Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Open Outcry Options Transaction Charges, 16529-16533 [2022-06094]

Download as PDF Federal Register / Vol. 87, No. 56 / Wednesday, March 23, 2022 / Notices would remove impediments to and perfect the mechanism of a free and open market and a national market system. For these reasons, the Exchange believes that the proposal is consistent with the Act. 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. As it relates to the proposed changes to the appeal process under Options 3, Section 20(k), the changes are designed to provide greater harmonization among similar rules and processes across the Exchange’s affiliated options exchanges, resulting in more efficient regulatory compliance for common members. 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. 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. jspears on DSK121TN23PROD with NOTICES1 III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act 7 and subparagraph (f)(6) of Rule 19b–4 thereunder.8 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 15 U.S.C. 78s(b)(3)(A)(iii). 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. 7 8 VerDate Sep<11>2014 20:07 Mar 22, 2022 Jkt 256001 16529 Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.9 IV. Solicitation of Comments J. Matthew DeLesDernier, Assistant Secretary. 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: [FR Doc. 2022–06101 Filed 3–22–22; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Electronic Comments [Release No. 34–94453; File No. SR–Phlx– 2022–10] • 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– BX–2022–004 on the subject line. Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Open Outcry Options Transaction Charges 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–BX–2022–004. 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–BX–2022–004 and should be submitted on or before April 13, 2022. PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 March 17, 2022. 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 March 10, 2022, 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 Phlx’s Pricing Schedule at Options 7, Section 4, ‘‘Multiply Listed Options Fees (Includes options overlying equities, ETFs, ETNs and indexes which are Multiply Listed) (Excludes SPY).’’ The Exchange originally filed the proposed pricing changes on March 1, 2022 (SR–PHLX–2022–09). On March 10, 2022, the Exchange withdrew that filing and submitted this filing. 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 17 CFR 200.30–3(a)(12). 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 9 1 E:\FR\FM\23MRN1.SGM 23MRN1 16530 Federal Register / Vol. 87, No. 56 / Wednesday, March 23, 2022 / Notices 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 jspears on DSK121TN23PROD with NOTICES1 1. Purpose Phlx proposes to amend its Pricing Schedule within Options 7, Section 4, ‘‘Multiply Listed Options Fees (Includes options overlying equities, ETFs, ETNs and indexes which are Multiply Listed) (Excludes SPY).’’ Specifically, Phlx proposes to increase the Lead Market Maker 3 and Market Maker 4 Floor 5 Options Transaction Charges 6 in multiply-listed Penny and non-Penny 3 The term ‘‘Floor Lead Market Maker’’ is a member who is registered as an options Lead Market Maker pursuant to Options 2, Section 12(a) and has a physical presence on the Exchange’s Trading Floor. See Phlx’s Pricing Schedule at Options 7, Section 1(c). 4 The term ‘‘Floor Market Maker’’ is a Market Maker who is neither an SQT or an RSQT. A Floor Market Maker may provide a quote in open outcry. See Phlx’s Pricing Schedule at Options 7, Section 1(c). The term ‘‘Streaming Quote Trader’’ or ‘‘SQT’’ is defined in Options 1, Section 1(b)(54) as a Market Maker who has received permission from the Exchange to generate and submit option quotations electronically in options to which such SQT is assigned. See Phlx’s Pricing Schedule at Options 7, Section 1(c). The term ‘‘Remote Streaming Quote Trader’’ or ‘‘RSQT’’ is defined in Options 1, Section 1(b)(49) as a Market Maker that is a member affiliated with an RSQTO with no physical trading floor presence who has received permission from the Exchange to generate and submit option quotations electronically in options to which such RSQT has been assigned. A Remote Streaming Quote Trader Organization or ‘‘RSQTO,’’ which may also be referred to as a Remote Market Making Organization (‘‘RMO’’), is a member organization in good standing that satisfies the RSQTO readiness requirements in Options 2, Section 1(a). See Phlx’s Pricing Schedule at Options 7, Section 1(c). 5 The term ‘‘floor transaction’’ is a transaction that is effected in open outcry on the Exchange’s Trading Floor. See Phlx’s Pricing Schedule at Options 7, Section 1(c). 6 Floor transaction fees apply to any ‘‘as of’’ or ‘‘reversal’’ adjustments for manually processed trades originally submitted electronically or through FBMS. See Phlx’s Pricing Schedule at Options 7, Section 4, footnote 8. The Floor Based Management System or ‘‘FBMS’’ is an order management system and the gateway for the electronic execution of equity, equity index and U.S. dollar-settled foreign currency option orders represented by Floor Brokers on the Exchange’s Options Floor. Floor Brokers contemporaneously upon receipt of an order and prior to the representation of such an order in the trading crowd, record all options orders represented by such Floor Broker to FBMS, which creates an electronic audit trail. The execution of orders to Phlx’s electronic trading system also occurs via FBMS. The FBMS application is available on handheld tablets and stationary desktops. VerDate Sep<11>2014 20:07 Mar 22, 2022 Jkt 256001 Symbols and pay a Floor Broker 7 a rebate when these parties are contra each other in certain open outcry transactions. Today, the Exchange assesses Options Transaction Charges in Multiply Listed options, including options overlying equities, ETFs, ETNs and indexes and excluding options in SPY.8 The Exchange currently assesses the following Floor Options Transaction Charges in multiply-listed Penny and non-Penny Symbols: $0.05 per contract for a Professional,9 $0.35 per contract for a Lead Market Maker and Market Maker, and $0.25 per contract for a Broker-Dealer 10 and Firm.11 Customers 12 are not assessed an Options Transaction Charge in multiplylisted Penny or non-Penny Symbols. The Exchange proposes to increase the Floor Lead Market Maker and Floor Market Maker Options Transaction Charges in Penny and non-Penny Symbols from $0.35 to $0.50 per contract and pay a Floor Broker 13 a new $0.15 per contract rebate when a Floor Broker executes an order contra a Floor 7 The term ‘‘Floor Broker’’ means an individual who is registered with the Exchange for the purpose, while on the Options Floor, of accepting and handling options orders. See Phlx’s Pricing Schedule at Options 7, Section 1(c). 8 Transactions in SPY originating on the Exchange floor will be subject to the Multiply Listed Options Fees (see Multiply Listed Options Fees in Options 7, Section 4). However, if one side of the transaction originates on the Exchange floor and any other side of the trade was the result of an electronically submitted order or a quote, then these fees will apply to the transactions which originated on the Exchange floor and contracts that are executed electronically on all sides of the transaction. The one side of the transaction which originates on the Exchange floor will count toward the volume which qualifies a participant for the Simple Order Rebate for Adding Liquidity for Lead Market Makers and Market Makers in SPY. See Options 7, Section 3, Part C. 9 The term ‘‘Professional’’ applies to transactions for the accounts of Professionals, as defined in Options 1, Section 1(b)(45) 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). See Phlx’s Pricing Schedule at Options 7, Section 1(c). 10 The term ‘‘Broker-Dealer’’ applies to any transaction which is not subject to any of the other transaction fees applicable within a particular category. See Phlx’s Pricing Schedule at Options 7, Section 1(c). 11 The term ‘‘Firm’’ applies to any transaction that is identified by a member or member organization for clearing in the Firm range at The Options Clearing Corporation (‘‘OCC’’). See Phlx’s Pricing Schedule at Options 7, Section 1(c). 12 The term ‘‘Customer’’ applies to any transaction that is identified by a member or member organization for clearing in the Customer range at 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 Phlx’s Pricing Schedule at Options 7, Section 1(c). 13 Today, Floor Brokers are not assessed any Options Transaction Charges. PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 Lead Marker Maker or Floor Market Maker in open outcry in multiply-listed Penny or non-Penny Symbols. The aforementioned pricing will not apply to singly listed options,14 index options,15 FLEX Options,16 strategy transactions,17 and Floor Qualified Contingent Cross Orders.18 The Exchange believes that assessing a Floor Lead Market Maker and a Floor Market Maker an increased fee of $0.15 per contract (increase from $0.35 to $0.50 per contract) and paying a Floor Broker a rebate of $0.15 per contract will incentivize Floor Brokers to attract a greater number of orders to Phlx’s Trading Floor and allow Floor Lead Market Makers and Floor Market Makers to interact with those orders. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,19 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,20 in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The 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.’’ 21 14 Singly Listed Options are subject to pricing within Options 7, Section 5C. 15 Index Options are subject to pricing within Options 7, Section 5A, and B. Today, Options Transaction Charges in non-Penny Options exclude NDX, NDXP and XND. 16 FLEX Options are subject to pricing within Options 7, Section 6B. 17 Strategy transactions include dividend, merger, short stock interest, reversal and conversion, jelly roll and box spread strategies as described within Options 7, Section 4. 18 Floor Qualified Contingent Cross (‘‘QCC’’) Orders, as described within Options 8, Section 30(e), are subject to pricing noted within Options 7, Section 4. Floor QCC Orders do not qualify as floor transactions as they are not executed in open outcry. 19 15 U.S.C. 78f(b). 20 15 U.S.C. 78f(b)(4) and (5). 21 Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (‘‘Regulation NMS Adopting Release’’). E:\FR\FM\23MRN1.SGM 23MRN1 Federal Register / Vol. 87, No. 56 / Wednesday, March 23, 2022 / Notices jspears on DSK121TN23PROD with NOTICES1 Likewise, in NetCoalition v. Securities and Exchange Commission 22 (‘‘NetCoalition’’) the D.C. Circuit upheld the Commission’s use of a market-based approach in evaluating the fairness of market data fees against a challenge claiming that Congress mandated a costbased approach.23 As the court emphasized, the Commission ‘‘intended in Regulation NMS that ‘market forces, rather than regulatory requirements’ play a role in determining the market data . . . to be made available to investors and at what cost.’’ 24 Further, ‘‘[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’. . . .’’ 25 Although the court and the SEC were discussing the cash equities markets, the Exchange believes that these views apply with equal force to the options markets. The Exchange’s proposal to increase the Floor Lead Market Maker and the Floor Market Maker Options Transaction Charges in multiply-listed Penny and non-Penny Symbols from $0.35 to $0.50 per contract and pay a Floor Broker a new $0.15 per contract rebate when a Floor Broker executes an order contra a Floor Lead Marker Maker or a Floor Market Maker in open outcry in multiply-listed Penny or non-Penny Symbols is reasonable. The Exchange desires to offer a $0.15 per contract rebate to the executing Floor Broker to attract additional order flow to the Phlx Trading Floor. A similar flat rebate is offered to Floor Brokers on BOX Exchange LLC (‘‘BOX’’).26 The proposed 22 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010). 23 See NetCoalition, at 534–535. 24 Id. at 537. 25 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)). 26 Today, BOX pays Floor Brokers a $0.075 per contract rebate for all Broker Dealer and Market Maker QOO Orders presented on the Trading Floor and a $0.05 per contract rebate for all Professional Customer QOO Orders presented on the Trading Floor. Unlike BOX who pays a $0.05 per contract rebate for both sides of the QOO Order, the Exchange would pay a Floor Broker a rebate of $0.15 per contract for orders in open outcry contra Floor Lead Market Makers and Floor Market Makers in multiply-listed Penny and non-Penny Symbols. See BOX’s Fee Schedule at Section III. BOX’s rebate does not apply to Public Customer executions, VerDate Sep<11>2014 20:07 Mar 22, 2022 Jkt 256001 rebate would be directed to the Floor Broker and not to the Floor Lead Market Maker or the Floor Market Maker who is assessed an Options Transaction Charge. In other words, the rebate is paid to the Floor Broker who executed the order in open outcry contra the Floor Lead Market Maker or the Floor Market Maker. The rebate would be paid from revenues obtained by assessing Floor Lead Market Makers and Floor Market Makers the proposed $0.50 per contract Options Transaction Charge instead of the current $0.35 per contract Options Transaction Charge.27 The Exchange believes it is reasonable to only apply the rebate to Floor Brokers and not to Floor Lead Market Makers and Floor Market Makers. Floor Lead Market Makers and Floor Market Makers only represent their own interest on the Trading Floor and therefore do not need a similar incentive. Unlike Floor Lead Market Makers and Floor Market Makers, Floor Brokers act as agents in representing orders on the Exchange’s Trading Floor. Participants who desire to have an order executed on Phlx’s Trading Floor would provide that order to a Floor Broker to be represented on the Trading Floor. Floor Lead Market Makers and Floor Market Makers may interact with orders represented by the Floor Broker in open outcry on the Trading Floor. Finally, Floor Lead Market Makers and Floor Market Makers may choose to conduct their business on a Trading Floor or in an electronic market, unlike Floor Brokers, who have a business model that is naturally tied to the physical trading space. While this proposal increases the Floor Options Transaction Charges for Floor Lead Market Makers and Floor Market Makers in open outcry in multiply-listed Penny or non-Penny Symbols when a Floor Broker executes an order contra a Floor Lead Market Maker or a Floor Market Maker, the Exchange believes that the ability to attract a greater amount of order flow on the Exchange’s Trading Floor will allow Floor Lead Market Makers and Floor Market Makers to participate in a greater number of open outcry transactions. Today, market participants may send order flow to the Trading Floor by either investing in technology, systems and personnel to participate on the Trading Floor, or utilizing the services of a Floor Broker. Offering the proposed rebate to executions subject to the Strategy QOO Order Fee Cap, or Broker Dealer executions where the Broker Dealer is facilitating a Public Customer. See BOX’s Fee Schedule at Section II. 27 BOX assesses its Market Makers a manual transaction fee of $0.35 per contract in Penny and Non-Penny Interval Classes. See BOX’s Fee Schedule at Section II. PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 16531 Floor Brokers will allow Floor Brokers to price their services at a level that would enable them to attract additional order flow to the Exchange. To the extent Floor Brokers are able to attract additional orders; they will gain important information that would allow them to solicit future orders for participation in other trades. This will in turn, benefit other Exchange participants through additional liquidity on the Trading Floor with which they may interact. Finally, the Exchange believes that the rebate will promote competition by allowing Floor Brokers to competitively price their services and for the Exchange to remain competitive with other exchanges. The Exchange’s proposal to increase the Floor Lead Market Maker and the Floor Market Maker Options Transaction Charges in multiply-listed Penny and non-Penny Symbols from $0.35 to $0.50 per contract and pay a Floor Broker a new $0.15 per contract rebate when a Floor Broker executes an order contra a Floor Lead Marker Maker or a Floor Market Maker in open outcry in multiply-listed Penny or non-Penny Symbols is equitable and not unfairly discriminatory. The Exchange believes it is equitable and not unfairly discriminatory to only apply the rebate to Floor Brokers and not to Floor Lead Market Makers and Floor Market Makers. Floor Lead Market Makers and Floor Market Makers only represent their own interest on the Trading Floor and therefore do not need a similar incentive. Unlike Floor Lead Market Makers and Floor Market Makers, Floor Brokers act as agents in representing orders on the Exchange’s Trading Floor. They serve a valuable function in open outcry in allowing market participants to have their orders represented in this venue without the need to be a member of the Exchange.28 Further, Floor Lead Market Makers and Floor Market Makers benefit from having access to interact with orders that are made available in open outcry on the Trading Floor. Floor Lead Market Makers and Floor Market Makers may choose to conduct their business on a Trading Floor or in an electronic market, unlike Floor Brokers, who have a business model that is naturally tied to the physical trading space. The Exchange believes that it is equitable and not unfairly discriminatory to assess Floor Lead Market Makers and Floor Market Makers a higher Options Transaction Charge because they have the benefit of trading 28 Participants who desire to have an order executed on Phlx’s Trading Floor would provide that order to a Floor Broker to be represented on the Trading Floor. E:\FR\FM\23MRN1.SGM 23MRN1 16532 Federal Register / Vol. 87, No. 56 / Wednesday, March 23, 2022 / Notices on the Trading Floor or in an electronic venue if they so choose. The proposed $0.50 Options Transaction Charge for Floor Lead Market Makers and Floor Market Makers and the $0.15 per contract rebate for Floor Brokers will be uniformly assessed and paid, respectively, to all Floor Lead Market Makers, Floor Market Makers, and Floor Brokers participating in open outcry trades in multiply-listed Penny and non-Penny symbols. The Exchange believes that its proposal to not pay a rebate when an order is executed electronically or for orders that are singly listed options, index options, FLEX Options, strategy transactions, and Floor QCC Orders is reasonable, equitable and not unfairly discriminatory as pricing for these types of transactions are specified separately from Floor Options Transaction Charges within Options 7, Section 4 of the Pricing Schedule. 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 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. Moreover, the proposal is designed to encourage Floor Brokers to attract a greater amount of order flow to Phlx’s Trading Floor. To the extent that the proposed change attracts additional order flow to Phlx’s Trading Floor, this increased order flow would continue to VerDate Sep<11>2014 20:07 Mar 22, 2022 Jkt 256001 make the Exchange a more competitive venue for order execution. Intra-Market Competition The proposed amendments do not impose an undue burden on intramarket competition. The Exchange’s proposal to increase the Floor Lead Market Maker and the Floor Market Maker Options Transaction Charges in multiply-listed Penny and non-Penny Symbols from $0.35 to $0.50 per contract and pay a Floor Broker a new $0.15 per contract rebate when a Floor Broker executes an order contra a Floor Lead Marker Maker or a Floor Market Maker in open outcry in multiply-listed Penny or non-Penny Symbols does not impose an undue burden on competition. Only applying a rebate to Floor Brokers and not to Floor Lead Market Makers and Floor Market Makers does not impose an undue burden on competition because Floor Lead Market Makers and Floor Market Makers only represent their own interest on the Trading Floor and therefore do not need a similar incentive. Unlike Floor Lead Market Makers and Floor Market Makers, Floor Brokers act as agents in representing orders on the Exchange’s Trading Floor. They serve a valuable function in open outcry in allowing market participants to have their orders represented in this venue without the need to be a member of the Exchange. Further, Floor Lead Market Makers and Floor Market Makers benefit from having access to interact with orders that are made available in open outcry on the Trading Floor. Floor Lead Market Makers and Floor Market Makers may choose to conduct their business on the Trading Floor or in an electronic market, unlike Floor Brokers, who have a business model that is naturally tied to the physical trading space. The Exchange believes that assessing Floor Lead Market Makers and Floor Market Makers a higher Options Transaction Charge does not impose an undue burden on competition because they have the benefit of trading on a Trading Floor or in an electronic venue if they so choose. The proposed $0.50 Options Transaction Charge for Floor Lead Market Makers and Floor Market Makers and the $0.15 per contract rebate for Floor Brokers will be uniformly assessed and paid, respectively, to all Floor Lead Market Makers, Floor Market Makers, and Floor Brokers participating in open outcry trades in multiply-listed Penny and non-Penny symbols. The Exchange believes that its proposal to not pay a rebate when an order is executed electronically or for orders that are singly listed options, index options, FLEX Options, strategy PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 transactions, and Floor QCC Orders does not impose an undue burden on competition as pricing for these types of transactions are specified separately from Floor Options Transaction Charges within Options 7, Section 4 of the Pricing Schedule. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.29 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– Phlx–2022–10 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–2022–10. 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 29 15 U.S.C. 78s(b)(3)(A)(ii). E:\FR\FM\23MRN1.SGM 23MRN1 Federal Register / Vol. 87, No. 56 / Wednesday, March 23, 2022 / Notices 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–2022–10 and should be submitted on or before April 13, 2022. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.30 prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. J. Matthew DeLesDernier, Assistant Secretary. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change [FR Doc. 2022–06094 Filed 3–22–22; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–94443; File No. SR–MRX– 2022–03] Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Harmonize Various Processes Under Options 3, Section 20 Across the Affiliated Nasdaq Options Exchanges jspears on DSK121TN23PROD with NOTICES1 March 17, 2022. 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 March 8, 2022, Nasdaq MRX, LLC (‘‘MRX’’ 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 17 CFR 200.30–3(a)(12). 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 30 1 VerDate Sep<11>2014 20:07 Mar 22, 2022 Jkt 256001 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to harmonize various processes under Options 3, Section 20 across the affiliated Nasdaq options exchanges. The text of the proposed rule change is available on the Exchange’s website at https://listingcenter.nasdaq.com/ rulebook/mrx/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. 1. Purpose The Exchange proposes to harmonize its existing processes with those of its affiliate Nasdaq Phlx LLC (‘‘Phlx’’) concerning the review of decisions on appeal under Options 3, Section 20. The Exchange also proposes a number of non-substantive changes. Each change is discussed in detail below. Appeal Today, Options 3, Section 20(k) governs the appeal process for determinations by Exchange staff made under this Rule, including obvious error determinations. Specifically, if a Member affected by a determination under this Rule so requests within the permitted time period, an Exchange Review Council panel will review decisions made by the Official under Options 3, Section 20, including whether an obvious error occurred and whether the correct determination was made. A request for review on appeal must be made in writing via email or other electronic means specified from time to time by the Exchange in an Options Trader Alert distributed to PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 16533 Members within thirty (30) minutes after the party making the appeal is given notification of the initial determination being appealed. The Exchange Review Council panel shall review the facts and render a decision as soon as practicable, but generally on the same trading day as the execution(s) under review. On requests for appeal received after 3:00 p.m. Eastern Time, a decision will be rendered as soon as practicable, but in no case later than the trading day following the date of the execution under review. Furthermore, if the Exchange Review Council panel votes to uphold the decision made under this Rule, the Exchange will assess a fee (‘‘Appeal Fee’’) of $5,000 against the Member(s) who initiated the request for appeal. The Exchange proposes generally to maintain its current appeal process with certain adjustments to harmonize its process with that of its affiliate, Phlx. First, while Phlx similarly requires the parties to submit a request for review within thirty (30) minutes of being notified of the determination being appealed, Phlx also provides parties with additional time to submit their request if the notification occurs later in the trading day. In particular, if the notification is made after 3:30 p.m. Eastern Time, either party has until 9:30 a.m. Eastern Time on the next trading day to submit a request for review.3 Similar to Phlx, the Exchange believes that this flexibility will be helpful for Members in submitting their appeal requests in a timely manner, particularly where notification of the Official’s decision was received later in the trading day, and therefore proposes to adopt this provision in Options 3, Section 20(k)(2). Second, the Exchange proposes to amend its provisions for when the Exchange Review Council panel must render a decision on requests for appeal by harmonizing to Phlx’s process. Specifically, the Exchange proposes in Options 3, Section 20(k)(2) that the Exchange Review Council panel shall review the facts and render a decision on the day of the transaction, or the next trade day in the case where a request is properly made after 3:30 p.m. on the day of the transaction or where the request is properly made the next trade day.4 The proposed language modifies the current process by extending the current cutoff time from 3:00 to 3:30 p.m. Eastern Time for the Exchange Review Council panel to render a decision on the next trading day, and by See Phlx Options 3, Section 20(l). See Phlx Options 3, Section 20(l) for analogous language. 3 4 E:\FR\FM\23MRN1.SGM 23MRN1

Agencies

[Federal Register Volume 87, Number 56 (Wednesday, March 23, 2022)]
[Notices]
[Pages 16529-16533]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-06094]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94453; File No. SR-Phlx-2022-10]


Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Open 
Outcry Options Transaction Charges

March 17, 2022.
    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 March 10, 2022, 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 Phlx's Pricing Schedule at Options 
7, Section 4, ``Multiply Listed Options Fees (Includes options 
overlying equities, ETFs, ETNs and indexes which are Multiply Listed) 
(Excludes SPY).''
    The Exchange originally filed the proposed pricing changes on March 
1, 2022 (SR-PHLX-2022-09). On March 10, 2022, the Exchange withdrew 
that filing and submitted this filing.
    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

[[Page 16530]]

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 Schedule within Options 7, 
Section 4, ``Multiply Listed Options Fees (Includes options overlying 
equities, ETFs, ETNs and indexes which are Multiply Listed) (Excludes 
SPY).'' Specifically, Phlx proposes to increase the Lead Market Maker 
\3\ and Market Maker \4\ Floor \5\ Options Transaction Charges \6\ in 
multiply-listed Penny and non-Penny Symbols and pay a Floor Broker \7\ 
a rebate when these parties are contra each other in certain open 
outcry transactions.
---------------------------------------------------------------------------

    \3\ The term ``Floor Lead Market Maker'' is a member who is 
registered as an options Lead Market Maker pursuant to Options 2, 
Section 12(a) and has a physical presence on the Exchange's Trading 
Floor. See Phlx's Pricing Schedule at Options 7, Section 1(c).
    \4\ The term ``Floor Market Maker'' is a Market Maker who is 
neither an SQT or an RSQT. A Floor Market Maker may provide a quote 
in open outcry. See Phlx's Pricing Schedule at Options 7, Section 
1(c).
    The term ``Streaming Quote Trader'' or ``SQT'' is defined in 
Options 1, Section 1(b)(54) as a Market Maker who has received 
permission from the Exchange to generate and submit option 
quotations electronically in options to which such SQT is assigned. 
See Phlx's Pricing Schedule at Options 7, Section 1(c). The term 
``Remote Streaming Quote Trader'' or ``RSQT'' is defined in Options 
1, Section 1(b)(49) as a Market Maker that is a member affiliated 
with an RSQTO with no physical trading floor presence who has 
received permission from the Exchange to generate and submit option 
quotations electronically in options to which such RSQT has been 
assigned. A Remote Streaming Quote Trader Organization or ``RSQTO,'' 
which may also be referred to as a Remote Market Making Organization 
(``RMO''), is a member organization in good standing that satisfies 
the RSQTO readiness requirements in Options 2, Section 1(a). See 
Phlx's Pricing Schedule at Options 7, Section 1(c).
    \5\ The term ``floor transaction'' is a transaction that is 
effected in open outcry on the Exchange's Trading Floor. See Phlx's 
Pricing Schedule at Options 7, Section 1(c).
    \6\ Floor transaction fees apply to any ``as of'' or 
``reversal'' adjustments for manually processed trades originally 
submitted electronically or through FBMS. See Phlx's Pricing 
Schedule at Options 7, Section 4, footnote 8.
    The Floor Based Management System or ``FBMS'' is an order 
management system and the gateway for the electronic execution of 
equity, equity index and U.S. dollar-settled foreign currency option 
orders represented by Floor Brokers on the Exchange's Options Floor. 
Floor Brokers contemporaneously upon receipt of an order and prior 
to the representation of such an order in the trading crowd, record 
all options orders represented by such Floor Broker to FBMS, which 
creates an electronic audit trail. The execution of orders to Phlx's 
electronic trading system also occurs via FBMS. The FBMS application 
is available on hand-held tablets and stationary desktops.
    \7\ The term ``Floor Broker'' means an individual who is 
registered with the Exchange for the purpose, while on the Options 
Floor, of accepting and handling options orders. See Phlx's Pricing 
Schedule at Options 7, Section 1(c).
---------------------------------------------------------------------------

    Today, the Exchange assesses Options Transaction Charges in 
Multiply Listed options, including options overlying equities, ETFs, 
ETNs and indexes and excluding options in SPY.\8\ The Exchange 
currently assesses the following Floor Options Transaction Charges in 
multiply-listed Penny and non-Penny Symbols: $0.05 per contract for a 
Professional,\9\ $0.35 per contract for a Lead Market Maker and Market 
Maker, and $0.25 per contract for a Broker-Dealer \10\ and Firm.\11\ 
Customers \12\ are not assessed an Options Transaction Charge in 
multiply-listed Penny or non-Penny Symbols.
---------------------------------------------------------------------------

    \8\ Transactions in SPY originating on the Exchange floor will 
be subject to the Multiply Listed Options Fees (see Multiply Listed 
Options Fees in Options 7, Section 4). However, if one side of the 
transaction originates on the Exchange floor and any other side of 
the trade was the result of an electronically submitted order or a 
quote, then these fees will apply to the transactions which 
originated on the Exchange floor and contracts that are executed 
electronically on all sides of the transaction. The one side of the 
transaction which originates on the Exchange floor will count toward 
the volume which qualifies a participant for the Simple Order Rebate 
for Adding Liquidity for Lead Market Makers and Market Makers in 
SPY. See Options 7, Section 3, Part C.
    \9\ The term ``Professional'' applies to transactions for the 
accounts of Professionals, as defined in Options 1, Section 1(b)(45) 
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). See Phlx's Pricing Schedule at Options 7, Section 1(c).
    \10\ The term ``Broker-Dealer'' applies to any transaction which 
is not subject to any of the other transaction fees applicable 
within a particular category. See Phlx's Pricing Schedule at Options 
7, Section 1(c).
    \11\ The term ``Firm'' applies to any transaction that is 
identified by a member or member organization for clearing in the 
Firm range at The Options Clearing Corporation (``OCC''). See Phlx's 
Pricing Schedule at Options 7, Section 1(c).
    \12\ The term ``Customer'' applies to any transaction that is 
identified by a member or member organization for clearing in the 
Customer range at 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 Phlx's Pricing Schedule 
at Options 7, Section 1(c).
---------------------------------------------------------------------------

    The Exchange proposes to increase the Floor Lead Market Maker and 
Floor Market Maker Options Transaction Charges in Penny and non-Penny 
Symbols from $0.35 to $0.50 per contract and pay a Floor Broker \13\ a 
new $0.15 per contract rebate when a Floor Broker executes an order 
contra a Floor Lead Marker Maker or Floor Market Maker in open outcry 
in multiply-listed Penny or non-Penny Symbols. The aforementioned 
pricing will not apply to singly listed options,\14\ index options,\15\ 
FLEX Options,\16\ strategy transactions,\17\ and Floor Qualified 
Contingent Cross Orders.\18\
---------------------------------------------------------------------------

    \13\ Today, Floor Brokers are not assessed any Options 
Transaction Charges.
    \14\ Singly Listed Options are subject to pricing within Options 
7, Section 5C.
    \15\ Index Options are subject to pricing within Options 7, 
Section 5A, and B. Today, Options Transaction Charges in non-Penny 
Options exclude NDX, NDXP and XND.
    \16\ FLEX Options are subject to pricing within Options 7, 
Section 6B.
    \17\ Strategy transactions include dividend, merger, short stock 
interest, reversal and conversion, jelly roll and box spread 
strategies as described within Options 7, Section 4.
    \18\ Floor Qualified Contingent Cross (``QCC'') Orders, as 
described within Options 8, Section 30(e), are subject to pricing 
noted within Options 7, Section 4. Floor QCC Orders do not qualify 
as floor transactions as they are not executed in open outcry.
---------------------------------------------------------------------------

    The Exchange believes that assessing a Floor Lead Market Maker and 
a Floor Market Maker an increased fee of $0.15 per contract (increase 
from $0.35 to $0.50 per contract) and paying a Floor Broker a rebate of 
$0.15 per contract will incentivize Floor Brokers to attract a greater 
number of orders to Phlx's Trading Floor and allow Floor Lead Market 
Makers and Floor Market Makers to interact with those orders.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\19\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\20\ 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.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78f(b).
    \20\ 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 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.'' \21\
---------------------------------------------------------------------------

    \21\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').

---------------------------------------------------------------------------

[[Page 16531]]

    Likewise, in NetCoalition v. Securities and Exchange Commission 
\22\ (``NetCoalition'') the D.C. Circuit upheld the Commission's use of 
a market-based approach in evaluating the fairness of market data fees 
against a challenge claiming that Congress mandated a cost-based 
approach.\23\ As the court emphasized, the Commission ``intended in 
Regulation NMS that `market forces, rather than regulatory 
requirements' play a role in determining the market data . . . to be 
made available to investors and at what cost.'' \24\
---------------------------------------------------------------------------

    \22\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \23\ See NetCoalition, at 534-535.
    \24\ Id. at 537.
---------------------------------------------------------------------------

    Further, ``[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'. . . .'' \25\ Although the court and 
the SEC were discussing the cash equities markets, the Exchange 
believes that these views apply with equal force to the options 
markets.
---------------------------------------------------------------------------

    \25\ 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's proposal to increase the Floor Lead Market Maker and 
the Floor Market Maker Options Transaction Charges in multiply-listed 
Penny and non-Penny Symbols from $0.35 to $0.50 per contract and pay a 
Floor Broker a new $0.15 per contract rebate when a Floor Broker 
executes an order contra a Floor Lead Marker Maker or a Floor Market 
Maker in open outcry in multiply-listed Penny or non-Penny Symbols is 
reasonable. The Exchange desires to offer a $0.15 per contract rebate 
to the executing Floor Broker to attract additional order flow to the 
Phlx Trading Floor. A similar flat rebate is offered to Floor Brokers 
on BOX Exchange LLC (``BOX'').\26\ The proposed rebate would be 
directed to the Floor Broker and not to the Floor Lead Market Maker or 
the Floor Market Maker who is assessed an Options Transaction Charge. 
In other words, the rebate is paid to the Floor Broker who executed the 
order in open outcry contra the Floor Lead Market Maker or the Floor 
Market Maker. The rebate would be paid from revenues obtained by 
assessing Floor Lead Market Makers and Floor Market Makers the proposed 
$0.50 per contract Options Transaction Charge instead of the current 
$0.35 per contract Options Transaction Charge.\27\ The Exchange 
believes it is reasonable to only apply the rebate to Floor Brokers and 
not to Floor Lead Market Makers and Floor Market Makers. Floor Lead 
Market Makers and Floor Market Makers only represent their own interest 
on the Trading Floor and therefore do not need a similar incentive. 
Unlike Floor Lead Market Makers and Floor Market Makers, Floor Brokers 
act as agents in representing orders on the Exchange's Trading Floor. 
Participants who desire to have an order executed on Phlx's Trading 
Floor would provide that order to a Floor Broker to be represented on 
the Trading Floor. Floor Lead Market Makers and Floor Market Makers may 
interact with orders represented by the Floor Broker in open outcry on 
the Trading Floor. Finally, Floor Lead Market Makers and Floor Market 
Makers may choose to conduct their business on a Trading Floor or in an 
electronic market, unlike Floor Brokers, who have a business model that 
is naturally tied to the physical trading space. While this proposal 
increases the Floor Options Transaction Charges for Floor Lead Market 
Makers and Floor Market Makers in open outcry in multiply-listed Penny 
or non-Penny Symbols when a Floor Broker executes an order contra a 
Floor Lead Market Maker or a Floor Market Maker, the Exchange believes 
that the ability to attract a greater amount of order flow on the 
Exchange's Trading Floor will allow Floor Lead Market Makers and Floor 
Market Makers to participate in a greater number of open outcry 
transactions.
---------------------------------------------------------------------------

    \26\ Today, BOX pays Floor Brokers a $0.075 per contract rebate 
for all Broker Dealer and Market Maker QOO Orders presented on the 
Trading Floor and a $0.05 per contract rebate for all Professional 
Customer QOO Orders presented on the Trading Floor. Unlike BOX who 
pays a $0.05 per contract rebate for both sides of the QOO Order, 
the Exchange would pay a Floor Broker a rebate of $0.15 per contract 
for orders in open outcry contra Floor Lead Market Makers and Floor 
Market Makers in multiply-listed Penny and non-Penny Symbols. See 
BOX's Fee Schedule at Section III. BOX's rebate does not apply to 
Public Customer executions, executions subject to the Strategy QOO 
Order Fee Cap, or Broker Dealer executions where the Broker Dealer 
is facilitating a Public Customer. See BOX's Fee Schedule at Section 
II.
    \27\ BOX assesses its Market Makers a manual transaction fee of 
$0.35 per contract in Penny and Non-Penny Interval Classes. See 
BOX's Fee Schedule at Section II.
---------------------------------------------------------------------------

    Today, market participants may send order flow to the Trading Floor 
by either investing in technology, systems and personnel to participate 
on the Trading Floor, or utilizing the services of a Floor Broker. 
Offering the proposed rebate to Floor Brokers will allow Floor Brokers 
to price their services at a level that would enable them to attract 
additional order flow to the Exchange. To the extent Floor Brokers are 
able to attract additional orders; they will gain important information 
that would allow them to solicit future orders for participation in 
other trades. This will in turn, benefit other Exchange participants 
through additional liquidity on the Trading Floor with which they may 
interact. Finally, the Exchange believes that the rebate will promote 
competition by allowing Floor Brokers to competitively price their 
services and for the Exchange to remain competitive with other 
exchanges.
    The Exchange's proposal to increase the Floor Lead Market Maker and 
the Floor Market Maker Options Transaction Charges in multiply-listed 
Penny and non-Penny Symbols from $0.35 to $0.50 per contract and pay a 
Floor Broker a new $0.15 per contract rebate when a Floor Broker 
executes an order contra a Floor Lead Marker Maker or a Floor Market 
Maker in open outcry in multiply-listed Penny or non-Penny Symbols is 
equitable and not unfairly discriminatory. The Exchange believes it is 
equitable and not unfairly discriminatory to only apply the rebate to 
Floor Brokers and not to Floor Lead Market Makers and Floor Market 
Makers. Floor Lead Market Makers and Floor Market Makers only represent 
their own interest on the Trading Floor and therefore do not need a 
similar incentive. Unlike Floor Lead Market Makers and Floor Market 
Makers, Floor Brokers act as agents in representing orders on the 
Exchange's Trading Floor. They serve a valuable function in open outcry 
in allowing market participants to have their orders represented in 
this venue without the need to be a member of the Exchange.\28\ 
Further, Floor Lead Market Makers and Floor Market Makers benefit from 
having access to interact with orders that are made available in open 
outcry on the Trading Floor. Floor Lead Market Makers and Floor Market 
Makers may choose to conduct their business on a Trading Floor or in an 
electronic market, unlike Floor Brokers, who have a business model that 
is naturally tied to the physical trading space. The Exchange believes 
that it is equitable and not unfairly discriminatory to assess Floor 
Lead Market Makers and Floor Market Makers a higher Options Transaction 
Charge because they have the benefit of trading

[[Page 16532]]

on the Trading Floor or in an electronic venue if they so choose. The 
proposed $0.50 Options Transaction Charge for Floor Lead Market Makers 
and Floor Market Makers and the $0.15 per contract rebate for Floor 
Brokers will be uniformly assessed and paid, respectively, to all Floor 
Lead Market Makers, Floor Market Makers, and Floor Brokers 
participating in open outcry trades in multiply-listed Penny and non-
Penny symbols.
---------------------------------------------------------------------------

    \28\ Participants who desire to have an order executed on Phlx's 
Trading Floor would provide that order to a Floor Broker to be 
represented on the Trading Floor.
---------------------------------------------------------------------------

    The Exchange believes that its proposal to not pay a rebate when an 
order is executed electronically or for orders that are singly listed 
options, index options, FLEX Options, strategy transactions, and Floor 
QCC Orders is reasonable, equitable and not unfairly discriminatory as 
pricing for these types of transactions are specified separately from 
Floor Options Transaction Charges within Options 7, Section 4 of the 
Pricing Schedule.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
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.
    Moreover, the proposal is designed to encourage Floor Brokers to 
attract a greater amount of order flow to Phlx's Trading Floor. To the 
extent that the proposed change attracts additional order flow to 
Phlx's Trading Floor, this increased order flow would continue to make 
the Exchange a more competitive venue for order execution.
Intra-Market Competition
    The proposed amendments do not impose an undue burden on intra-
market competition.
    The Exchange's proposal to increase the Floor Lead Market Maker and 
the Floor Market Maker Options Transaction Charges in multiply-listed 
Penny and non-Penny Symbols from $0.35 to $0.50 per contract and pay a 
Floor Broker a new $0.15 per contract rebate when a Floor Broker 
executes an order contra a Floor Lead Marker Maker or a Floor Market 
Maker in open outcry in multiply-listed Penny or non-Penny Symbols does 
not impose an undue burden on competition. Only applying a rebate to 
Floor Brokers and not to Floor Lead Market Makers and Floor Market 
Makers does not impose an undue burden on competition because Floor 
Lead Market Makers and Floor Market Makers only represent their own 
interest on the Trading Floor and therefore do not need a similar 
incentive. Unlike Floor Lead Market Makers and Floor Market Makers, 
Floor Brokers act as agents in representing orders on the Exchange's 
Trading Floor. They serve a valuable function in open outcry in 
allowing market participants to have their orders represented in this 
venue without the need to be a member of the Exchange. Further, Floor 
Lead Market Makers and Floor Market Makers benefit from having access 
to interact with orders that are made available in open outcry on the 
Trading Floor. Floor Lead Market Makers and Floor Market Makers may 
choose to conduct their business on the Trading Floor or in an 
electronic market, unlike Floor Brokers, who have a business model that 
is naturally tied to the physical trading space. The Exchange believes 
that assessing Floor Lead Market Makers and Floor Market Makers a 
higher Options Transaction Charge does not impose an undue burden on 
competition because they have the benefit of trading on a Trading Floor 
or in an electronic venue if they so choose. The proposed $0.50 Options 
Transaction Charge for Floor Lead Market Makers and Floor Market Makers 
and the $0.15 per contract rebate for Floor Brokers will be uniformly 
assessed and paid, respectively, to all Floor Lead Market Makers, Floor 
Market Makers, and Floor Brokers participating in open outcry trades in 
multiply-listed Penny and non-Penny symbols.
    The Exchange believes that its proposal to not pay a rebate when an 
order is executed electronically or for orders that are singly listed 
options, index options, FLEX Options, strategy transactions, and Floor 
QCC Orders does not impose an undue burden on competition as pricing 
for these types of transactions are specified separately from Floor 
Options Transaction Charges within Options 7, Section 4 of the Pricing 
Schedule.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\29\
---------------------------------------------------------------------------

    \29\ 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-2022-10 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-2022-10. 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

[[Page 16533]]

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-2022-10 and should be submitted on 
or before April 13, 2022.
    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
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    \30\ 17 CFR 200.30-3(a)(12).

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-06094 Filed 3-22-22; 8:45 am]
BILLING CODE 8011-01-P
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