Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Pricing Schedule at Equity 7, Section 3 To Modify the Enhanced Market Quality Program, 59767-59771 [2021-23435]
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Federal Register / Vol. 86, No. 206 / Thursday, October 28, 2021 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–93406; File No. SR–Phlx–
2021–64]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the
Exchange’s Pricing Schedule at Equity
7, Section 3 To Modify the Enhanced
Market Quality Program
October 22, 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 October
19, 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 Equity 7,
Section 3, to modify the Enhanced
Market Quality Program, as described
further below. The text of the proposed
rule change is available on the
Exchange’s website at https://
listingcenter.nasdaq.com/rulebook/
phlx/rules, at the principal office of the
Exchange, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend Equity 7, Section 3
to modify the Enhanced Market Quality
Program, which the Exchange
established earlier this year.3
The Existing Enhanced Market Quality
Program
The Enhanced Market Quality
Program, as it presently exists on the
Exchange, provides supplemental
incentives to member organizations that
meet certain quality standards in acting
as market makers for securities on the
Exchange. It rewards member
organizations that make a significant
contribution to market quality by
providing liquidity at the national best
bid and offer (‘‘NBBO’’) in a large
number of securities for a significant
portion of the day.4
Specifically, the Exchange makes a
lump sum payment at the end of each
month (a ‘‘Fixed Payment’’) to a member
organization to the extent that the
member organization, through one or
more of its MPIDs, quotes at the NBBO
for at least a threshold percentage of the
time during Market Hours in an average
number of securities per day during the
month, as specified below (satisfying
the ‘‘NBBO requirement’’).
On a daily basis, the Exchange
determines the number of securities in
which each of a member organization’s
MPIDs satisfies the NBBO requirement.
The Exchange aggregates all of a
member organization’s MPIDs to
determine the number of securities for
purposes of the NBBO requirement.
59767
The Program is open to all member
organizations. A member organization
may, but is not required to be, a
registered market maker in any security;
thus, the Program does not by itself
impose a two-sided quotation obligation
or convey any of the benefits associated
with being a registered market maker.
Accordingly, the Program is designed to
attract liquidity both from traditional
market makers and from other firms that
are willing to commit capital to support
liquidity at the NBBO.
The Exchange determines the amount
of the Fixed Payment that it pays to a
qualifying member organization by
multiplying the average daily number of
its qualifying securities during the
month within the range set forth in the
highest qualifying Tier (rounded to the
nearest whole number) by the
applicable amounts set forth in the
tables below and adding the specified
lump sum, where applicable. For a
particular Tape A security to count
towards the threshold for qualifying for
the Fixed Payment on a particular day,
and receiving the Fixed Payment, a
member organization has to quote such
security at the NBBO for at least 30% of
the time during Market Hours on that
day. For a particular Tape B security to
count towards the threshold for
qualifying for the Fixed Payment on a
particular day, and receiving the Fixed
Payment, a member organization has to
quote such security at the NBBO for at
least 50% of the time during Market
Hours on that day. A member
organization that qualifies for the Fixed
Payment for securities in each of Tapes
A and B receive Fixed Payments
covering qualifying securities in both
Tapes, but within each Tape, a member
organization may only qualify for one
Tier during a month. The Exchange
notes that it makes the Fixed Payment
in addition to other rebates or fees
provided under Equity 7, Sections 3 (a)–
(c).
The existing schedules of Tiers and
Fixed Payments are as follows:
TAPE A SECURITIES
jspears on DSK121TN23PROD with NOTICES1
Tiers
1
2
3
4
5
.........
.........
.........
.........
.........
1 15
2 17
Average daily number of securities quoted at the NBBO for at
least 30% of the time during Market Hours during the month
0–199 ................................................................................................
200–299 ............................................................................................
300–399 ............................................................................................
400–499 ............................................................................................
500 or greater ...................................................................................
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Fixed payment
$0 per qualified security per month.
$25 per qualified security over 199.
$2,500 + ($200 per qualified security over 299).
$22,500 + ($300 per qualified security over 399).
$52,500 + ($400 per qualified security over 499).
3 See Securities Exchange Act Release No. 34–
92754 (August 25, 2021), 86 FR 48789 (August 31,
2021) (SR–Phlx–2021–47).
4 For purposes of the Enhanced Market Quality
Program, a member organization is deemed to quote
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at the NBBO in a security if it quotes a displayed
order of at least 100 shares in the security and
prices the order at either the national best bid or
the national best offer or both the national best bid
and offer for the security.
E:\FR\FM\28OCN1.SGM
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TAPE B SECURITIES
Tiers
1
2
3
4
.........
.........
.........
.........
Average daily number of securities quoted at the NBBO for at
least 50% of the time during Market Hours during the month
Fixed payment
0–299 ................................................................................................
300–399 ............................................................................................
400–499 ............................................................................................
500 or greater ...................................................................................
In establishing this Program, the
Exchange hoped to provide improved
trading conditions for all market
participants through narrower bid-ask
spreads and increased depth of liquidity
available at the inside market. In
addition, the Program reflected an effort
by the Exchange to use financial
incentives to encourage a wider variety
of member organizations to make
positive commitments to promote
market quality. The Exchange believes
that different member organizations may
respond to different incentives, and
therefore the Enhanced Market Quality
Program was designed to promote
market quality through quoting activity.
The Exchange recognized that while
generally market participants will
provide quotes with the intention of
trading, market makers and liquidity
providers cannot control when
counterparties choose to interact with
those quotes; as such, the Exchange
believed that it would be beneficial to
the market to offer this incentive based
on quoting activity directly.
Proposed Amendments to the Existing
Enhanced Market Quality Program
The Exchange remains committed to
achieving the objectives of the
Enhanced Market Quality Program
insofar as it believes that the Program
$0 per qualified security per month.
$100 per qualified security over 299.
$10,000 + ($200 per qualified security over 399).
$30,000 + ($300 per qualified security over 499).
will facilitate the growth and
strengthening of its market. However,
the Exchange has determined that the
existing design of the Program requires
modification to improve its
effectiveness. As presently designed, the
Enhanced Market Quality Program
provides incentives to those member
organizations that meet the NBBO
requirement for all securities in Tapes A
and B, without consideration for the
extent to which such securities actually
trade. As a result, the Exchange has
observed that it has paid much of its
Fixed Payments to member
organizations for quoting at the NBBO
in securities that trade scarcely, if at all.
Paying incentives in this way has done
little to raise the profile and
attractiveness of the Exchange. The
Exchange believes that it would be
better positioned to meet its objectives
by reallocating incentives so that they
reward member organizations that meet
the NBBO requirement for securities in
Tapes A and B that are in demand
among market participants and trade
extensively. To this end, the Exchange
proposes the following amendments to
the Enhanced Market Quality Program.
First, rather than pay Fixed Payments
to member organizations that meet the
NBBO requirements for any Tape A or
B security, the Exchange proposes to
limit payments each month to the top
1,500 securities in each of these Tapes,
as determined by their total value traded
during the second month prior to the
current month. The Exchange would
then divide these 1,500 securities into
three equal groups (or ‘‘Classes’’) for
each Tape, with the top 500 ranked
securities placed in Class 3, the middle
500 ranked securities placed in Class 2,
and the lowest ranked 500 securities
placed in Class 1. The Exchange would
assign Fixed Payment amounts to each
of the three Classes in each Tape and in
each of five Tiers,5 with these amounts
generally increasing from Class 1 to
Class 3, and from Tiers 1–5. Generally
speaking (with exceptions set forth in
the schedules below), this proposed
structure would provide the largest
Fixed Payments to those member
organizations that meet the NBBO
requirement in the greatest number of
qualifying securities and those that
trade most extensively, and the lowest
incentives to those member
organizations that meet the NBBO
requirement in the fewest number of
qualifying securities and those that
trade least extensively.
The proposed amended schedules are
as follows:
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TAPE A SECURITIES
Tiers
Average daily
number of securities quoted at
the NBBO for at
least 30% of the
time during Market Hours during
the month
1 ....................
0–24 ..................
2 ....................
25–49 ................
3 ....................
50–149 ..............
4 ....................
150–249 ............
5 ....................
250 or greater ...
Fixed payment for securities in
Tape A in Class 1
Fixed payment for securities in
Tape A in Class 2
Fixed payment for securities in
Tape A in Class 3.
$0 per qualified security per
month.
$0 per qualified security per
month.
$50 per qualified security per
month [sic].
$5,000 + ($100 per qualified security over 149) per month.
$15,000 + ($150 per qualified security over 249) per month.
$0 per qualified security per
month.
$0 per qualified security per
month.
$200 per qualified security over 49
per month.
$20,000 + ($300 per qualified security over 149) per month.
$50,000 + ($350 per qualified security over 249) per month.
$0 per qualified security per
month.
$200 per qualified security over 24
per month.
$5,000 + ($450 per qualified security over 49) per month.
$50,000 + ($600 per qualified security over 149) per month.
$50,000 + ($600 per qualified security over 149) per month.
5 For securities in Tape B, the Exchange proposes
to increase the number of Tiers from 4 to 5. For
securities in both Tapes A and B, the Exchange
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proposes to modify the numbers of securities for
which a member organization must meet the NBBO
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requirement during Market Hours during the month
to qualify for each of these Tiers.
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59769
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TAPE B SECURITIES
Tiers
Average daily
number of securities quoted at
the NBBO for at
least 50% of the
time during Market Hours during
the month
1 ....................
0–24 ..................
2 ....................
25–49 ................
3 ....................
50–149 ..............
4 ....................
150–249 ............
5 ....................
250 or greater ...
Fixed payment for securities in
Tape B in Class 1
Fixed payment for securities in
Tape B in Class 2
Fixed payment for securities in
Tape B in Class 3.
$0 per qualified security per
month.
$0 per qualified security per
month.
$0 per qualified security per
month.
$50 per qualified security over 149
per month.
$5,000 + ($75 per qualified security over 249) per month.
$0 per qualified security per
month.
$0 per qualified security per
month.
$25 per qualified security over 49
per month.
$2,500 + ($50 per qualified security over 149) per month.
$7,500 + ($150 per qualified security over 249) per month.
$0 per qualified security per
month.
$100 per qualified security over 24
per month.
$2,500 + ($150 per qualified security over 49) per month.
$17,500 + ($300 per qualified security over 149) per month.
$17,500 + ($300 per qualified security over 149) per month.
Under these proposed amended
schedules, a member organization that
meets the NBBO requirement for a
requisite number of qualifying securities
during a month to qualify for a
particular Tier will be entitled to receive
the Fixed Payment that corresponds to
the combination of: (i) That Tier; and (ii)
the Class in which the Exchange has
placed the qualifying securities for that
month.
Generally speaking, the Tier
qualification calculation methodology
will not change under the proposal,6
except that the numbers of securities for
which a member organization must
meet the NBBO requirement to qualify
for each Tier will be different. Also, the
universe of qualifying securities that
count towards the Tier requirement will
be limited to the Exchange’s list of the
top 1,500 securities for each Tape by
total value traded during the second
month prior to the current month (e.g.,
for October 2021, the measurement
period for determining the list will be
August 2021). The Exchange notes that
a symbol that did not trade during the
measurement month will not be eligible
for inclusion in the list.
Under the proposal, a member
organization that qualifies for a Fixed
Payment for securities in each of Tapes
A and B and in multiple Classes within
each Tape will receive Fixed Payments
covering qualifying securities in both
Tapes, and within each Tape, for the
each of the applicable Classes, but
within each Tape and Class, a member
organization may only qualify for one
Tier during a month. The Exchange will
continue to pay the Fixed Payment in
addition to other rebates or fees
6 The amended Program will continue to be open
to all member organizations. As in the existing
Program, a member organization may, but is not
required to be, a registered market maker in any
security.
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17:34 Oct 27, 2021
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provided under Equity 7, Sections 3(a)–
(c).
As of the outset of every month, the
Exchange will reevaluate and, as
applicable, update its lists of the
securities that it places in each Class,
and it will publish its updated lists on
its website as of the outset of the month
in which they will apply.
The following are examples of the
operation of the proposed amended
Enhanced Market Quality Program.
Example 1: A member organization
quotes an average of 200 symbols a day
in Tape A, Class 2 in excess of the 30%
NBBO requirement to qualify for a Tier
during the month. Under the proposal,
the member organization would qualify
for a Fixed Payment equal to the
combination of Tier 4, Class 2. The
Fixed Payment due to such member
organization is calculated as follows: 51
(the number of symbols over 149) times
$300, which equals $15,300, plus
$20,000, for a total of $35,300 for the
month.
Example 2: A member organization
meets the NBBO requirements for an
average of 200 symbols a day in Tape A,
Class 2, 26 symbols a day in securities
in Tape A, Class 3, and 51 securities in
Tape B, Class 2. In this scenario, the
member organization would qualify for
three Fixed Payments.
• First, for the 200 Tape A, Class 2
securities for which the member
organization meets the NBBO
requirement during the month, the
member organization would receive a
Fixed Payment equal to the combination
of Tier 4, Class 2. The Fixed Payment
due to such member organization is
calculated as follows: 51 (the number of
symbols over 149) times $300, which
equals $15,300, plus $20,000, for a total
of $35,300 for the month.
• Second, for the 26 Tape A, Class 3
securities for which the member
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organization meets the NBBO
requirement during the month, the
member organization would receive a
Fixed Payment equal to the combination
of Tier 2, Class 3. The Fixed Payment
due to such member organization is
calculated as follows: 2 (the number of
symbols over 24) times $200, which
equals $400 for the month.
• Third, for the 51 Tape B, Class 2
securities for which the member
organization meets the NBBO
requirement during the month, the
member organization would receive a
Fixed Payment equal to the combination
of Tier 3, Class 2. The Fixed Payment
due to such member organization is
calculated as follows: 2 (the number of
symbols over 49) times $25, which
equals $50 for the month.
The total of all Fixed Payments due to
the member organization for the month
will be $35,750 ($35,300 + $400 + $50).
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,7 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,8 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees and other charges
among member organizations and
issuers and other persons using any
facility, and is not designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.
The Commission and the courts have
repeatedly expressed their preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. In Regulation NMS, while
adopting a series of steps to improve the
current market model, the Commission
7 15
8 15
E:\FR\FM\28OCN1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
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highlighted the importance of market
forces in determining prices and SRO
revenues and, also, recognized that
current regulation of the market system
‘‘has been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 9
Likewise, in NetCoalition v. Securities
and Exchange Commission 10
(‘‘NetCoalition’’) the D.C. Circuit stated
as follows: ‘‘[n]o one disputes that
competition for order flow is ‘fierce.’
. . . As the SEC explained, ‘[i]n the U.S.
national market system, buyers and
sellers of securities, and the brokerdealers that act as their order-routing
agents, have a wide range of choices of
where to route orders for execution’;
[and] ‘no exchange can afford to take its
market share percentages for granted’
because ‘no exchange possesses a
monopoly, regulatory or otherwise, in
the execution of order flow from broker
dealers’. . . .’’ 11
The Exchange believes that the
proposed amended Enhanced Market
Quality Program is reasonable because it
is similar to other incentive programs
offered by the Exchange for displayed
orders that provide liquidity, like the
Qualified Market Maker Program set
forth in Equity 7, Sections 3(c). The
proposed amended Fixed Payment will
provide an opportunity to member
organizations to receive an additional
credit in return for certain levels of
participation on the Exchange as
measured by quoting at the NBBO for a
significant portion of the day each
month. The proposed Fixed Payment is
set at a level that reflects the beneficial
contributions of market participants that
quote significantly at the NBBO in
certain qualifying securities. The
Exchange believes that it is reasonable
to amend the Program to limit the
universe of qualifying securities to a list
of 1,500 symbols that traded most
extensively on the Exchange in Tapes A
and B during the second month prior to
the current month, and to vary the
amount of Fixed Payments in relation to
the relative extent to which symbols on
that list trade, because improving the
quality of quotes for more popular
symbols will do more to enhance the
attractiveness of the Exchange than will
improving quote quality for thinlytraded symbols. Given that the
9 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
10 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir.
2010).
11 Id. at 539 (quoting Securities Exchange Act
Release No. 59039 (December 2, 2008), 73 FR
74770, 74782–83 (December 9, 2008) (SR–
NYSEArca–2006–21)).
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Exchange has finite resources to allocate
to incentive programs, it is reasonable to
allocate (or reallocate) those resources
in a manner that is most likely to
achieve its intended objectives. The
Exchange notes that a competing
exchange which operates a similar
incentive program also targets its
incentives to a select list of symbols.12
The Exchange believes that it remains
reasonable to limit applicability of the
proposed Fixed Payments to securities
in Tapes A and B, and to set the credits
higher for the Tape A securities, insofar
as the Exchange seeks to incentivize
member organizations to quote at the
NBBO on the Exchange in such
securities and improve the market
therefor.
The Exchange believes that the
proposed amended Fixed Payments set
forth by the Enhanced Market Quality
Program are an equitable allocation and
are not unfairly discriminatory because
the Exchange will offer the same Fixed
Payment rates to all similarly situated
member organizations. Moreover, the
proposed qualification criteria requires
a member organization to quote
significantly at the NBBO in securities
that trade extensively, therefore
contributing to market quality in a
meaningful way on the Exchange. Any
member organization may quote at the
NBBO at the level required by the
qualification criteria of the Enhanced
Market Quality Program. The Exchange
notes that it has a similar Qualified
Market Maker Program in which
member organizations are required to
quote at the NBBO more than a certain
amount of time during regular market
hours.13 For these reasons, the Exchange
believes that the proposed amended
Enhanced Market Quality Program
Fixed Payments and qualification
criteria are an equitable allocation and
are not unfairly discriminatory.
The Exchange also believes that it is
equitable and not unfairly
discriminatory to apply the Enhanced
Market Quality Program only to Tape A
12 Securities Exchange Act Release No. 34–92150
(June 10, 2021), 86 FR 32090, 32091 n.9 (June 16,
2021) (‘‘SR–MEMX–2021–07’’) (‘‘As proposed, the
term ‘DLI Target Securities’ means a list of
securities designated as such, the universe of which
will be determined by the Exchange and published
on the Exchange’s website. The Exchange
anticipates that the initial DLI Target Securities list
will include between 275 and 300 securities. The
DLI Target Securities list will always include at
least 75 securities and may be periodically updated
by the Exchange, provided that the Exchange will
not remove a security from the DLI Target Securities
list without at least 30 days’ prior notice to
Members as published on the Exchange’s website
(unless the security is no longer eligible for trading
on the Exchange).’’
13 See Qualified Market Maker Program, Equity 7,
Section 3(c).
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and Tape B securities, and then only to
the top 1,500 symbols in each Tape by
total value traded during the second
month prior to the current month, and
to set the Fixed Payment rates higher for
the Tape A securities than Tape B
securities, because the Exchange has
limited resources available to it for
incentive programs and the Exchange
believes that the most effective
application of such limited resources is
to improve the market quality for the
most actively traded Tape A and Tape
B securities, as proposed.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. In terms of
inter-market competition, the Exchange
notes that it operates in a highly
competitive market in which market
participants can readily favor competing
venues if they deem fee levels at a
particular venue to be excessive, or
rebate opportunities available at other
venues to be more favorable. In such an
environment, the Exchange must
continually adjust its fees to remain
competitive with other exchanges and
with alternative trading systems that
have been exempted from compliance
with the statutory standards applicable
to exchanges. Because competitors are
free to modify their own fees in
response, and because market
participants may readily adjust their
order routing practices, the Exchange
believes that the degree to which fee
changes in this market may impose any
burden on competition is extremely
limited.
In this instance, the proposed changes
to the Exchange’s Program do not
impose a burden on competition
because the Exchange’s execution
services are completely voluntary and
subject to extensive competition both
from other exchanges and from offexchange venues. The proposed
amended Program will continue to
provide member organizations with the
opportunity to receive incentive
payments if they improve the market by
providing significant quoting at the
NBBO in a large number of securities,
while limiting the universe of such
securities to those which the Exchange
believes will do most to improve market
quality.
In terms of intra-market 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 because the program
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is open to all member organizations on
the same terms.
In sum, the proposed amendments to
the Program are designed to render it
more effective in improving the quality
of the Exchange for securities that are
likely to attract the greatest trading
interest; however, if the changes
proposed herein are unattractive to
market participants, it is likely that the
Exchange will lose market share as a
result. Accordingly, the Exchange does
not believe that the proposed changes
will impair the ability of member
organizations or competing order
execution venues to maintain their
competitive standing in the financial
markets.
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.14
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:
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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–2021–64 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–2021–64. 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–2021–64 and should
be submitted on or before November 18,
2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–23435 Filed 10–27–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–93407; File No. SR–
NASDAQ–2021–081]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend the
Exchange’s Schedule of Transaction
Credits and Charges at Equity 7,
Section 118(a)
October 22, 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 October
13, 2021, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ 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 schedule of transaction
credits and charges, at Equity 7, Section
118(a) as described further below.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/nasdaq/rules, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend the Exchange’s
schedule of transaction credits and
charges, at Equity 7, Section 118(a).
Each month, the Exchange determines
the applicability to a member of the
various credits and charges set forth in
this schedule based, in part, on the
nature and extent of a member’s
activities on the Exchange during the
month. Credits generally apply to
members that add liquidity to the
Exchange during the month, with credit
amounts varying based upon the extent
or nature of such liquidity adding
activity, or other criteria, while
transaction charges that are discounted
1 15
14 15
U.S.C. 78s(b)(3)(A)(ii).
VerDate Sep<11>2014
17:34 Oct 27, 2021
15 17
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Frm 00078
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
28OCN1
]]>Agencies
[Federal Register Volume 86, Number 206 (Thursday, October 28, 2021)]
[Notices]
[Pages 59767-59771]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-23435]
[[Page 59767]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93406; File No. SR-Phlx-2021-64]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Exchange's Pricing Schedule at Equity 7, Section 3 To Modify the
Enhanced Market Quality Program
October 22, 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 October 19, 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
Equity 7, Section 3, to modify the Enhanced Market Quality Program, as
described further below. The text of the proposed rule change is
available on the Exchange's website at https://listingcenter.nasdaq.com/rulebook/phlx/rules, at the principal office
of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend Equity 7,
Section 3 to modify the Enhanced Market Quality Program, which the
Exchange established earlier this year.\3\
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 34-92754 (August 25,
2021), 86 FR 48789 (August 31, 2021) (SR-Phlx-2021-47).
---------------------------------------------------------------------------
The Existing Enhanced Market Quality Program
The Enhanced Market Quality Program, as it presently exists on the
Exchange, provides supplemental incentives to member organizations that
meet certain quality standards in acting as market makers for
securities on the Exchange. It rewards member organizations that make a
significant contribution to market quality by providing liquidity at
the national best bid and offer (``NBBO'') in a large number of
securities for a significant portion of the day.\4\
---------------------------------------------------------------------------
\4\ For purposes of the Enhanced Market Quality Program, a
member organization is deemed to quote at the NBBO in a security if
it quotes a displayed order of at least 100 shares in the security
and prices the order at either the national best bid or the national
best offer or both the national best bid and offer for the security.
---------------------------------------------------------------------------
Specifically, the Exchange makes a lump sum payment at the end of
each month (a ``Fixed Payment'') to a member organization to the extent
that the member organization, through one or more of its MPIDs, quotes
at the NBBO for at least a threshold percentage of the time during
Market Hours in an average number of securities per day during the
month, as specified below (satisfying the ``NBBO requirement'').
On a daily basis, the Exchange determines the number of securities
in which each of a member organization's MPIDs satisfies the NBBO
requirement. The Exchange aggregates all of a member organization's
MPIDs to determine the number of securities for purposes of the NBBO
requirement.
The Program is open to all member organizations. A member
organization may, but is not required to be, a registered market maker
in any security; thus, the Program does not by itself impose a two-
sided quotation obligation or convey any of the benefits associated
with being a registered market maker. Accordingly, the Program is
designed to attract liquidity both from traditional market makers and
from other firms that are willing to commit capital to support
liquidity at the NBBO.
The Exchange determines the amount of the Fixed Payment that it
pays to a qualifying member organization by multiplying the average
daily number of its qualifying securities during the month within the
range set forth in the highest qualifying Tier (rounded to the nearest
whole number) by the applicable amounts set forth in the tables below
and adding the specified lump sum, where applicable. For a particular
Tape A security to count towards the threshold for qualifying for the
Fixed Payment on a particular day, and receiving the Fixed Payment, a
member organization has to quote such security at the NBBO for at least
30% of the time during Market Hours on that day. For a particular Tape
B security to count towards the threshold for qualifying for the Fixed
Payment on a particular day, and receiving the Fixed Payment, a member
organization has to quote such security at the NBBO for at least 50% of
the time during Market Hours on that day. A member organization that
qualifies for the Fixed Payment for securities in each of Tapes A and B
receive Fixed Payments covering qualifying securities in both Tapes,
but within each Tape, a member organization may only qualify for one
Tier during a month. The Exchange notes that it makes the Fixed Payment
in addition to other rebates or fees provided under Equity 7, Sections
3 (a)-(c).
The existing schedules of Tiers and Fixed Payments are as follows:
Tape A Securities
------------------------------------------------------------------------
Average daily number of
securities quoted at the
Tiers NBBO for at least 30% of Fixed payment
the time during Market
Hours during the month
------------------------------------------------------------------------
1.............. 0-199...................... $0 per qualified security
per month.
2.............. 200-299.................... $25 per qualified security
over 199.
3.............. 300-399.................... $2,500 + ($200 per
qualified security over
299).
4.............. 400-499.................... $22,500 + ($300 per
qualified security over
399).
5.............. 500 or greater............. $52,500 + ($400 per
qualified security over
499).
------------------------------------------------------------------------
[[Page 59768]]
Tape B Securities
------------------------------------------------------------------------
Average daily number of
securities quoted at the
Tiers NBBO for at least 50% of Fixed payment
the time during Market
Hours during the month
------------------------------------------------------------------------
1.............. 0-299...................... $0 per qualified security
per month.
2.............. 300-399.................... $100 per qualified
security over 299.
3.............. 400-499.................... $10,000 + ($200 per
qualified security over
399).
4.............. 500 or greater............. $30,000 + ($300 per
qualified security over
499).
------------------------------------------------------------------------
In establishing this Program, the Exchange hoped to provide
improved trading conditions for all market participants through
narrower bid-ask spreads and increased depth of liquidity available at
the inside market. In addition, the Program reflected an effort by the
Exchange to use financial incentives to encourage a wider variety of
member organizations to make positive commitments to promote market
quality. The Exchange believes that different member organizations may
respond to different incentives, and therefore the Enhanced Market
Quality Program was designed to promote market quality through quoting
activity. The Exchange recognized that while generally market
participants will provide quotes with the intention of trading, market
makers and liquidity providers cannot control when counterparties
choose to interact with those quotes; as such, the Exchange believed
that it would be beneficial to the market to offer this incentive based
on quoting activity directly.
Proposed Amendments to the Existing Enhanced Market Quality Program
The Exchange remains committed to achieving the objectives of the
Enhanced Market Quality Program insofar as it believes that the Program
will facilitate the growth and strengthening of its market. However,
the Exchange has determined that the existing design of the Program
requires modification to improve its effectiveness. As presently
designed, the Enhanced Market Quality Program provides incentives to
those member organizations that meet the NBBO requirement for all
securities in Tapes A and B, without consideration for the extent to
which such securities actually trade. As a result, the Exchange has
observed that it has paid much of its Fixed Payments to member
organizations for quoting at the NBBO in securities that trade
scarcely, if at all. Paying incentives in this way has done little to
raise the profile and attractiveness of the Exchange. The Exchange
believes that it would be better positioned to meet its objectives by
reallocating incentives so that they reward member organizations that
meet the NBBO requirement for securities in Tapes A and B that are in
demand among market participants and trade extensively. To this end,
the Exchange proposes the following amendments to the Enhanced Market
Quality Program.
First, rather than pay Fixed Payments to member organizations that
meet the NBBO requirements for any Tape A or B security, the Exchange
proposes to limit payments each month to the top 1,500 securities in
each of these Tapes, as determined by their total value traded during
the second month prior to the current month. The Exchange would then
divide these 1,500 securities into three equal groups (or ``Classes'')
for each Tape, with the top 500 ranked securities placed in Class 3,
the middle 500 ranked securities placed in Class 2, and the lowest
ranked 500 securities placed in Class 1. The Exchange would assign
Fixed Payment amounts to each of the three Classes in each Tape and in
each of five Tiers,\5\ with these amounts generally increasing from
Class 1 to Class 3, and from Tiers 1-5. Generally speaking (with
exceptions set forth in the schedules below), this proposed structure
would provide the largest Fixed Payments to those member organizations
that meet the NBBO requirement in the greatest number of qualifying
securities and those that trade most extensively, and the lowest
incentives to those member organizations that meet the NBBO requirement
in the fewest number of qualifying securities and those that trade
least extensively.
---------------------------------------------------------------------------
\5\ For securities in Tape B, the Exchange proposes to increase
the number of Tiers from 4 to 5. For securities in both Tapes A and
B, the Exchange proposes to modify the numbers of securities for
which a member organization must meet the NBBO requirement during
Market Hours during the month to qualify for each of these Tiers.
---------------------------------------------------------------------------
The proposed amended schedules are as follows:
Tape A Securities
----------------------------------------------------------------------------------------------------------------
Average daily
number of
securities quoted
at the NBBO for at Fixed payment for Fixed payment for Fixed payment for
Tiers least 30% of the securities in Tape securities in Tape securities in Tape
time during Market A in Class 1 A in Class 2 A in Class 3.
Hours during the
month
----------------------------------------------------------------------------------------------------------------
1............................... 0-24.............. $0 per qualified $0 per qualified $0 per qualified
security per security per security per
month. month. month.
2............................... 25-49............. $0 per qualified $0 per qualified $200 per qualified
security per security per security over 24
month. month. per month.
3............................... 50-149............ $50 per qualified $200 per qualified $5,000 + ($450 per
security per security over 49 qualified
month [sic]. per month. security over 49)
per month.
4............................... 150-249........... $5,000 + ($100 per $20,000 + ($300 $50,000 + ($600
qualified per qualified per qualified
security over security over security over
149) per month. 149) per month. 149) per month.
5............................... 250 or greater.... $15,000 + ($150 $50,000 + ($350 $50,000 + ($600
per qualified per qualified per qualified
security over security over security over
249) per month. 249) per month. 149) per month.
----------------------------------------------------------------------------------------------------------------
[[Page 59769]]
Tape B Securities
----------------------------------------------------------------------------------------------------------------
Average daily
number of
securities quoted
at the NBBO for at Fixed payment for Fixed payment for Fixed payment for
Tiers least 50% of the securities in Tape securities in Tape securities in Tape
time during Market B in Class 1 B in Class 2 B in Class 3.
Hours during the
month
----------------------------------------------------------------------------------------------------------------
1............................... 0-24.............. $0 per qualified $0 per qualified $0 per qualified
security per security per security per
month. month. month.
2............................... 25-49............. $0 per qualified $0 per qualified $100 per qualified
security per security per security over 24
month. month. per month.
3............................... 50-149............ $0 per qualified $25 per qualified $2,500 + ($150 per
security per security over 49 qualified
month. per month. security over 49)
per month.
4............................... 150-249........... $50 per qualified $2,500 + ($50 per $17,500 + ($300
security over 149 qualified per qualified
per month. security over security over
149) per month. 149) per month.
5............................... 250 or greater.... $5,000 + ($75 per $7,500 + ($150 per $17,500 + ($300
qualified qualified per qualified
security over security over security over
249) per month. 249) per month. 149) per month.
----------------------------------------------------------------------------------------------------------------
Under these proposed amended schedules, a member organization that
meets the NBBO requirement for a requisite number of qualifying
securities during a month to qualify for a particular Tier will be
entitled to receive the Fixed Payment that corresponds to the
combination of: (i) That Tier; and (ii) the Class in which the Exchange
has placed the qualifying securities for that month.
Generally speaking, the Tier qualification calculation methodology
will not change under the proposal,\6\ except that the numbers of
securities for which a member organization must meet the NBBO
requirement to qualify for each Tier will be different. Also, the
universe of qualifying securities that count towards the Tier
requirement will be limited to the Exchange's list of the top 1,500
securities for each Tape by total value traded during the second month
prior to the current month (e.g., for October 2021, the measurement
period for determining the list will be August 2021). The Exchange
notes that a symbol that did not trade during the measurement month
will not be eligible for inclusion in the list.
---------------------------------------------------------------------------
\6\ The amended Program will continue to be open to all member
organizations. As in the existing Program, a member organization
may, but is not required to be, a registered market maker in any
security.
---------------------------------------------------------------------------
Under the proposal, a member organization that qualifies for a
Fixed Payment for securities in each of Tapes A and B and in multiple
Classes within each Tape will receive Fixed Payments covering
qualifying securities in both Tapes, and within each Tape, for the each
of the applicable Classes, but within each Tape and Class, a member
organization may only qualify for one Tier during a month. The Exchange
will continue to pay the Fixed Payment in addition to other rebates or
fees provided under Equity 7, Sections 3(a)-(c).
As of the outset of every month, the Exchange will reevaluate and,
as applicable, update its lists of the securities that it places in
each Class, and it will publish its updated lists on its website as of
the outset of the month in which they will apply.
The following are examples of the operation of the proposed amended
Enhanced Market Quality Program.
Example 1: A member organization quotes an average of 200 symbols a
day in Tape A, Class 2 in excess of the 30% NBBO requirement to qualify
for a Tier during the month. Under the proposal, the member
organization would qualify for a Fixed Payment equal to the combination
of Tier 4, Class 2. The Fixed Payment due to such member organization
is calculated as follows: 51 (the number of symbols over 149) times
$300, which equals $15,300, plus $20,000, for a total of $35,300 for
the month.
Example 2: A member organization meets the NBBO requirements for an
average of 200 symbols a day in Tape A, Class 2, 26 symbols a day in
securities in Tape A, Class 3, and 51 securities in Tape B, Class 2. In
this scenario, the member organization would qualify for three Fixed
Payments.
First, for the 200 Tape A, Class 2 securities for which
the member organization meets the NBBO requirement during the month,
the member organization would receive a Fixed Payment equal to the
combination of Tier 4, Class 2. The Fixed Payment due to such member
organization is calculated as follows: 51 (the number of symbols over
149) times $300, which equals $15,300, plus $20,000, for a total of
$35,300 for the month.
Second, for the 26 Tape A, Class 3 securities for which
the member organization meets the NBBO requirement during the month,
the member organization would receive a Fixed Payment equal to the
combination of Tier 2, Class 3. The Fixed Payment due to such member
organization is calculated as follows: 2 (the number of symbols over
24) times $200, which equals $400 for the month.
Third, for the 51 Tape B, Class 2 securities for which the
member organization meets the NBBO requirement during the month, the
member organization would receive a Fixed Payment equal to the
combination of Tier 3, Class 2. The Fixed Payment due to such member
organization is calculated as follows: 2 (the number of symbols over
49) times $25, which equals $50 for the month.
The total of all Fixed Payments due to the member organization for
the month will be $35,750 ($35,300 + $400 + $50).
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\7\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\8\ in particular, in that it provides
for the equitable allocation of reasonable dues, fees and other charges
among member organizations and issuers and other persons using any
facility, and is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission
[[Page 59770]]
highlighted the importance of market forces in determining prices and
SRO revenues and, also, recognized that current regulation of the
market system ``has been remarkably successful in promoting market
competition in its broader forms that are most important to investors
and listed companies.'' \9\
---------------------------------------------------------------------------
\9\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
---------------------------------------------------------------------------
Likewise, in NetCoalition v. Securities and Exchange Commission
\10\ (``NetCoalition'') the D.C. Circuit stated as follows: ``[n]o one
disputes that competition for order flow is `fierce.' . . . As the SEC
explained, `[i]n the U.S. national market system, buyers and sellers of
securities, and the broker-dealers that act as their order-routing
agents, have a wide range of choices of where to route orders for
execution'; [and] `no exchange can afford to take its market share
percentages for granted' because `no exchange possesses a monopoly,
regulatory or otherwise, in the execution of order flow from broker
dealers'. . . .'' \11\
---------------------------------------------------------------------------
\10\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\11\ Id. at 539 (quoting Securities Exchange Act Release No.
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008)
(SR-NYSEArca-2006-21)).
---------------------------------------------------------------------------
The Exchange believes that the proposed amended Enhanced Market
Quality Program is reasonable because it is similar to other incentive
programs offered by the Exchange for displayed orders that provide
liquidity, like the Qualified Market Maker Program set forth in Equity
7, Sections 3(c). The proposed amended Fixed Payment will provide an
opportunity to member organizations to receive an additional credit in
return for certain levels of participation on the Exchange as measured
by quoting at the NBBO for a significant portion of the day each month.
The proposed Fixed Payment is set at a level that reflects the
beneficial contributions of market participants that quote
significantly at the NBBO in certain qualifying securities. The
Exchange believes that it is reasonable to amend the Program to limit
the universe of qualifying securities to a list of 1,500 symbols that
traded most extensively on the Exchange in Tapes A and B during the
second month prior to the current month, and to vary the amount of
Fixed Payments in relation to the relative extent to which symbols on
that list trade, because improving the quality of quotes for more
popular symbols will do more to enhance the attractiveness of the
Exchange than will improving quote quality for thinly-traded symbols.
Given that the Exchange has finite resources to allocate to incentive
programs, it is reasonable to allocate (or reallocate) those resources
in a manner that is most likely to achieve its intended objectives. The
Exchange notes that a competing exchange which operates a similar
incentive program also targets its incentives to a select list of
symbols.\12\
---------------------------------------------------------------------------
\12\ Securities Exchange Act Release No. 34-92150 (June 10,
2021), 86 FR 32090, 32091 n.9 (June 16, 2021) (``SR-MEMX-2021-07'')
(``As proposed, the term `DLI Target Securities' means a list of
securities designated as such, the universe of which will be
determined by the Exchange and published on the Exchange's website.
The Exchange anticipates that the initial DLI Target Securities list
will include between 275 and 300 securities. The DLI Target
Securities list will always include at least 75 securities and may
be periodically updated by the Exchange, provided that the Exchange
will not remove a security from the DLI Target Securities list
without at least 30 days' prior notice to Members as published on
the Exchange's website (unless the security is no longer eligible
for trading on the Exchange).''
---------------------------------------------------------------------------
The Exchange believes that it remains reasonable to limit
applicability of the proposed Fixed Payments to securities in Tapes A
and B, and to set the credits higher for the Tape A securities, insofar
as the Exchange seeks to incentivize member organizations to quote at
the NBBO on the Exchange in such securities and improve the market
therefor.
The Exchange believes that the proposed amended Fixed Payments set
forth by the Enhanced Market Quality Program are an equitable
allocation and are not unfairly discriminatory because the Exchange
will offer the same Fixed Payment rates to all similarly situated
member organizations. Moreover, the proposed qualification criteria
requires a member organization to quote significantly at the NBBO in
securities that trade extensively, therefore contributing to market
quality in a meaningful way on the Exchange. Any member organization
may quote at the NBBO at the level required by the qualification
criteria of the Enhanced Market Quality Program. The Exchange notes
that it has a similar Qualified Market Maker Program in which member
organizations are required to quote at the NBBO more than a certain
amount of time during regular market hours.\13\ For these reasons, the
Exchange believes that the proposed amended Enhanced Market Quality
Program Fixed Payments and qualification criteria are an equitable
allocation and are not unfairly discriminatory.
---------------------------------------------------------------------------
\13\ See Qualified Market Maker Program, Equity 7, Section 3(c).
---------------------------------------------------------------------------
The Exchange also believes that it is equitable and not unfairly
discriminatory to apply the Enhanced Market Quality Program only to
Tape A and Tape B securities, and then only to the top 1,500 symbols in
each Tape by total value traded during the second month prior to the
current month, and to set the Fixed Payment rates higher for the Tape A
securities than Tape B securities, because the Exchange has limited
resources available to it for incentive programs and the Exchange
believes that the most effective application of such limited resources
is to improve the market quality for the most actively traded Tape A
and Tape B securities, as proposed.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. In terms of inter-market
competition, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues if they deem fee levels at a particular venue to be
excessive, or rebate opportunities available at other venues to be more
favorable. In such an environment, the Exchange must continually adjust
its fees to remain competitive with other exchanges and with
alternative trading systems that have been exempted from compliance
with the statutory standards applicable to exchanges. Because
competitors are free to modify their own fees in response, and because
market participants may readily adjust their order routing practices,
the Exchange believes that the degree to which fee changes in this
market may impose any burden on competition is extremely limited.
In this instance, the proposed changes to the Exchange's Program do
not impose a burden on competition because the Exchange's execution
services are completely voluntary and subject to extensive competition
both from other exchanges and from off-exchange venues. The proposed
amended Program will continue to provide member organizations with the
opportunity to receive incentive payments if they improve the market by
providing significant quoting at the NBBO in a large number of
securities, while limiting the universe of such securities to those
which the Exchange believes will do most to improve market quality.
In terms of intra-market 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
because the program
[[Page 59771]]
is open to all member organizations on the same terms.
In sum, the proposed amendments to the Program are designed to
render it more effective in improving the quality of the Exchange for
securities that are likely to attract the greatest trading interest;
however, if the changes proposed herein are unattractive to market
participants, it is likely that the Exchange will lose market share as
a result. Accordingly, the Exchange does not believe that the proposed
changes will impair the ability of member organizations or competing
order execution venues to maintain their competitive standing in the
financial markets.
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.\14\
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\14\ 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-2021-64 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-2021-64. 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-2021-64 and should be submitted on
or before November 18, 2021.
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\15\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-23435 Filed 10-27-21; 8:45 am]
BILLING CODE 8011-01-P
