Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Phlx's Pricing Schedule at Options 7, Section 3, 3632-3635 [2022-01218]

Download as PDF 3632 Federal Register / Vol. 87, No. 15 / Monday, January 24, 2022 / Notices 10 seconds of trading followed by a narrow market at any point in the subsequent 10-second period, regardless of the types of market participants involved in such transactions. The proposed change to subsection (c)(4)(B) would harmonize the treatment of Obvious Error transactions involving Customers and non-Customers, no matter what type of market participants those parties may be. For these reasons, the Exchange believes that the proposal is consistent with the Act. thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or disapproved. 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 that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is identical to a NYSE Arca proposed rule change recently approved by the Commission.16 The Exchange anticipates that the other options exchanges will adopt substantively similar proposals, such that there would be no burden on intermarket competition from the Exchange’s proposal. Accordingly, the proposed change is not meant to affect competition among the options exchanges. For these reasons, the Exchange believes that the proposed rule change reflects this competitive environment and does not impose any undue burden on intermarket competition. 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: III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: A. Significantly affect the protection of investors or the public interest; B. impose any significant burden on competition; and C. 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 17 and Rule 19b–4(f)(6) 18 Paper Comments • Send paper comments in triplicate to Vanessa Countryman, Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–CboeEDGX–2022–003. 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, 16 See Securities Exchange Act Release No. 93818 (December 17, 2021), 86 FR 73009 (December 23, 2021) (SR–NYSEArca–2021–91). 17 15 U.S.C. 78s(b)(3)(A). 18 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. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. jspears on DSK121TN23PROD with NOTICES1 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– CboeEDGX–2022–003 on the subject line. VerDate Sep<11>2014 18:11 Jan 21, 2022 Jkt 256001 PO 00000 Frm 00138 Fmt 4703 Sfmt 4703 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–CboeEDGX–2022–003 and should be submitted on or before February 14, 2022. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.19 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2022–01223 Filed 1–21–22; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–93986; File No. SR–Phlx– 2022–01] Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Phlx’s Pricing Schedule at Options 7, Section 3 January 18, 2022. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on January 3, 2022, Nasdaq PHLX LLC (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘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 Phlx’s Pricing Schedule at Options 7, Section 3, ‘‘Rebates and Fees for Adding and Removing Liquidity in SPY.’’ The Exchange also proposes to remove obsolete rule text within Options 7, Section 9, ‘‘Other Member Fees.’’ 19 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 E:\FR\FM\24JAN1.SGM 24JAN1 Federal Register / Vol. 87, No. 15 / Monday, January 24, 2022 / Notices The text of the proposed rule change is available on the Exchange’s website at https://listingcenter.nasdaq.com/ rulebook/phlx/rules, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Phlx proposes to amend its pricing at Options 7, Section 3, ‘‘Rebates and Fees for Adding and Removing Liquidity in SPY.’’ Specifically, Phlx proposes to amend its Simple Order Customer 4 Fee for Removing Liquidity in options overlying the SPDR® S&P 500 ETF Trust (‘‘SPY’’). The Exchange also proposes to remove obsolete rule text within Options 7, Section 9, ‘‘Other Member Fees.’’ Each change will be described below. Options 7, Section 3 jspears on DSK121TN23PROD with NOTICES1 Today, the Exchange assesses a $0.38 per contract Customer Simple Order Fee for Removing Liquidity in SPY. The Exchange assesses a Lead Market 4 The term ‘‘Customer’’ applies to any transaction that is identified by a member or member organization for clearing in the Customer range at The Options Clearing Corporation (‘‘OCC’’) which is not for the account of a broker or dealer or for the account of a ‘‘Professional’’ (as that term is defined in Options 1, Section 1(b)(45)). See Options 7, Section 1(c). VerDate Sep<11>2014 18:11 Jan 21, 2022 Jkt 256001 Maker,5 Market Maker,6 Firm,7 BrokerDealer 8 and Professional 9 Simple Order Fee for Removing Liquidity in SPY of $0.48 per contract. The Exchange proposes to increase the Customer Simple Order Fee for Removing Liquidity in SPY from $0.38 to $0.41 per contract. Notwithstanding the increase, the Customer Simple Order Fee for Removing Liquidity in SPY remains the lowest fee for removing liquidity in SPY. The Exchange believes that the Customer Simple Order Fee for Removing Liquidity in SPY will continue to attract order flow to the Exchange despite the increase. Options 7, Section 9 The Exchange proposes to remove obsolete rule text within Options 7, Section 9.B, Port Fees. Options 7, Section 9.B refers to a technology infrastructure migration that occurred in 2019. The rule text related to the migration is now obsolete. At this time, the Exchange proposes to remove the rule text which describes the migration within Options 7, Section 9.B because it is outdated. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,10 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,11 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 5 The term ‘‘Lead Market Maker’’ applies to transactions for the account of a Lead Market Maker (as defined in Options 2, Section 12(a)). A Lead Market Maker is an Exchange member who is registered as an options Lead Market Maker pursuant to Rule Options 2, Section 12(a)[sic]. An options Lead Market Maker includes a Remote Lead Market Maker which is defined as an options Lead Market Maker in one or more classes that does not have a physical presence on an Exchange floor and is approved by the Exchange pursuant to Options 2, Section 11. 6 The term ‘‘Market Maker’’ is defined in Options 1, Section 1(b)(28) as a member of the Exchange who is registered as an options Market Maker pursuant to Options 2, Section 12(a). A Market Maker includes SQTs and RSQTs as well as on and Floor Market Makers. 7 The term ‘‘Firm’’ applies to any transaction that is identified by a member or member organization for clearing in the Firm range at OCC. 8 The term ‘‘Broker-Dealer’’ applies to any transaction which is not subject to any of the other transaction fees applicable within a particular category. 9 The term ‘‘Professional’’ applies to transactions for the accounts of Professionals, as defined in Exchange Rule 1000(b)(43) means any person or entity that (i) is not a broker or dealer in securities, and (ii) places more than 390 orders in listed options per day on average during a calendar month for its own beneficial account(s). 10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(4) and (5). PO 00000 Frm 00139 Fmt 4703 Sfmt 4703 3633 designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange’s proposed changes to its Pricing Schedule are reasonable in several respects. As a threshold matter, the Exchange is subject to significant competitive forces in the market for options securities transaction services that constrain its pricing determinations in that market. The fact that this market is competitive has long been recognized by the courts. In NetCoalition v. Securities and Exchange Commission, the D.C. Circuit stated as follows: ‘‘[n]o one disputes that competition for order flow is ‘fierce.’ . . . As the SEC explained, ‘[i]n the U.S. national market system, buyers and sellers of securities, and the broker-dealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution’; [and] ‘no exchange can afford to take its market share percentages for granted’ because ‘no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers’. . . .’’ 12 The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, while adopting a series of steps to improve the current market model, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 13 Numerous indicia demonstrate the competitive nature of this market. For example, clear substitutes to the Exchange exist in the market for options security transaction services. The Exchange is only one of sixteen options exchanges to which market participants may direct their order flow. Within this environment, market participants can freely and often do shift their order flow among the Exchange and competing venues in response to changes in their respective pricing schedules. As such, the proposal represents a reasonable attempt by the Exchange to increase its liquidity and market share relative to its competitors. 12 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) (quoting Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770, 74782– 83 (December 9, 2008) (SR–NYSEArca–2006–21)). 13 Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (‘‘Regulation NMS Adopting Release’’). E:\FR\FM\24JAN1.SGM 24JAN1 3634 Federal Register / Vol. 87, No. 15 / Monday, January 24, 2022 / Notices Options 7, Section 3 The Exchange’s proposal to increase the Customer Simple Order Fee for Removing Liquidity in SPY from $0.38 to $0.41 per contract is reasonable. Notwithstanding the increase, the Customer Simple Order Fee for Removing Liquidity in SPY remains the lowest fee for removing liquidity in SPY. The Exchange believes that the Customer Simple Order Fee for Removing Liquidity in SPY will continue to attract order flow to the Exchange despite the increase. The Exchange’s proposal to increase the Customer Simple Order Fee for Removing Liquidity in SPY from $0.38 to $0.41 per contract is equitable and not unfairly discriminatory. Priority Customers continue to be assessed the lowest Simple Order Fee for Removing Liquidity in SPY. Priority Customer liquidity benefits all market participants by providing more trading opportunities, which attracts Market Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. Options 7, Section 9 The Exchange’s proposal to remove obsolete rule text within Options 7, Section 9.B, Port Fees is reasonable, equitable and not unfairly discriminatory. Options 7, Section 9.B refers to a technology infrastructure migration that occurred in 2019. The rule text related to the migration is outdated and would not apply to any Phlx market participant. jspears on DSK121TN23PROD with NOTICES1 B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. Inter-Market Competition The proposal does not impose an undue burden on inter-market competition. The Exchange believes its proposal remains competitive with other options markets and will offer market participants with another choice of where to transact options. The Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its VerDate Sep<11>2014 18:11 Jan 21, 2022 Jkt 256001 fees to remain competitive with other exchanges that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited. Intra-Market Competition The proposed amendments do not impose an undue burden on intramarket competition. Options 7, Section 3 The Exchange’s proposal to increase the Customer Simple Order Fee for Removing Liquidity in SPY from $0.38 to $0.41 per contract does not impose an undue burden on competition. Priority Customers continue to be assessed the lowest Simple Order Fee for Removing Liquidity in SPY. Priority Customer liquidity benefits all market participants by providing more trading opportunities, which attracts Market Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. Options 7, Section 9 The Exchange’s proposal to remove obsolete rule text within Options 7, Section 9.B, Port Fees does not impose an undue burden on competition. The rule text related to the migration is outdated and would not apply to any Phlx market participant. 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 14 15 PO 00000 U.S.C. 78s(b)(3)(A)(ii). Frm 00140 Fmt 4703 Sfmt 4703 furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– Phlx–2022–01 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–2022–01. 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–2022–01, and should be submitted on or before February 14, 2022. E:\FR\FM\24JAN1.SGM 24JAN1 Federal Register / Vol. 87, No. 15 / Monday, January 24, 2022 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2022–01218 Filed 1–21–22; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–93992; File No. SR–NYSE– 2022–01] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Price List To Extend a Waiver of New Firm Application Fees for Certain Applications and of Bond Trading License Fees January 18, 2022. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on January 4, 2022, New York Stock Exchange LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the selfregulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its Price List to (1) extend a fee waiver for new firm application fees for applicants seeking only to obtain a bond trading license (‘‘BTL’’) for 2022; and (2) waive the BTL fee for 2022. The Exchange proposes to implement the fee changes effective January 3, 2022. The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. jspears on DSK121TN23PROD with NOTICES1 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 self-regulatory organization included statements concerning the purpose of, 15 17 CFR 200.30–3(a)(12). U.S.C.78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 18:11 Jan 21, 2022 Jkt 256001 and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those 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 parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its Price List to (1) extend a fee waiver for new firm application fees for applicants seeking only to obtain a BTL for 2022; and (2) waive the BTL fee for 2022.4 The Exchange proposes to implement the fee changes effective January 3, 2022. The Exchange currently charges a New Firm Fee ranging from $2,000 to $4,000, depending on the type of firm, which is charged per application for any broker-dealer that applies to be approved as an Exchange member organization. The Exchange proposes to amend the Price List to waive the New Firm Fee for 2022 for new member organization applicants that are seeking only to obtain a BTL and not trade equities at the Exchange. The proposed waiver of the New Firm Fee would be available only to applicants seeking approval as a new member organization, including carrying firms, introducing firms, or non-public organizations, which would be seeking to obtain a BTL at the Exchange and not trade equities. Further, if a new firm that is approved as a member organization and has had the New Firm Fee waived converts a BTL to a full trading license within one year of approval, the New Firm Fee would be charged in full retroactively. The Exchange believes that charging the New Firm Fee retroactively within a year of approval is appropriate because it would discourage applicants to claim that they are applying for a BTL solely to avoid New Firm Fees. Additionally, the Exchange currently charges a BTL fee of $1,000 per year. 4 The Exchange initially filed to adopt the fee waiver and waive the BTL fee in 2015. See Securities Exchange Act Release No. 74031 (January 12, 2015), 80 FR 2462 (January 16, 2015) (SR– NYSE–2014–78). The Exchange has filed to extend the fee waiver and waive the BTL fee for each calendar year since 2017. See Securities Exchange Act Release Nos. 79710 (December 29, 2016), 82 FR 1395 (January 5, 2017) (SR–NYSE–2016–89); 82418 (December 28, 2017), 83 FR 568 (January 4, 2018) (SR–NYSE–2017–70); 84899 (December 20, 2018), 83 FR 67395 (December 28, 2018) (SR–NYSE–2018– 65); 87952 (January 13, 2020), 85 FR 3089 (January 17, 2020) (SR–NYSE–2019–73); and 90891 (January 11, 2021), 86 FR 4147 (January 15, 2021) (SR– NYSE–2021–03). PO 00000 Frm 00141 Fmt 4703 Sfmt 4703 3635 The Exchange proposes to amend the Price List to waive the BTL fee for 2022 for all member organizations. The Exchange believes that the proposed fee changes would provide increased incentives for bond trading firms that are not currently Exchange member organizations to apply for Exchange membership and a BTL. The Exchange believes that having more member organizations trading on the Exchange’s bond platform would benefit investors through the additional display of liquidity and increased execution opportunities in Exchange-traded bonds at the Exchange. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,5 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,6 in particular, because it provides for the equitable allocation of reasonable dues, fees, and other charges among its members, issuers and other persons using its facilities and does not unfairly discriminate between customers, issuers, brokers or dealers. The Exchange believes that it is reasonable to waive the New Firm Fee and the annual BTL fee for 2022 to provide an incentive for bond trading firms to apply for Exchange membership and a BTL. The Exchange believes that providing an incentive for bond trading firms that are not currently Exchange member organizations to apply for membership and a BTL would encourage market participants to become members of the Exchange and bring additional liquidity to a transparent bond market. To the extent the existing New Firm Fees or the BTL fee serves as a disincentive for bond trading firms to become Exchange member organizations, the Exchange believes that the proposed fee change could expand the number of firms eligible to trade bonds on the Exchange. The Exchange believes creating incentives for bond trading firms to trade bonds on the Exchange protects investors and the public interest by increasing the competition and liquidity on a transparent market for bond trading. The proposed waiver of the New Firm Fee and BTL fee is equitable and not unfairly discriminatory because it would be offered to all market participants that wish to trade at the Exchange the narrower class of debt securities only. 5 15 6 15 E:\FR\FM\24JAN1.SGM U.S.C. 78f(b). U.S.C. 78f(b)(4), (5). 24JAN1

Agencies

[Federal Register Volume 87, Number 15 (Monday, January 24, 2022)]
[Notices]
[Pages 3632-3635]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-01218]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93986; File No. SR-Phlx-2022-01]


Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Phlx's 
Pricing Schedule at Options 7, Section 3

January 18, 2022.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on January 3, 2022, Nasdaq PHLX LLC (``Phlx'' or 
``Exchange'') filed with the Securities and Exchange Commission (the 
``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\ 15 U.S.C. 78a.
    \3\ 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 Phlx's Pricing Schedule at Options 
7, Section 3, ``Rebates and Fees for Adding and Removing Liquidity in 
SPY.'' The Exchange also proposes to remove obsolete rule text within 
Options 7, Section 9, ``Other Member Fees.''

[[Page 3633]]

    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/phlx/rules, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Phlx proposes to amend its pricing at Options 7, Section 3, 
``Rebates and Fees for Adding and Removing Liquidity in SPY.'' 
Specifically, Phlx proposes to amend its Simple Order Customer \4\ Fee 
for Removing Liquidity in options overlying the SPDR[supreg] S&P 500 
ETF Trust (``SPY''). The Exchange also proposes to remove obsolete rule 
text within Options 7, Section 9, ``Other Member Fees.'' Each change 
will be described below.
---------------------------------------------------------------------------

    \4\ The term ``Customer'' applies to any transaction that is 
identified by a member or member organization for clearing in the 
Customer range at The Options Clearing Corporation (``OCC'') which 
is not for the account of a broker or dealer or for the account of a 
``Professional'' (as that term is defined in Options 1, Section 
1(b)(45)). See Options 7, Section 1(c).
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Options 7, Section 3
    Today, the Exchange assesses a $0.38 per contract Customer Simple 
Order Fee for Removing Liquidity in SPY. The Exchange assesses a Lead 
Market Maker,\5\ Market Maker,\6\ Firm,\7\ Broker-Dealer \8\ and 
Professional \9\ Simple Order Fee for Removing Liquidity in SPY of 
$0.48 per contract. The Exchange proposes to increase the Customer 
Simple Order Fee for Removing Liquidity in SPY from $0.38 to $0.41 per 
contract. Notwithstanding the increase, the Customer Simple Order Fee 
for Removing Liquidity in SPY remains the lowest fee for removing 
liquidity in SPY. The Exchange believes that the Customer Simple Order 
Fee for Removing Liquidity in SPY will continue to attract order flow 
to the Exchange despite the increase.
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    \5\ The term ``Lead Market Maker'' applies to transactions for 
the account of a Lead Market Maker (as defined in Options 2, Section 
12(a)). A Lead Market Maker is an Exchange member who is registered 
as an options Lead Market Maker pursuant to Rule Options 2, Section 
12(a)[sic]. An options Lead Market Maker includes a Remote Lead 
Market Maker which is defined as an options Lead Market Maker in one 
or more classes that does not have a physical presence on an 
Exchange floor and is approved by the Exchange pursuant to Options 
2, Section 11.
    \6\ The term ``Market Maker'' is defined in Options 1, Section 
1(b)(28) as a member of the Exchange who is registered as an options 
Market Maker pursuant to Options 2, Section 12(a). A Market Maker 
includes SQTs and RSQTs as well as on and Floor Market Makers.
    \7\ The term ``Firm'' applies to any transaction that is 
identified by a member or member organization for clearing in the 
Firm range at OCC.
    \8\ The term ``Broker-Dealer'' applies to any transaction which 
is not subject to any of the other transaction fees applicable 
within a particular category.
    \9\ The term ``Professional'' applies to transactions for the 
accounts of Professionals, as defined in Exchange Rule 1000(b)(43) 
means any person or entity that (i) is not a broker or dealer in 
securities, and (ii) places more than 390 orders in listed options 
per day on average during a calendar month for its own beneficial 
account(s).
---------------------------------------------------------------------------

Options 7, Section 9
    The Exchange proposes to remove obsolete rule text within Options 
7, Section 9.B, Port Fees. Options 7, Section 9.B refers to a 
technology infrastructure migration that occurred in 2019. The rule 
text related to the migration is now obsolete. At this time, the 
Exchange proposes to remove the rule text which describes the migration 
within Options 7, Section 9.B because it is outdated.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\10\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\11\ 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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange's proposed changes to its Pricing Schedule are 
reasonable in several respects. As a threshold matter, the Exchange is 
subject to significant competitive forces in the market for options 
securities transaction services that constrain its pricing 
determinations in that market. The fact that this market is competitive 
has long been recognized by the courts. In NetCoalition v. Securities 
and Exchange Commission, the D.C. Circuit stated as follows: ``[n]o one 
disputes that competition for order flow is `fierce.' . . . As the SEC 
explained, `[i]n the U.S. national market system, buyers and sellers of 
securities, and the broker-dealers that act as their order-routing 
agents, have a wide range of choices of where to route orders for 
execution'; [and] `no exchange can afford to take its market share 
percentages for granted' because `no exchange possesses a monopoly, 
regulatory or otherwise, in the execution of order flow from broker 
dealers'. . . .'' \12\
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    \12\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \13\
---------------------------------------------------------------------------

    \13\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    Numerous indicia demonstrate the competitive nature of this market. 
For example, clear substitutes to the Exchange exist in the market for 
options security transaction services. The Exchange is only one of 
sixteen options exchanges to which market participants may direct their 
order flow. Within this environment, market participants can freely and 
often do shift their order flow among the Exchange and competing venues 
in response to changes in their respective pricing schedules. As such, 
the proposal represents a reasonable attempt by the Exchange to 
increase its liquidity and market share relative to its competitors.

[[Page 3634]]

Options 7, Section 3
    The Exchange's proposal to increase the Customer Simple Order Fee 
for Removing Liquidity in SPY from $0.38 to $0.41 per contract is 
reasonable. Notwithstanding the increase, the Customer Simple Order Fee 
for Removing Liquidity in SPY remains the lowest fee for removing 
liquidity in SPY. The Exchange believes that the Customer Simple Order 
Fee for Removing Liquidity in SPY will continue to attract order flow 
to the Exchange despite the increase.
    The Exchange's proposal to increase the Customer Simple Order Fee 
for Removing Liquidity in SPY from $0.38 to $0.41 per contract is 
equitable and not unfairly discriminatory. Priority Customers continue 
to be assessed the lowest Simple Order Fee for Removing Liquidity in 
SPY. Priority Customer liquidity benefits all market participants by 
providing more trading opportunities, which attracts Market Makers. An 
increase in the activity of these market participants in turn 
facilitates tighter spreads, which may cause an additional 
corresponding increase in order flow from other market participants.
Options 7, Section 9
    The Exchange's proposal to remove obsolete rule text within Options 
7, Section 9.B, Port Fees is reasonable, equitable and not unfairly 
discriminatory. Options 7, Section 9.B refers to a technology 
infrastructure migration that occurred in 2019. The rule text related 
to the migration is outdated and would not apply to any Phlx market 
participant.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
Inter-Market Competition
    The proposal does not impose an undue burden on inter-market 
competition. The Exchange believes its proposal remains competitive 
with other options markets and will offer market participants with 
another choice of where to transact options. The Exchange notes that it 
operates in a highly competitive market in which market participants 
can readily favor competing venues if they deem fee levels at a 
particular venue to be excessive, or rebate opportunities available at 
other venues to be more favorable. In such an environment, the Exchange 
must continually adjust its fees to remain competitive with other 
exchanges that have been exempted from compliance with the statutory 
standards applicable to exchanges. Because competitors are free to 
modify their own fees in response, and because market participants may 
readily adjust their order routing practices, the Exchange believes 
that the degree to which fee changes in this market may impose any 
burden on competition is extremely limited.
Intra-Market Competition
    The proposed amendments do not impose an undue burden on intra-
market competition.
Options 7, Section 3
    The Exchange's proposal to increase the Customer Simple Order Fee 
for Removing Liquidity in SPY from $0.38 to $0.41 per contract does not 
impose an undue burden on competition. Priority Customers continue to 
be assessed the lowest Simple Order Fee for Removing Liquidity in SPY. 
Priority Customer liquidity benefits all market participants by 
providing more trading opportunities, which attracts Market Makers. An 
increase in the activity of these market participants in turn 
facilitates tighter spreads, which may cause an additional 
corresponding increase in order flow from other market participants.
Options 7, Section 9
    The Exchange's proposal to remove obsolete rule text within Options 
7, Section 9.B, Port Fees does not impose an undue burden on 
competition. The rule text related to the migration is outdated and 
would not apply to any Phlx market participant.

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).
---------------------------------------------------------------------------

    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-2022-01 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-2022-01. 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-2022-01, and should be submitted on 
or before February 14, 2022.


[[Page 3635]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-01218 Filed 1-21-22; 8:45 am]
BILLING CODE 8011-01-P
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