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, Section 5, 32989-32993 [2021-13105]
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Federal Register / Vol. 86, No. 118 / Wednesday, June 23, 2021 / Notices
Commission, 100 F Street NE,
Washington, DC 20549.
SECURITIES AND EXCHANGE
COMMISSION
All submissions should refer to File
Number SR–DTC–2021–009. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of DTC and on DTCC’s website
(https://dtcc.com/legal/sec-rulefilings.aspx). 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–DTC–
2021–009 and should be submitted on
or before July 14, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–13103 Filed 6–22–21; 8:45 am]
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BILLING CODE 8011–01–P
[Release No. 34–92192; File No. SR–BOX–
2021–07]
Self-Regulatory Organizations; BOX
Exchange LLC; Notice of Designation
of a Longer Period for Commission
Action on a Proposed Rule Change To
Adopt BOX Rule 7670 To Establish a
Virtual Trading Floor on BOX
On April 16, 2021, BOX Exchange
LLC (‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
establish a virtual trading floor on the
Exchange. The proposed rule change
was published for comment in the
Federal Register on May 5, 2021.3
Section 19(b)(2) of the Act 4 provides
that within 45 days of the publication of
notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding, or as to which the
self-regulatory organization consents,
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day after
publication of the notice for this
proposed rule change is June 19, 2021.
The Commission is extending the 45day time period for Commission action
on the proposed rule change. The
Commission finds it appropriate to
designate a longer period within which
to take action on the proposed rule
change so that it has sufficient time to
consider the proposed rule change.
Accordingly, pursuant to Section
19(b)(2) of the Act,5 the Commission
designates August 3, 2021, as the date
by which the Commission shall either
approve or disapprove, or institute
proceedings to determine whether to
disapprove, the proposed rule change
(File No. SR–BOX–2021–07).
U.S.C.78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 91714
(April 29, 2021), 86 FR 24119.
4 15 U.S.C. 78s(b)(2).
5 Id.
2 17
CFR 200.30–3(a)(12).
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–13099 Filed 6–22–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92200; File No. SR–Phlx–
2021–36]
June 16, 2021.
1 15
14 17
32989
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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, Section 5
June 16, 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 June 11,
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, Section 5 to adopt an incentive
program for Lead Market Makers
(‘‘LMMs’’) and Market Makers in
Nasdaq 100 Micro Index (‘‘XND’’)
options.
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
6 17
CFR 200.30–3(a)(31).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 86, No. 118 / Wednesday, June 23, 2021 / Notices
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 XND
on a pilot basis, and subsequently began
to list XND options on April 15, 2021.3
The Exchange now proposes to amend
its Pricing Schedule to adopt a rebate
program in order to incentivize LMMS
and Market Makers to provide
significant liquidity in XND options
during the trading day, which, in turn,
would provide greater trading
opportunities, narrower bid-ask spreads,
and enhanced price discovery for all
market participants in XND.
Today, LMMs and Market Makers are
subject to certain intra-day electronic
quoting obligations on the Exchange.4
As further described below, the
Exchange proposes to amend the
Exchange’s Pricing Schedule to provide
rebates to any LMM or Market Maker in
XND that meet heightened quoting
standards during the trading day, which
will be specified in new Section 5.B of
Options 7.5 As proposed, an LMM or
Market Maker will be eligible to receive
the following additional rebates in all
XND series if they meet the following
criteria: (i) $0.03 per contract if the
LMM or Market Maker provides
continuous electronic quotes during the
trading day that meet or exceed the
below heightened quoting standards for
all XND series with an expiration of 14
days or less, for the corresponding
minimum time requirement on average
in a given month based on daily
performance; (ii) $0.01 per contract if
the LMM or Market Maker provides
continuous electronic quotes during the
trading day that meet or exceed the
below heightened quoting standards for
all XND series with an expiration of 15
day to 60 days, for the corresponding
minimum time requirement on average
in a given month based on daily
performance; and (iii) $0.01 per contract
if the LMM or Market Maker provides
continuous electronic quotes during the
trading day that meet or exceed the
below heightened quoting standards for
all XND series with an expiration of 61
days or greater, for the corresponding
minimum time requirement on average
in a given month based on daily
performance. The foregoing rebates may
be cumulative such that a qualifying
LMM or Market Maker may receive a
total rebate of $0.05 per contract for all
XND series.
Expiring
Minimum time
requirement
(%)
Premium level
14 days or less
Width
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90
90
90
90
85
85
.......................
.......................
.......................
.......................
.......................
.......................
$0.00–$1.00 .............
$1.01–$3.00 .............
$3.01–$5.00 .............
$5.01–$10.00 ...........
$10.01–$25.00 .........
Greater than $25.00
15 days to 60 days
Size
$0.05
0.08
0.10
0.45
1.00
2.50
Width
5
5
5
5
5
5
days or less expiration bucket, $0.01 in
the 15–60 days bucket, and/or $0.01 in
the 61 days or greater bucket) if it also
meets the specified heightened quoting
standards in the applicable expiration
bucket, which rebate amount would
then apply to all of the LMM’s or Market
Maker’s XND contracts. In other words,
an LMM or Market Maker can qualify
for any one or combination of the
foregoing rebates such that it may
receive anywhere between $0.01 and up
to a total of $0.05 per contract, which
would then be applied to all XND
contracts.
The following examples further
illustrate how the proposed rebate
program will work:
3 See Securities Exchange Act Release No. 91524
(April 9, 2021), 86 FR 19909 (April 15, 2021) (SR–
Phlx–2021–07) (‘‘Adopting Filing’’). The Exchange
also filed to adopt initial fees for XND options on
April 15, 2021. See Securities Exchange Act Release
No. 91696 (April 28, 2021), 86 FR 24109 (May 5,
2021) (SR–Phlx–2021–24).
4 See Options 2, Sections 4(c), 5(a), and 5(c).
5 In connection with this change, existing
Sections 5.B and 5.C of Options 7 will be
renumbered to 5.C and 5.D, respectively.
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Example 1
A Market Maker is meeting the quote
width requirement ($0.06) on a $0.95
premium XND option 20 days until
expiration 93% of the time. The 93%
performance would count towards the
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Size
$0.06
0.08
0.10
0.50
1.10
3.00
In calculating whether an LMM or
Market Maker met the heightened
quoting standard each month, the
Exchange will exclude from the
calculation in that month the worst
quoting day in XND for the LMM or
Market Maker.
As proposed, the above minimum
time requirements will apply to each
series on an individual basis such that
an LMM or Market Maker must meet
those requirements separately for each
premium level (e.g., a Market Maker
must quote a $0.95 premium XND
option at least 90% of the time,
separately quote a $2.00 premium XND
option at least 90% of the time, etc. all
the way down to the last premium level
of greater than $25 in order to be eligible
for a rebate).6 An LMM or Market Maker
meeting all the minimum time
requirements in all premium levels
would thus be eligible to receive the
applicable rebate (i.e., $0.03 in the 14
61 days or greater
Width
5
5
5
5
5
5
$0.10
0.12
0.15
0.60
1.25
3.50
Size
5
5
5
5
5
5
15–60 day expiration bucket that could
gain the $0.01 per contract rebate. Six
days later, as the XND option is now 14
days until expiration, the Market Maker
tightens to quoting $0.05 wide 91% of
the time. The 91% performance would
count towards the 14 days or less
expiration bucket that could gain the
$0.03 per contract rebate.
Example 2
A Market Maker is meeting the quote
width, size and minimum time
requirements for all 14 days or less XND
options up to a $25 premium level, but
the Market Maker does not hit the 85%
minimum time requirement for XND
options with a premium greater than
$25. As a result, the Market Maker
would not be eligible to receive the
$0.03 per contract rebate for the 14 days
or less expiration bucket. However, it
could still be eligible to receive the
$0.01 per contract rebates in the other
6 As noted below, this is different from Cboe
Exchange, Inc.’s (‘‘Cboe’’) LMM incentive program,
which also requires LMMs to quote in a specified
percentage of all series. See infra note 9.
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two expiration buckets (15–60 days and
61 days or greater) if they meet all of the
corresponding quote width, size and
minimum time requirements for all
premium levels for each bucket.
LMMs and Market Makers in XND
options are not obligated to satisfy the
heightened quoting standards described
in the table above. Rather, the LMM or
Market Maker will only receive a rebate
if they satisfy the abovementioned
heightened quoting standard. If an LMM
or Market Maker does not meet the
heightened quoting standard, then it
will simply not receive the rebate for
that month. The Exchange notes,
however, that with respect to quoting
obligations, LMMs and Market Makers
must still comply with the continuous
quoting obligations and other
obligations of LMMs and Market Makers
described in the Exchange’s Rules.7 The
Exchange believes that the proposed
rebates for the additional quoting
standards described above will
incentivize LMMs and Market Makers to
provide significant liquidity in XND
options.
As it relates to the proposed exception
to the heightened quoting standards
described above to exclude the LMM’s
or Market Maker’s worst quoting day in
XND in a given month, the Exchange
seeks to adopt this exception to provide
flexibility for LMMs and Market Makers,
which in turn may further encourage
those market participants to provide
liquidity in XND options. For example,
the Exchange notes that there may be
certain circumstances, such as where
the LMM or Market Maker has a system
issue, that may impact their ability to
meet the proposed heightened quoting
standards for that day, which could
result in the LMM or Market Maker no
longer being able to satisfy the
heightened quoting standard for the
remainder of the month. The Exchange
believes that the proposed change will
further encourage LMMs and Market
Makers to continue to quote aggressively
in XND options throughout the entire
month despite one poor performing day.
For example, absent the proposed rule
change, if an LMM or Market Maker has
a poor performing day early in the
month, the market participant may no
longer have an incentive to continue to
quote at the proposed heightened levels
for the remainder of the month as it
would know it would no longer be
eligible to receive the proposed rebates
for that month even if it continued to
meet or exceed the prescribed quoting
standards. Accordingly, the Exchange
believes the proposed rule change
would eliminate the potential
7 See
supra note 4.
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disincentive that could occur if one
poor performing day prevented an LMM
or Market Maker from meeting the
proposed heightened quoting standards.
The Exchange notes that the proposed
XND incentive program is substantially
similar to incentive programs in place at
Cboe that offer financial benefits for
meeting heightened quoting standards,
with certain structural differences.8 For
instance, the proposed XND incentive
program will pay the rebates to the
qualifying LMM or Market Maker on a
per contract basis, instead of as one
monthly payment like Cboe’s programs.
Furthermore, the proposed rebates may
be cumulative such that the qualifying
LMM or Market Maker may receive up
to $0.05 per contract in all XND series,
as discussed above. The proposed
program will also be available to both
LMMs and Market Makers in XND
whereas Cboe’s programs are generally
limited to LMMs. In this respect, the
Exchange seeks to expand the pool of
Market Makers that may provide
liquidity in XND, which is ultimately
beneficial to the marketplace by
facilitating tighter spreads and more
trading opportunities, particularly in a
newly listed and traded product on the
Exchange during the trading day. In
addition, while the Exchange will
require LMMs and Market Makers to
satisfy the proposed heightened quoting
standards for a specified percentage of
time for XND series, the Exchange will
not require LMMs or Market Makers to
meet the proposed heightened quoting
requirements in a specified percentage
of XND series like Cboe’s programs.9
Otherwise, the proposed heightened
quoting standards are similar to the
detail and format (specific expiration
categories and corresponding premiums,
quote widths, and sizes) of the
heightened quoting standards currently
in place for Cboe’s incentive
programs.10
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,11 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,12 in particular, in that it
provides for the equitable allocation of
8 See, e.g., Cboe Fees Schedule, ‘‘MRUT LMM
Incentive Program,’’ ‘‘MSCI LMM Incentive
Program,’’ ‘‘GTH VIX/VIXW LMM Incentive
Program,’’ ‘‘GTH SPX/SPXW LMM Incentive
Program,’’ and ‘‘RTH SPESG LMM Incentive
Program.’’
9 For example, Cboe’s RTH SPESG LMM
Incentive Program requires the LMM to meet the
specified heightened quoting standards in at least
60% of the series 90% of the time in a given month.
10 See supra note 8.
11 15 U.S.C. 78f(b).
12 15 U.S.C. 78f(b)(4) and (5).
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32991
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 believes that the
proposed XND incentive program is
reasonable, equitable, and not unfairly
discriminatory. The proposed
heightened quoting standards and rebate
amounts for meeting the heightened
quoting standards in XND series are
reasonably designed to incentivize an
LMM or Market Maker to meet the
quoting standards for XND during the
trading day, thereby providing liquid
and active markets, which facilitates
tighter spreads, increased trading
opportunities, and overall enhanced
market quality to the benefit of all
market participants, particularly in a
newly listed and traded product like
XND in order to encourage its growth on
the Exchange. The Exchange believes
that creating an incentive program in
which LMMs and Market Makers must
satisfy a heightened quoting standard to
receive the rebates is a reasonable way
to fortify market quality in XND,
especially given XND’s new market
ecosystem where the Exchange expects
lower trading liquidity and trading
levels as compared to more established
products that generally contain deeper
pools of liquidity and are more active.
The Exchange believes that the
proposed rebates are set at appropriate
levels that are reasonably designed to
incentivize LMMs and Market Makers to
provide liquid and active markets in
XND options to encourage its growth on
the Exchange. As stated in the Adopting
Filing, the Exchange is seeking to attract
a greater source of retail customer
business by listing XND options.13
Accordingly, the Exchange is proposing
to provide a higher rebate in XND series
with expirations of 14 days or less as
compared to longer-term XND series
(i.e., $0.03 per contract compared to
$0.01 per contract) in order to
incentivize significant liquidity in retail
XND orders, which would typically be
in XND series with shorter expirations
and lower premiums. The Exchange also
believes that allowing the proposed
rebates to be cumulative such that
qualifying LMMs and Market Makers
could receive a total rebate of up to
$0.05 per contract would encourage a
more liquid and active market in all
XND series, which will have a beneficial
impact on market quality.
The Exchange believes that the
proposed heightened quoting standards
in XND options are reasonable in that
13 See
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supra note 3.
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they are similar to the detail and format
(specific expiration categories and
corresponding premiums, quote widths,
and sizes) of the heightened quoting
standards currently in place for Cboe’s
incentive programs.14 For example, the
proposed expiration categories are
similar to those for Cboe’s MRUT LMM
incentive program except the Exchange
will not have a separate expiration
category for long term options (i.e., 271
days or greater). The Exchange notes
that it does not currently list any long
term XND options series. The Exchange
believes that the proposed premiums
and quote widths in the proposed
heightened quoting standards for XND
LMMs and Market Makers reasonably
reflect what the Exchange believes will
be typical market characteristics in XND
options, given their reduced notional
value based on the Nasdaq 100 Index,
minimum increments, and target retail
base, thus smaller, retail-sized orders. In
addition, the Exchange believes that the
proposed size requirement of five (5)
contracts in the heightened quoting
standards is a reasonable balance of the
typical market characteristics of an XND
order (i.e., smaller, retail-sized orders)
and the desire for the Exchange to
encourage significant liquidity in XND
options. Furthermore, the Exchange
believes that the proposed minimum
time requirements are set at reasonable
levels that would encourage LMMs and
Market Makers to contribute to greater
liquidity in a newly-listed product like
XND.
The Exchange believes the proposed
XND incentive program is equitable and
not unfairly discriminatory as all LMMs
and Market Makers may qualify for this
program by meeting the heightened
quoting standards described above. In
addition, the Exchange believes that it is
equitable and not unfairly
discriminatory to only offer the
proposed incentives to LMMs and
Market Makers. LMMs and Market
Makers add value through continuous
quoting and are subject to additional
requirements and obligations (such as
continuous quoting obligations) that
other market participants are not.
Furthermore, by incentivizing LMMs
and Market Makers to satisfy the
heightened quoting standards in XND
series, the proposed changes may
increase liquidity and tighter spreads,
which can lead to increased volume,
thereby benefitting all market
participants by providing a robust
market, particularly in a newly listed
and traded product like XND in order to
encourage its growth on the Exchange.
14 See
supra note 8.
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17:13 Jun 22, 2021
The Exchange believes that the
proposed rule change to exclude the
LMM’s or Market Maker’s worst quoting
day each month is reasonable because it
will encourage those market
participants to continue to quote
aggressively in XND options throughout
the entire month despite an individual
poor performing day. As discussed
above, there may be days on which an
LMM or Market Maker cannot quote
aggressively (e.g., the market participant
has a system issue) and in certain
months, one poor performing day may
prevent an LMM or Market Maker from
meeting the heightened quoting
standard required to receive the rebates
under the proposed incentive program.
Moreover, in such months where an
LMM or Market Maker has a poor
performing day, the LMM or Market
Maker may be discouraged from quoting
aggressively the remainder of the month
if it knows it were no longer eligible to
receive the rebates that month. This can
be especially problematic if a poor
performing day occurs early in the
month. The Exchange notes that the
proposed XND rebate program is to
ensure there are sufficient incentives for
an LMM or Market Maker to quote at
heightened levels in this newly-listed
product. Accordingly, the Exchange
believes the proposed rule change will
encourage LMMs and Market Makers to
quote aggressively in a class throughout
the entire month (and thereby ensure
sufficient liquidity), notwithstanding a
poor performing day. The Exchange also
notes that its affiliated exchange,
Nasdaq ISE, LLC (‘‘ISE’’) similarly omits
a Market Maker’s worst quoting day
each month under its Market Maker
Plus rebate program.15 Lastly, the
Exchange believes the proposed
exclusion is equitable and not unfairly
discriminatory as it will apply equally
to all LMMs and Market Makers.
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 intra-market competition,
the Exchange does not believe that its
proposal will place any category of
market participant at a competitive
disadvantage. The proposed XND
incentive program is intended to
encourage growth in a newly listed and
traded product by providing rebates for
LMMs and Market Makers that meet or
exceed the proposed heighted quoting
standards described above. As discussed
15 See
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above, the Exchange believes that its
proposal will incentivize LMMS and
Market Makers to provide significant
liquidity in XND options during the
trading day, which, in turn, would
provide greater trading opportunities,
narrower bid-ask spreads, and enhanced
price discovery for all market
participants in XND.
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 there
are other products today that are
similarly based on the Nasdaq–100
Index. Specifically, market participants
are offered an opportunity to transact in
NDX, NDXP, or NQX, or separately
execute options overlying QQQ, which
offer various notional sizes.16 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. Furthermore, the Exchange notes
that there are other existing investment
products that are similar to XND options
in that they seek to allow investors to
gain broad market exposure through
reduced value options.17 In sum, if the
changes proposed herein are
unattractive to market participants, it is
likely that the Exchange will lose
market share as a result.
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
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 18 and
16 See e.g., Options 7, Section 5.A for NDX and
NDXP pricing. See also ISE Options 7, Section 5.B
for NQX pricing. NQX is currently listed only on
ISE.
17 For instance, Cboe offers both MRUT and MiniSPX (‘‘XSP’’) options, which are reduced-value
options based on broad-based indexes (i.e., the
Russell 2000 Index and S&P 500 Index). See Cboe
Fees Schedule for MRUT and XSP pricing.
18 15 U.S.C. 78s(b)(3)(A).
E:\FR\FM\23JNN1.SGM
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Federal Register / Vol. 86, No. 118 / Wednesday, June 23, 2021 / Notices
subparagraph (f)(6) of Rule 19b–4
thereunder.19
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:
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–2021–36 and should
be submitted on or before July 14, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–13105 Filed 6–22–21; 8:45 am]
BILLING CODE 8011–01–P
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–2021–36 on the subject line.
Paper Comments
jbell on DSKJLSW7X2PROD with NOTICES
• 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–2021–36. 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
19 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
VerDate Sep<11>2014
17:13 Jun 22, 2021
Jkt 253001
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meetings
2:00 p.m. on Thursday,
June 24, 2021.
PLACE: The meeting will be held via
remote means and/or at the
Commission’s headquarters, 100 F
Street NE, Washington, DC 20549.
STATUS: This meeting will be closed to
the public.
MATTERS TO BE CONSIDERED:
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the closed meeting. Certain
staff members who have an interest in
the matters also may be present.
In the event that the time, date, or
location of this meeting changes, an
announcement of the change, along with
the new time, date, and/or place of the
meeting will be posted on the
Commission’s website at https://
www.sec.gov.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B)
and (10) and 17 CFR 200.402(a)(3),
(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and
(a)(10), permit consideration of the
scheduled matters at the closed meeting.
The subject matter of the closed
meeting will consist of the following
topics:
Institution and settlement of
injunctive actions;
TIME AND DATE:
20 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00112
Fmt 4703
Sfmt 4703
32993
Institution and settlement of
administrative proceedings;
Resolution of litigation claims; and
Other matters relating to examinations
and enforcement proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting agenda items that
may consist of adjudicatory,
examination, litigation, or regulatory
matters.
CONTACT PERSON FOR MORE INFORMATION:
For further information, please contact
Vanessa A. Countryman from the Office
of the Secretary at (202) 551–5400.
Dated: June 17, 2021.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2021–13155 Filed 6–17–21; 11:15 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 5756]
Order Approving Adjustment for
Inflation of the Dollar Amount Tests in
Rule 205–3 Under the Investment
Advisers Act of 1940
June 17, 2021.
I. Background
Section 205(a)(1) of the Investment
Advisers Act of 1940 (‘‘Advisers Act’’)
generally prohibits an investment
adviser from entering into, extending,
renewing, or performing any investment
advisory contract that provides for
compensation to the adviser based on a
share of capital gains on, or capital
appreciation of, the funds of a client
(also known as performance
compensation or performance fees).1
Section 205(e) authorizes the Securities
and Exchange Commission
(‘‘Commission’’) to exempt any advisory
contract from the performance fee
prohibition if the contract is with any
person that the Commission determines
does not need the protections of the
prohibition, on the basis of certain
factors described in that section.2 Rule
205–3 under the Advisers Act exempts
an investment adviser from the
prohibition against charging a client
performance fees when the client is a
1 15
U.S.C. 80b–5(a)(1).
section 205(e), the Commission may
determine that persons do not need the protections
of section 205(a)(1) on the basis of such factors as
‘‘financial sophistication, net worth, knowledge of
and experience in financial matters, amount of
assets under management, relationship with a
registered investment adviser, and such other
factors as the Commission determines are consistent
with [section 205].’’ 15 U.S.C. 80b–5(e).
2 Under
E:\FR\FM\23JNN1.SGM
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]]>Agencies
[Federal Register Volume 86, Number 118 (Wednesday, June 23, 2021)]
[Notices]
[Pages 32989-32993]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-13105]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92200; File No. SR-Phlx-2021-36]
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, Section 5
June 16, 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 June 11, 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, Section 5 to adopt an incentive program for Lead Market
Makers (``LMMs'') and Market Makers in Nasdaq 100 Micro Index (``XND'')
options.
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
[[Page 32990]]
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
XND on a pilot basis, and subsequently began to list XND options on
April 15, 2021.\3\ The Exchange now proposes to amend its Pricing
Schedule to adopt a rebate program in order to incentivize LMMS and
Market Makers to provide significant liquidity in XND options during
the trading day, which, in turn, would provide greater trading
opportunities, narrower bid-ask spreads, and enhanced price discovery
for all market participants in XND.
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 91524 (April 9,
2021), 86 FR 19909 (April 15, 2021) (SR-Phlx-2021-07) (``Adopting
Filing''). The Exchange also filed to adopt initial fees for XND
options on April 15, 2021. See Securities Exchange Act Release No.
91696 (April 28, 2021), 86 FR 24109 (May 5, 2021) (SR-Phlx-2021-24).
---------------------------------------------------------------------------
Today, LMMs and Market Makers are subject to certain intra-day
electronic quoting obligations on the Exchange.\4\ As further described
below, the Exchange proposes to amend the Exchange's Pricing Schedule
to provide rebates to any LMM or Market Maker in XND that meet
heightened quoting standards during the trading day, which will be
specified in new Section 5.B of Options 7.\5\ As proposed, an LMM or
Market Maker will be eligible to receive the following additional
rebates in all XND series if they meet the following criteria: (i)
$0.03 per contract if the LMM or Market Maker provides continuous
electronic quotes during the trading day that meet or exceed the below
heightened quoting standards for all XND series with an expiration of
14 days or less, for the corresponding minimum time requirement on
average in a given month based on daily performance; (ii) $0.01 per
contract if the LMM or Market Maker provides continuous electronic
quotes during the trading day that meet or exceed the below heightened
quoting standards for all XND series with an expiration of 15 day to 60
days, for the corresponding minimum time requirement on average in a
given month based on daily performance; and (iii) $0.01 per contract if
the LMM or Market Maker provides continuous electronic quotes during
the trading day that meet or exceed the below heightened quoting
standards for all XND series with an expiration of 61 days or greater,
for the corresponding minimum time requirement on average in a given
month based on daily performance. The foregoing rebates may be
cumulative such that a qualifying LMM or Market Maker may receive a
total rebate of $0.05 per contract for all XND series.
---------------------------------------------------------------------------
\4\ See Options 2, Sections 4(c), 5(a), and 5(c).
\5\ In connection with this change, existing Sections 5.B and
5.C of Options 7 will be renumbered to 5.C and 5.D, respectively.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Expiring
-----------------------------------------------------------------------------------------------
Minimum time requirement (%) Premium level 14 days or less 15 days to 60 days 61 days or greater
-----------------------------------------------------------------------------------------------
Width Size Width Size Width Size
--------------------------------------------------------------------------------------------------------------------------------------------------------
90........................... $0.00-$1.00.............. $0.05 5 $0.06 5 $0.10 5
90........................... $1.01-$3.00.............. 0.08 5 0.08 5 0.12 5
90........................... $3.01-$5.00.............. 0.10 5 0.10 5 0.15 5
90........................... $5.01-$10.00............. 0.45 5 0.50 5 0.60 5
85........................... $10.01-$25.00............ 1.00 5 1.10 5 1.25 5
85........................... Greater than $25.00...... 2.50 5 3.00 5 3.50 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
In calculating whether an LMM or Market Maker met the heightened
quoting standard each month, the Exchange will exclude from the
calculation in that month the worst quoting day in XND for the LMM or
Market Maker.
As proposed, the above minimum time requirements will apply to each
series on an individual basis such that an LMM or Market Maker must
meet those requirements separately for each premium level (e.g., a
Market Maker must quote a $0.95 premium XND option at least 90% of the
time, separately quote a $2.00 premium XND option at least 90% of the
time, etc. all the way down to the last premium level of greater than
$25 in order to be eligible for a rebate).\6\ An LMM or Market Maker
meeting all the minimum time requirements in all premium levels would
thus be eligible to receive the applicable rebate (i.e., $0.03 in the
14 days or less expiration bucket, $0.01 in the 15-60 days bucket, and/
or $0.01 in the 61 days or greater bucket) if it also meets the
specified heightened quoting standards in the applicable expiration
bucket, which rebate amount would then apply to all of the LMM's or
Market Maker's XND contracts. In other words, an LMM or Market Maker
can qualify for any one or combination of the foregoing rebates such
that it may receive anywhere between $0.01 and up to a total of $0.05
per contract, which would then be applied to all XND contracts.
---------------------------------------------------------------------------
\6\ As noted below, this is different from Cboe Exchange, Inc.'s
(``Cboe'') LMM incentive program, which also requires LMMs to quote
in a specified percentage of all series. See infra note 9.
---------------------------------------------------------------------------
The following examples further illustrate how the proposed rebate
program will work:
Example 1
A Market Maker is meeting the quote width requirement ($0.06) on a
$0.95 premium XND option 20 days until expiration 93% of the time. The
93% performance would count towards the 15-60 day expiration bucket
that could gain the $0.01 per contract rebate. Six days later, as the
XND option is now 14 days until expiration, the Market Maker tightens
to quoting $0.05 wide 91% of the time. The 91% performance would count
towards the 14 days or less expiration bucket that could gain the $0.03
per contract rebate.
Example 2
A Market Maker is meeting the quote width, size and minimum time
requirements for all 14 days or less XND options up to a $25 premium
level, but the Market Maker does not hit the 85% minimum time
requirement for XND options with a premium greater than $25. As a
result, the Market Maker would not be eligible to receive the $0.03 per
contract rebate for the 14 days or less expiration bucket. However, it
could still be eligible to receive the $0.01 per contract rebates in
the other
[[Page 32991]]
two expiration buckets (15-60 days and 61 days or greater) if they meet
all of the corresponding quote width, size and minimum time
requirements for all premium levels for each bucket.
LMMs and Market Makers in XND options are not obligated to satisfy
the heightened quoting standards described in the table above. Rather,
the LMM or Market Maker will only receive a rebate if they satisfy the
abovementioned heightened quoting standard. If an LMM or Market Maker
does not meet the heightened quoting standard, then it will simply not
receive the rebate for that month. The Exchange notes, however, that
with respect to quoting obligations, LMMs and Market Makers must still
comply with the continuous quoting obligations and other obligations of
LMMs and Market Makers described in the Exchange's Rules.\7\ The
Exchange believes that the proposed rebates for the additional quoting
standards described above will incentivize LMMs and Market Makers to
provide significant liquidity in XND options.
---------------------------------------------------------------------------
\7\ See supra note 4.
---------------------------------------------------------------------------
As it relates to the proposed exception to the heightened quoting
standards described above to exclude the LMM's or Market Maker's worst
quoting day in XND in a given month, the Exchange seeks to adopt this
exception to provide flexibility for LMMs and Market Makers, which in
turn may further encourage those market participants to provide
liquidity in XND options. For example, the Exchange notes that there
may be certain circumstances, such as where the LMM or Market Maker has
a system issue, that may impact their ability to meet the proposed
heightened quoting standards for that day, which could result in the
LMM or Market Maker no longer being able to satisfy the heightened
quoting standard for the remainder of the month. The Exchange believes
that the proposed change will further encourage LMMs and Market Makers
to continue to quote aggressively in XND options throughout the entire
month despite one poor performing day. For example, absent the proposed
rule change, if an LMM or Market Maker has a poor performing day early
in the month, the market participant may no longer have an incentive to
continue to quote at the proposed heightened levels for the remainder
of the month as it would know it would no longer be eligible to receive
the proposed rebates for that month even if it continued to meet or
exceed the prescribed quoting standards. Accordingly, the Exchange
believes the proposed rule change would eliminate the potential
disincentive that could occur if one poor performing day prevented an
LMM or Market Maker from meeting the proposed heightened quoting
standards.
The Exchange notes that the proposed XND incentive program is
substantially similar to incentive programs in place at Cboe that offer
financial benefits for meeting heightened quoting standards, with
certain structural differences.\8\ For instance, the proposed XND
incentive program will pay the rebates to the qualifying LMM or Market
Maker on a per contract basis, instead of as one monthly payment like
Cboe's programs. Furthermore, the proposed rebates may be cumulative
such that the qualifying LMM or Market Maker may receive up to $0.05
per contract in all XND series, as discussed above. The proposed
program will also be available to both LMMs and Market Makers in XND
whereas Cboe's programs are generally limited to LMMs. In this respect,
the Exchange seeks to expand the pool of Market Makers that may provide
liquidity in XND, which is ultimately beneficial to the marketplace by
facilitating tighter spreads and more trading opportunities,
particularly in a newly listed and traded product on the Exchange
during the trading day. In addition, while the Exchange will require
LMMs and Market Makers to satisfy the proposed heightened quoting
standards for a specified percentage of time for XND series, the
Exchange will not require LMMs or Market Makers to meet the proposed
heightened quoting requirements in a specified percentage of XND series
like Cboe's programs.\9\ Otherwise, the proposed heightened quoting
standards are similar to the detail and format (specific expiration
categories and corresponding premiums, quote widths, and sizes) of the
heightened quoting standards currently in place for Cboe's incentive
programs.\10\
---------------------------------------------------------------------------
\8\ See, e.g., Cboe Fees Schedule, ``MRUT LMM Incentive
Program,'' ``MSCI LMM Incentive Program,'' ``GTH VIX/VIXW LMM
Incentive Program,'' ``GTH SPX/SPXW LMM Incentive Program,'' and
``RTH SPESG LMM Incentive Program.''
\9\ For example, Cboe's RTH SPESG LMM Incentive Program requires
the LMM to meet the specified heightened quoting standards in at
least 60% of the series 90% of the time in a given month.
\10\ See supra note 8.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\11\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\12\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees and
other charges among members and issuers and other persons using any
facility, and is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Exchange believes that the proposed XND incentive program is
reasonable, equitable, and not unfairly discriminatory. The proposed
heightened quoting standards and rebate amounts for meeting the
heightened quoting standards in XND series are reasonably designed to
incentivize an LMM or Market Maker to meet the quoting standards for
XND during the trading day, thereby providing liquid and active
markets, which facilitates tighter spreads, increased trading
opportunities, and overall enhanced market quality to the benefit of
all market participants, particularly in a newly listed and traded
product like XND in order to encourage its growth on the Exchange. The
Exchange believes that creating an incentive program in which LMMs and
Market Makers must satisfy a heightened quoting standard to receive the
rebates is a reasonable way to fortify market quality in XND,
especially given XND's new market ecosystem where the Exchange expects
lower trading liquidity and trading levels as compared to more
established products that generally contain deeper pools of liquidity
and are more active.
The Exchange believes that the proposed rebates are set at
appropriate levels that are reasonably designed to incentivize LMMs and
Market Makers to provide liquid and active markets in XND options to
encourage its growth on the Exchange. As stated in the Adopting Filing,
the Exchange is seeking to attract a greater source of retail customer
business by listing XND options.\13\ Accordingly, the Exchange is
proposing to provide a higher rebate in XND series with expirations of
14 days or less as compared to longer-term XND series (i.e., $0.03 per
contract compared to $0.01 per contract) in order to incentivize
significant liquidity in retail XND orders, which would typically be in
XND series with shorter expirations and lower premiums. The Exchange
also believes that allowing the proposed rebates to be cumulative such
that qualifying LMMs and Market Makers could receive a total rebate of
up to $0.05 per contract would encourage a more liquid and active
market in all XND series, which will have a beneficial impact on market
quality.
---------------------------------------------------------------------------
\13\ See supra note 3.
---------------------------------------------------------------------------
The Exchange believes that the proposed heightened quoting
standards in XND options are reasonable in that
[[Page 32992]]
they are similar to the detail and format (specific expiration
categories and corresponding premiums, quote widths, and sizes) of the
heightened quoting standards currently in place for Cboe's incentive
programs.\14\ For example, the proposed expiration categories are
similar to those for Cboe's MRUT LMM incentive program except the
Exchange will not have a separate expiration category for long term
options (i.e., 271 days or greater). The Exchange notes that it does
not currently list any long term XND options series. The Exchange
believes that the proposed premiums and quote widths in the proposed
heightened quoting standards for XND LMMs and Market Makers reasonably
reflect what the Exchange believes will be typical market
characteristics in XND options, given their reduced notional value
based on the Nasdaq 100 Index, minimum increments, and target retail
base, thus smaller, retail-sized orders. In addition, the Exchange
believes that the proposed size requirement of five (5) contracts in
the heightened quoting standards is a reasonable balance of the typical
market characteristics of an XND order (i.e., smaller, retail-sized
orders) and the desire for the Exchange to encourage significant
liquidity in XND options. Furthermore, the Exchange believes that the
proposed minimum time requirements are set at reasonable levels that
would encourage LMMs and Market Makers to contribute to greater
liquidity in a newly-listed product like XND.
---------------------------------------------------------------------------
\14\ See supra note 8.
---------------------------------------------------------------------------
The Exchange believes the proposed XND incentive program is
equitable and not unfairly discriminatory as all LMMs and Market Makers
may qualify for this program by meeting the heightened quoting
standards described above. In addition, the Exchange believes that it
is equitable and not unfairly discriminatory to only offer the proposed
incentives to LMMs and Market Makers. LMMs and Market Makers add value
through continuous quoting and are subject to additional requirements
and obligations (such as continuous quoting obligations) that other
market participants are not. Furthermore, by incentivizing LMMs and
Market Makers to satisfy the heightened quoting standards in XND
series, the proposed changes may increase liquidity and tighter
spreads, which can lead to increased volume, thereby benefitting all
market participants by providing a robust market, particularly in a
newly listed and traded product like XND in order to encourage its
growth on the Exchange.
The Exchange believes that the proposed rule change to exclude the
LMM's or Market Maker's worst quoting day each month is reasonable
because it will encourage those market participants to continue to
quote aggressively in XND options throughout the entire month despite
an individual poor performing day. As discussed above, there may be
days on which an LMM or Market Maker cannot quote aggressively (e.g.,
the market participant has a system issue) and in certain months, one
poor performing day may prevent an LMM or Market Maker from meeting the
heightened quoting standard required to receive the rebates under the
proposed incentive program. Moreover, in such months where an LMM or
Market Maker has a poor performing day, the LMM or Market Maker may be
discouraged from quoting aggressively the remainder of the month if it
knows it were no longer eligible to receive the rebates that month.
This can be especially problematic if a poor performing day occurs
early in the month. The Exchange notes that the proposed XND rebate
program is to ensure there are sufficient incentives for an LMM or
Market Maker to quote at heightened levels in this newly-listed
product. Accordingly, the Exchange believes the proposed rule change
will encourage LMMs and Market Makers to quote aggressively in a class
throughout the entire month (and thereby ensure sufficient liquidity),
notwithstanding a poor performing day. The Exchange also notes that its
affiliated exchange, Nasdaq ISE, LLC (``ISE'') similarly omits a Market
Maker's worst quoting day each month under its Market Maker Plus rebate
program.\15\ Lastly, the Exchange believes the proposed exclusion is
equitable and not unfairly discriminatory as it will apply equally to
all LMMs and Market Makers.
---------------------------------------------------------------------------
\15\ See ISE Options 7, Section 3, footnote 5.
---------------------------------------------------------------------------
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 intra-market competition, the Exchange does not believe
that its proposal will place any category of market participant at a
competitive disadvantage. The proposed XND incentive program is
intended to encourage growth in a newly listed and traded product by
providing rebates for LMMs and Market Makers that meet or exceed the
proposed heighted quoting standards described above. As discussed
above, the Exchange believes that its proposal will incentivize LMMS
and Market Makers to provide significant liquidity in XND options
during the trading day, which, in turn, would provide greater trading
opportunities, narrower bid-ask spreads, and enhanced price discovery
for all market participants in XND.
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 there are
other products today that are similarly based on the Nasdaq-100 Index.
Specifically, market participants are offered an opportunity to
transact in NDX, NDXP, or NQX, or separately execute options overlying
QQQ, which offer various notional sizes.\16\ 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.
Furthermore, the Exchange notes that there are other existing
investment products that are similar to XND options in that they seek
to allow investors to gain broad market exposure through reduced value
options.\17\ In sum, if the changes proposed herein are unattractive to
market participants, it is likely that the Exchange will lose market
share as a result.
---------------------------------------------------------------------------
\16\ See e.g., Options 7, Section 5.A for NDX and NDXP pricing.
See also ISE Options 7, Section 5.B for NQX pricing. NQX is
currently listed only on ISE.
\17\ For instance, Cboe offers both MRUT and Mini-SPX (``XSP'')
options, which are reduced-value options based on broad-based
indexes (i.e., the Russell 2000 Index and S&P 500 Index). See Cboe
Fees Schedule for MRUT and XSP pricing.
---------------------------------------------------------------------------
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
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \18\ and
[[Page 32993]]
subparagraph (f)(6) of Rule 19b-4 thereunder.\19\
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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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-2021-36 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-2021-36. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-Phlx-2021-36 and should be submitted on
or before July 14, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-13105 Filed 6-22-21; 8:45 am]
BILLING CODE 8011-01-P
