–36 from April 30, 2021 to
June 30, 2021. The proposed rule
change would extend the 120-day
period that certain individuals can
function as principals without having
successfully passed an appropriate
qualification examination through June
PO 00000
Frm 00201
Fmt 4703
Sfmt 4703
30, 2021,3 and would apply only to
those individuals who were designated
to function as principals prior to March
3, 2021. This proposed rule change is
based on a filing recently submitted by
the Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) 4 and is
intended to harmonize the Exchange’s
registration rules with those of FINRA
so as to promote uniform standards
across the securities industry.
In response to the COVID–19 global
pandemic, last year FINRA began
providing temporary relief by way of
frequently asked questions (‘‘FAQs’’) 5
to address disruptions to the
administration of FINRA qualification
examinations caused by the pandemic
that have significantly limited the
ability of individuals to sit for
examinations due to Prometric test
center capacity issues.6
FINRA published the first FAQ on
March 20, 2020, providing that
individuals who were designated to
function as principals under FINRA
Rule 1210.04 7 prior to February 2, 2020,
would be given until May 31, 2020, to
pass the appropriate principal
qualification examination.8 On May 19,
2020, FINRA extended the relief to pass
the appropriate examination until June
30, 2020. On June 29, 2020, FINRA
again extended the temporary relief
3 See Exchange Act Release No. 91506 (April 8,
2021) 86 FR 19671 (April 14, 2021) (SR–FINRA–
2021–005) (the ‘‘FINRA Filing’’). The Exchange
notes that the FINRA Filing also provides
temporarily relief to individuals registered with
FINRA as Operations Professionals under FINRA
Rule 1220. The Exchange does not have a
registration category for Operations Professionals
and therefore, the Exchange is not proposing to
adopt that aspect of the FINRA Filing. If the
Exchange seeks to provide additional temporary
relief from the rule requirement identified in this
proposal beyond June 30, 2021, it will submit a
separate rule filing to further extend the temporary
extension of time.
4 See id.
5 See https://www.finra.org/rules-guidance/keytopics/covid-19/faq#qe.
6 At the outset of the COVID–19 pandemic, all
FINRA qualification examinations were
administered at test centers operated by Prometric.
Based on the health and welfare concerns resulting
from COVID–19, in March 2020 Prometric closed all
of its test centers in the United States and Canada
and began to slowly reopen some of them at limited
capacity in May. Currently, Prometric has resumed
testing in many of its United States and Canada test
centers, at either full or limited occupancy, based
on local and government mandates.
7 Exchange Rule 3100, Interpretation and Policy
.04, is the corresponding rule to FINRA Rule
1210.04.
8 FINRA Rule 1210.04 (Requirements for
Registered Persons Functioning as Principals for a
Limited Period) allows a FINRA-member firm to
designate certain individuals to function in a
principal capacity for 120 calendar days before
having to pass an appropriate principal
qualification examination. Exchange Rule 3100,
Interpretation and Policy .04, provides the same
allowance to Exchange Members.
E:\FR\FM\05MYN1.SGM
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]]>Agencies
[Federal Register Volume 86, Number 85 (Wednesday, May 5, 2021)]
[Notices]
[Pages 24109-24114]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-09281]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91696; File No. SR-Phlx-2021-24]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change to the Exchange's
Pricing Schedule at Options 7 To Adopt Pricing for Index Options on the
Nasdaq 100 Micro Index
April 28, 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 15, 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 Substance
of the Proposed Rule Change
The Exchange proposes to amend the Exchange's Pricing Schedule at
Options 7 to adopt pricing for index options on the Nasdaq 100 Micro
Index, 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 Exchange recently received approval to list index options on
the Nasdaq 100 Micro Index (``XND'') on a pilot basis.\3\ XND will be
same in all respects as the current Nasdaq 100 Index options contract
(``NDX'') listed on the Exchange, except it will be based on 1/100th of
the value of Nasdaq 100 Index, and will be P.M. settled with an
exercise settlement value based on the closing index value of Nasdaq
100 Index on the day of expiration.\4\ The Exchange will begin to list
XND on April 15, 2021.
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 91524 (April 9,
2021) (SR-Phlx-2021-07).
\4\ Id. The Exchange notes that similar features are available
with other index options contracts listed on the Exchange, including
P.M. settled options on the full value of the Nasdaq-100 Index
(``NDXP'').
---------------------------------------------------------------------------
The Exchange now proposes to amend its Pricing Schedule to adopt
pricing for XND. By way of background, certain proprietary products
such as NDX and NDXP are commonly excluded from a variety of fee
programs. The Exchange notes that the reason for such exclusion is
because the Exchange has expended considerable resources developing and
maintaining its proprietary products. Similar to NDX and NDXP, XND is a
proprietary product. As such, the Exchange proposes to establish
transaction fees for XND that are similarly structured to the
transaction fees for NDX and NDXP with some differences as noted below.
The Exchange also proposes to exclude XND from several pricing programs
in the same manner as which NDX and NDXP are excluded today.
[[Page 24110]]
Options 7, Section 1.B
Today, the Customer \5\ Rebates in Section 1.B of the Pricing
Schedule are not paid on NDX or NDXP in any rebate category. However,
NDX or NDXP contracts count toward the volume requirement to qualify
for a Customer Rebate Tier. The Exchange proposes to apply the Customer
Rebate program in the same manner for XND.
---------------------------------------------------------------------------
\5\ 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)).
---------------------------------------------------------------------------
Options 7, Section 4
Options Transaction Charges and Surcharges
Today, as set forth in Options 7, Section 4, electronic (both
simple and complex orders) and floor Options Transaction Charges for
NDX and NDXP are $0.75 per contract for all Non-Customers.\6\ No
Options Transaction Charges for NDX and NDXP apply to Customers.
Furthermore, a $0.25 per contract surcharge is assessed to Non-
Customers in NDX and NDXP.
---------------------------------------------------------------------------
\6\ The term ``Non-Customer'' applies to transactions for the
accounts of Lead Market Makers, Market Makers, Firms, Professionals,
Broker-Dealers and JBOs.
---------------------------------------------------------------------------
The Exchange now proposes to establish a similar pricing structure
for XND where all Non-Customers will be assessed a uniform Options
Transaction Charge for electronic (simple and complex orders) and floor
transactions, and Customers will not be assessed any Options
Transaction Charges. Specifically, the Exchange proposes to assess Non-
Customers a uniform electronic and floor Options Transaction Charge of
$0.10 per contract in XND. As noted above, Customers will receive free
executions in XND. The Exchange also proposes to assess Non-Customers a
surcharge of $0.10 per contract in XND. The Exchange is proposing to
assess a lower Options Transaction Charge and surcharge for XND as
compared to NDX and NDXP because XND is based on 1/100 of the value of
the Nasdaq 100 Index whereas both NDX and NDXP are based on the full
value of the Nasdaq 100 Index. The Exchange therefore seeks to assess
corresponding reduced fees for XND.
Fee Programs
Today, NDX and NDXP are excluded from a variety of fee programs in
Options 7, Section 4. The Exchange proposes to update Options 7,
Section 4 to similarly exclude XND from these fee programs.
NDX and NDXP are currently excluded from the $0.12 per contract
surcharge assessed to electronic Complex Orders that remove liquidity
from the Complex Order Book and auctions, excluding PIXL, in Non-Penny
Symbols.\7\ The Exchange proposes to extend this exclusion to XND.
---------------------------------------------------------------------------
\7\ See Options 7, Section 4, note 7. The Exchange notes that
XND, like NDX and NDXP, is a Non-Penny Symbol.
---------------------------------------------------------------------------
Today, Lead Market Makers \8\ and Market Makers \9\ are subject to
a ``Monthly Market Maker Cap'' of $500,000 for: (i) Electronic Option
Transaction Charges, excluding surcharges and excluding options
overlying NDX and NDXP; and (ii) QCC Transaction Fees (as defined in
Exchange Options 3, Section 12 and Floor QCC Orders, as defined in
Options 8, Section 30(e)). The Exchange proposes to similarly exclude
XND from the Monthly Market Maker Cap.
---------------------------------------------------------------------------
\8\ The term ``Lead Market Maker'' applies to transactions for
the account of a Lead Market Maker (as defined in Options 2, Section
12(a)).
\9\ The term ``Market Maker'' is defined in Options 1, Section
1(b)(28) as a member of the Exchange who is registered as an options
Market Maker pursuant to Options 2, Section 12(a).
---------------------------------------------------------------------------
Today, Firms \10\ are subject to a maximum fee of $75,000
(``Monthly Firm Fee Cap'') where Firm Floor Option Transaction Charges
and QCC Transaction Fees, in the aggregate, for one billing month will
not exceed the Monthly Firm Fee Cap per member organization when such
members are trading in their own proprietary account. NDX and NDXP
transactions are currently excluded from the Monthly Firm Fee Cap. The
Exchange proposes to likewise exclude XND transactions from the Monthly
Firm Fee Cap.
---------------------------------------------------------------------------
\10\ The term ``Firm'' applies to any transaction that is
identified by a member or member organization for clearing in the
Firm range at OCC.
---------------------------------------------------------------------------
Today, the Exchange waives the Firm Floor Options Transaction
Charges in Options 7, Section 4 for members executing facilitation
orders pursuant to Options 8, Section 30 when such members are trading
in their own proprietary account (including Cabinet Options Transaction
Charges). The Firm Floor Options Transaction Charges will be waived for
the buy side of a transaction if the same member or its affiliates
under Common Ownership \11\ represents both sides of a Firm transaction
when such members are trading in their own proprietary account. In
addition, the Broker-Dealer \12\ Floor Options Transaction Charge
(including Cabinet Options Transaction Charges) will be waived for
members executing facilitation orders pursuant to Options 8, Section 30
when such members would otherwise incur this charge for trading in
their own proprietary account contra to a Customer (``BD-Customer
Facilitation''), if the member's BD-Customer Facilitation average daily
volume (including both FLEX and non-FLEX transactions) exceeds 10,000
contracts per day in a given month.\13\ NDX and NDXP transactions are
currently excluded from each of the waivers set forth in the above
paragraph. The Exchange proposes to likewise exclude XND transactions
from the foregoing waivers.
---------------------------------------------------------------------------
\11\ The term ``Common Ownership'' shall mean members or member
organizations under 75% common ownership or control.
\12\ The term ``Broker-Dealer'' applies to any transaction which
is not subject to any of the other transaction fees applicable
within a particular category.
\13\ The Exchange will correct the typo in the rule text from
``BDCustomer Facilitation'' to ``BD-Customer Facilitation.''
---------------------------------------------------------------------------
Today, transactions in NDX and NDXP are excluded from the
``Strategy Caps'' in Options 7, Section 4. Strategy Caps limit the fees
that otherwise apply to certain categories of market participants when
they engage in floor options transactions while employing strategies
set forth in the Pricing Schedule, namely dividend, merger, short stock
interest, reversal and conversion, jelly roll, or box spread
strategies. The Exchange proposes to likewise exclude transactions in
XND from Strategy Caps.
Today, no Marketing Fees are assessed on transactions in NDX or
NDXP. The Exchange proposes to likewise exclude XND transactions from
the Marketing Fees.
Options 7, Section 6
PIXL Pricing
Today, options overlying NDX and NDXP are not subject to Options 7,
Section 6.A. PIXL Pricing.\14\ The Exchange proposes to likewise
exclude XND from PIXL Pricing in Options 7, Section 6.A. Like NDX and
NDXP transactions, XND transactions in PIXL will be subject to Options
7, Section 5.A pricing.\15\
---------------------------------------------------------------------------
\14\ The Exchange will remove the stray comma from the rule
text.
\15\ As discussed later in this filing, the Exchange is also
proposing to relocate NDX and NDXP pricing from Options 7, Section 4
into a separate schedule with XND pricing within Options 7, Section
5.A. Accordingly, the current reference to Options 7, Section 4 NDX
and NDXP pricing within the PIXL pricing schedule will be updated to
Options 7, Section 5.A.
---------------------------------------------------------------------------
FLEX Transaction Fees
Today, FLEX options are assessed the transaction fees set forth in
Options 7,
[[Page 24111]]
Section 6.B.\16\ Pursuant to this Section 6.B, the NDX and NDXP options
surcharge of $0.25 per contract applies to FLEX NDX and NDXP options
for all Non-Customers.\17\ Furthermore, the NDX and NDXP Options
Transaction Charges of $0.75 per contract (Non-Customer) and $0.00 per
contract (Customer) currently within Options 7, Section 4 apply to FLEX
NDX and NDXP options.\18\
---------------------------------------------------------------------------
\16\ The characteristics of a FLEX option are described in
Options 8, Section 34.
\17\ The Exchange will correct the typo in the rule text from
``Section 6, B'' to ``Section 6.B.''
\18\ See supra note 15. All current references to Options 7,
Section 4 NDX and NDXP pricing within the FLEX transaction fees
schedule will be updated to Options 7, Section 5.A.
---------------------------------------------------------------------------
The Exchange proposes to charge FLEX XND options in a similar
manner. Specifically, the Exchange will apply the proposed XND options
surcharge of $0.10 per contract to Non-Customers in FLEX XND options.
Further, the Exchange will apply the proposed XND Options Transaction
Charges of $0.10 per contract (Non-Customer) and $0.00 per contract
(Customer) to FLEX XND options.
Market Access and Routing Subsidy (``MARS'')
Today, as set forth in Options 7, Section 6.E, the Exchange
provides MARS Payments to Phlx members that have System Eligibility
\19\ and have routed the requisite number of Eligible Contracts \20\
daily in a month, which were executed on Phlx. Currently, NDX and NDXP
are not considered Eligible Contracts. Under this proposal, XND will
likewise be excluded from Eligible Contracts.
---------------------------------------------------------------------------
\19\ To qualify for MARS, a Phlx member's routing system
(``hereinafter System'') would be required to: (1) Enable the
electronic routing of orders to all of the U.S. options exchanges,
including Phlx; (2) provide current consolidated market data from
the U.S. options exchanges; and (3) be capable of interfacing with
Phlx's API to access current Phlx match engine functionality.
Further, the member's System would also need to cause Phlx to be the
one of the top five default destination exchanges for individually
executed marketable orders if Phlx is at the national best bid or
offer (``NBBO''), regardless of size or time, but allow any user to
manually override Phlx as a default destination on an order-by-order
basis. Notwithstanding the above, with respect to Complex Orders a
Phlx member's routing system would not be required to enable the
electronic routing of orders to all of the U.S. options exchanges or
provide current consolidated market data from the U.S. options
exchanges. Any Phlx member would be permitted to avail itself of
this arrangement, provided that its order routing functionality
incorporates the features described above and satisfies Phlx that it
appears to be robust and reliable. The member remains solely
responsible for implementing and operating its system.
\20\ For the purpose of qualifying for the MARS Payment,
Eligible Contracts include the following: Firm, Broker-Dealer, Joint
Back Office or ``JBO'' or Professional equity option orders that are
electronically delivered and executed. Eligible Contracts do not
include floor-based orders, qualified contingent cross or ``QCC''
orders, price improvement or ``PIXL'' orders, or Singly Listed
Orders.
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Options 7, Section 5
In connection with the foregoing changes to adopt pricing for XND,
the Exchange proposes to relocate the pricing for NDX and NDXP and
related notes presently set forth in Options 7, Section 4 regarding the
Options Transaction Charges and the Non-Customer surcharge, and to
group them with the proposed Options Transaction Charges and proposed
Non-Customer surcharge for XND.\21\ The Exchange proposes to set forth
the foregoing fees in new Section 5.A of Options 7, and title this
section ``Broad-Based Index Options.'' As proposed, the pricing
schedule in Options 7, Section 5.A, which will apply to electronic
(simple and complex orders) and floor transactions, will be as follows:
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\21\ In particular, note 5 will be deleted in Options 7, Section
4 and relocated into new note 1 in Options 7, Section 5.A. Further,
the note 8 language in Options 7, Section 4 will be copied into a
new bullet point in Options 7, Section 5.A.
Options Transaction Charges
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Lead market
Symbol Customer Professional maker and Broker-dealer Firm
market maker
----------------------------------------------------------------------------------------------------------------
NDX \1\......................... $0.00 $0.75 $0.75 $0.75 $0.75
NDXP \1\........................ 0.00 0.75 0.75 0.75 0.75
XND \2\......................... 0.00 0.10 0.10 0.10 0.10
----------------------------------------------------------------------------------------------------------------
These fees are per contract.
Floor transaction fees will apply to any ``as of'' or ``reversal'' adjustments for manually processed
trades originally submitted electronically or through FBMS.
\1\ A surcharge for NDX and NDXP of $0.25 per contract will be assessed to Non-Customers.
\2\ A surcharge for XND of $0.10 per contract will be assessed to Non-Customers.
As shown above, the rates for NDX and NDXP are not changing;
rather, the existing Options Transaction Charges and Non-Customer
surcharges in Options 7, Section 4 are being relocated into Options 7,
Section 5.A and grouped together with the proposed pricing for XND. The
Exchange considers it appropriate to separate out NDX, NDXP, and XND
pricing in the manner described above so that Phlx's pricing for these
index options may be easily located within its Pricing Schedule. For
the sake of clarity, the Exchange also proposes to amend the Options
Transaction Charge header for Non-Penny Symbols in Options 7, Section
4, which already excludes NDX and NDXP, to add XND to the list of
excluded Non-Penny Symbols that will not be subject to this fee. The
Exchange further proposes to amend its Pricing Schedule to update all
current references to Options 7, Section 4 NDX and NDXP pricing to
Options 7, Section 5.A.\22\
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\22\ In particular, the Exchange will update references within
Options 7, Sections 6.A and 6.B.
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The Exchange also proposes non-substantive, clean-up changes in
Options 7, Section 5 to restructure the existing rule text. With the
changes proposed above to add new Section 5.A of Options 7 to set forth
NDX, NDXP, and XND pricing, the Exchange proposes to set forth Singly
Listed Options pricing in new Section 5.B. The Exchange also proposes
to set forth FX Options pricing in new Section 5.C, and further
proposes to relocate the language regarding U.S. dollar-settled foreign
currency options into the new Section 5.C header. Accordingly, new
Section 5.C will be titled, ``FX Options: U.S. dollar-settled foreign
currency options include XDB, XDE, XDN, XDS, XDA, XDZ and XDC.'' The
Exchange is not amending any of the existing rates for Singly Listed
Options or FX Options with this proposal. Lastly, the Exchange proposes
to retitle Options 7, Section 5 as ``Index and Singly Listed Options
(Includes options overlying FX Options, equities, ETFs, ETNs, and
indexes not listed on another exchange).''
[[Page 24112]]
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\23\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\24\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees and
other charges among members and issuers and other persons using any
facility, and is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\23\ 15 U.S.C. 78f(b).
\24\ 15 U.S.C. 78f(b)(4) and (5).
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Options 7, Section 1.B
The Exchange's proposal to not pay the Customer Rebates in Options
7, Section 1.B on XND, but to count XND volume toward qualifying for a
Customer Rebate Tier, similar to NDX and NDXP, is reasonable because
the Exchange seeks to treat XND in the same manner as NDX and NDXP
under this rebate program. NDX, NDXP, and XND represent similar options
on the same underlying Nasdaq 100 Index. Further, it is reasonable to
not pay Customer Rebates on XND in any rebate category because this
index option will be exclusively listed on Phlx only. The original
intent of the Customer Rebate Program was to pay rebates on
electronically-delivered multiply-listed options. By definition, XND
will not be a multiply-listed option, and the Exchange does not desire
to pay rebates on XND because of the exclusivity of this option. While
the Exchange will not pay any Customer Rebates on XND transactions, the
Exchange also believes it is reasonable to count XND in the total
volume to qualify a market participant for these rebates as market
participants would be incentivized to transact in XND to qualify for
the Customer Rebate Tiers.
The Exchange believes that its proposal to not pay Customer Rebates
on XND, but to count XND volume toward the volume requirement to
qualify for a rebate tier is equitable and not unfairly discriminatory
because the Exchange would apply the rebate program as described
uniformly for all market participants. Any market participant is
eligible to earn a Customer Rebate.
Options 7, Section 4
Options Transaction Charges and Surcharges
The Exchange believes it is reasonable to assess the proposed
Options Transaction Charge and Non-Customer surcharge as discussed
above for XND because the proposed pricing reflects the exclusive and
proprietary nature of this product. Similar to NDX and NDXP, the
Exchange seeks to recoup the operational costs for listing proprietary
products.\25\ Also, pricing by symbol is a common practice on many U.S.
options exchanges as a means to incentivize order flow to be sent to an
exchange for execution in particular products. Other options exchanges
price by symbol.\26\ Further, the Exchange notes that with its
products, market participants are offered an opportunity to transact in
NDX, NDXP, or XND, or separately execute options overlying PowerShares
QQQ Trust (``QQQ'').\27\ Offering such proprietary products provides
market participants with a variety of choices in selecting the product
they desire to utilize in order to transact in the Nasdaq 100 Index.
When exchanges are able to recoup costs associated with offering
proprietary products, it incentivizes growth and competition for the
innovation of additional products.
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\25\ By way of example, in analyzing an obvious error, the
Exchange would have additional data points available in establishing
a theoretical price for a multiply listed option as compared to a
proprietary product, which requires additional analysis and
administrative time to comply with Exchange rules to resolve an
obvious error.
\26\ See pricing for the Mini-RUT Index options (``MRUT'') on
Cboe Exchange, Inc.'s Fees Schedule.
\27\ QQQ is an exchange-traded fund based on the same Nasdaq 100
Index as NDX, NDXP, and XND.
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Further, the Exchange believes that the proposed rates for XND are
reasonable because they are well within the range of fees assessed for
the Exchange's other proprietary products, namely NDX and NDXP.\28\ The
Exchange believes it is reasonable to charge lower rates for XND
compared to NDX and NDXP because XND is based on 1/100 of the value of
the Nasdaq 100 Index while both NDX and NDXP are based on the full
value of the Nasdaq 100 Index. The Exchange therefore seeks to assess
corresponding reduced fees for this product.
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\28\ Specifically, the Exchange is proposing to assess Non-
Customers an Options Transaction Charge of $0.10 per contract in XND
while Customers will receive free executions. Today, the Exchange
assesses Non-Customers an Options Transaction Charge of $0.75 per
contract for both NDX and NDXP, and does not assess Customers an
Options Transaction Charge. Additionally, the Exchange is proposing
to assess Non-Customers a surcharge of $0.10 per contract for XND
whereas today, Non-Customers are assessed a surcharge of $0.25 per
contract for NDX and NDXP.
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The Exchange's proposal to assess the $0.10 per contract Options
Transaction Charge in XND is equitable and not unfairly discriminatory
because the Exchange will assess this fee uniformly to all Non-
Customers. The Exchange similarly believes that the proposed $0.10 per
contract XND surcharge is equitable and not unfairly discriminatory
because it will apply uniformly to all Non-Customers. The Exchange
believes it is equitable and not unfairly discriminatory to assess no
transaction fees to Customers for XND because Customer orders bring
valuable liquidity to the market, which liquidity benefits other market
participants. Customer liquidity benefits all market participants by
providing more trading opportunities, which attracts Lead Market Makers
and Market Makers. An increase in the activity of these market
participants in turn facilitates tighter spreads, which may cause an
additional corresponding increase in order flow from other market
participants.
Fee Programs
The Exchange believes that the proposed updates in Options 7,
Section 4 in connection with the application of certain fee programs to
XND are reasonable, equitable, and not unfairly discriminatory.
Particularly, the Exchange believes that it is reasonable to exclude
XND from the Non-Penny complex surcharge in note 7 of Options 7,
Section 4, Monthly Market Maker Cap, Monthly Firm Fee Cap, Floor
Options Transaction Charge waivers, Strategy Caps, and Marketing Fees
in the same manner in which NDX and NDXP are currently excluded from
the same programs today. The Exchange believes it is appropriate to
update these fee programs in a manner that similarly situates XND with
NDX and NDXP as these are all proprietary products that are based on
the Nasdaq 100 Index. In addition, similar to NDX and NDXP, the
Exchange seeks to recoup the operational costs for listing proprietary
products by excluding XND from programs that cap or waive transaction
fees for market participants. As it relates to the Marketing Fee, the
Exchange believes it is reasonable to exclude XND from this fee,
similar to NDX and NDXP today, because the purpose of the Marketing Fee
is to generate more Customer order flow to the Exchange. Because XND
will be an exclusively listed product on Phlx, the Exchange does not
believe that applying a marketing fee is necessary for this product.
The Exchange's proposal to exclude XND from the various fee
programs in Options 7, Section 4 as discussed above is equitable and
not unfairly discriminatory because the programs will equally exclude
in the same manner all market participants' orders in XND. The Exchange
notes that its proposal does not alter any of the existing fee
programs, but instead merely proposes to exclude XND in
[[Page 24113]]
those programs in the same way that NDX and NDXP are currently
excluded.
Options 7, Section 6
PIXL Pricing
The Exchange's proposal to exclude XND from PIXL pricing in Options
7, Section 6.A, and instead assess XND transactions in PIXL the
proposed Options 7, Section 5.A pricing is reasonable because the
Exchange intends to assess the same fees across the board for XND
transactions (i.e., $0.10 per contract for Non-Customers and free
executions for Customers). This will align the pricing structure for
XND with NDX and NDXP, which are currently assessed the same $0.75 per
contract Non-Customer fee across the board while Customers receive free
executions.
The proposed changes are equitable and not unfairly discriminatory
because the Exchange will uniformly exclude NDXP from PIXL pricing for
all market participants, and instead uniformly charge them the Options
7, Section 5.A pricing.
FLEX Transaction Fees
The Exchange believes that its proposal to assess FLEX XND options
the Options Transaction Charge and Non-Customer options surcharge in
Options 7, Section 5.A is reasonable because the Exchange intends to
assess the same fees across the board for XND transactions.
Specifically, the Exchange will apply the proposed XND options
surcharge of $0.10 per contract to Non-Customers in FLEX XND options.
Further, the Exchange will apply the proposed XND Options Transaction
Charges of $0.10 per contract (Non-Customer) and $0.00 per contract
(Customer) to FLEX XND options. FLEX NDX and NDXP options are likewise
assessed the same Options Transaction Charge and Non-Customer options
surcharge that NDX and NDXP options are assessed today. The Exchange's
proposal is equitable and not unfairly discriminatory because the
Exchange will uniformly apply these fees to FLEX NDX and NDXP options
to all similarly situated market participants.
MARS
The Exchange believes it is reasonable to exclude XND from Eligible
Contracts for purposes of qualifying for a MARS Payment in the same
manner in which NDX and NDXP are currently excluded today. The Exchange
believes it is appropriate to update its MARS program in a manner that
similarly situates XND with its other proprietary products, NDX and
NDXP, which are all based on the Nasdaq 100 Index.
The Exchange believes that its proposal is equitable and not
unfairly discriminatory because the Exchange will uniformly exclude XND
from MARS for all market participants.
Options 7, Section 5
The Exchange believes that the proposed changes to relocate and
group the transaction fees for NDX, NDXP, and XND within Options 7,
Section 5.A, and all of the non-substantive changes related to the
relocation, each as discussed above, are reasonable, equitable, and not
unfairly discriminatory. The proposed changes are all intended to bring
greater clarity, and will ensure that the Exchange's pricing for NDX,
NDXP, and XND may be easily located within its Pricing Schedule. The
Exchange further believes that the proposed non-substantive changes in
Options 7, Section 5 to restructure the existing rule text and retitle
various section headers are reasonable, equitable, and not unfairly
discriminatory as they will facilitate the use of the Pricing Schedule
by market participants.
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. The Exchange notes that with its products, market
participants are offered an opportunity to transact in NDX, NDXP, or
XND, or separately execute options overlying QQQ. Offering these
products provides market participants with a variety of choices in
selecting the product they desire to utilize to transact in the Nasdaq
100 Index.
Further, the Exchange does not believe that the proposed rule
change will impose any burden on intra-market competition that is not
necessary or appropriate in furtherance of the purposes of the Act
because the proposed XND pricing will apply uniformly to all similarly
situated market participants. Specifically, all Non-Customers will be
assessed a uniform Options Transaction Charge and options surcharge
while Customers receive free executions. As discussed above, Customer
liquidity benefits all market participants by providing more trading
opportunities, which attracts other market participants, thus
facilitating tighter spreads and increased order flow.
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.\29\
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\29\ 15 U.S.C. 78s(b)(3)(A)(ii).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-Phlx-2021-24 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-2021-24. 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
[[Page 24114]]
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-2021-24 and should be submitted on or before May 26, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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\30\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-09281 Filed 5-4-21; 8:45 am]
BILLING CODE 8011-01-P
