Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Phlx's Pricing Schedule, 67091-67098 [2022-24142]
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Federal Register / Vol. 87, No. 214 / Monday, November 7, 2022 / Notices
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–ISE–2022–24 and should be
submitted on or before November 28,
2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022–24144 Filed 11–4–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96197; File No. SR–Phlx–
2022–41]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Phlx’s Pricing
Schedule
November 1, 2022.
khammond on DSKJM1Z7X2PROD with NOTICES
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
17, 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 7.3
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
30 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 The Exchange initially filed the proposed
pricing changes on October 3, 2022 as SR–Phlx–
2022–40. The instant filing replaced SR–Phlx–
2022–40 which was withdrawn on October 17,
2022.
1 15
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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
Schedule at Options 7. Specifically,
Phlx proposes to amend: (1) Options 7,
Section 3, Rebates and Fees for Adding
and Removing Liquidity in SPY, with
respect to its pricing for Price
Improvement XL (‘‘PIXL’’) executions in
SPY; (2) Options 7, Section 4, Multiply
Listed Options Fees (Includes options
overlying equities, ETFs, ETNs and
indexes which are Multiply Listed)
(Excludes SPY and broad-based index
options symbols listed within Options
7, Section 5.A), with respect to its
Qualified Contingent Cross (‘‘QCC’’)
Rebates and Monthly Firm Fee Cap; and
(3) Options 7, Section 6, Other
Transaction Fees, with respect to PIXL
pricing other than options in SPY. Each
change will be described below.
Options 7, Section 3
The Exchange proposes to amend
Options 7, Section 3, Rebates and Fees
for Adding and Removing Liquidity in
SPY, with respect to its PIXL executions
in SPY. Today, SPY PIXL Initiating
Orders 4 are assessed a $0.05 per
contract fee, however, members or
member organizations that qualify for
Options 7, Section 2, Customer 5 Rebate
Tiers 2 through 6 or qualify for the
4 An order entered into a PIXL Auction
mechanism shall be comprised of two orders, a
PIXL agency order and a contra-side Initiating
Order. See Options 3, Section 13.
5 The term ‘‘Customer’’ applies to any transaction
that is identified by a member or member
organization for clearing in the Customer range at
The Options Clearing Corporation (‘‘OCC’’) which
is not for the account of a broker or dealer or for
the account of a ‘‘Professional’’ (as that term is
defined in Options 1, Section 1(b)(45)). See Options
7, Section 1(c).
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67091
Monthly Firm Fee Cap 6 are eligible for
a rebate of $0.12 per contract for all SPY
Complex PIXL Orders greater than 499
contracts, provided the member or
member organization executes an
average of 2,500 contracts per day of
SPY Complex PIXL Orders in a month.7
The Exchange separately assesses fees
for PIXL Orders contra the Initiating
Order 8 which are not being amended at
this time.
At this time, the Exchange proposes to
continue to assess SPY PIXL Initiating
Orders a $0.05 per contract fee.
Members or member organizations that
qualify for Options 7, Section 2,
Customer Rebate Tiers 2 through 6 or
qualify for the Monthly Firm Fee Cap
will continue to be eligible for a rebate
of $0.12 per contract for all SPY
Complex PIXL Orders greater than 499
contracts when contra to an Initiating
Order, provided the member or member
organization executes an average of
2,500 contracts per day of SPY Complex
PIXL Orders in a month. The Exchange’s
proposal to further qualify that the SPY
Complex PIXL Orders greater than 499
contracts must be contra to an Initiating
Order, in addition to the member or
member organization having executed
an average of 2,500 contracts per day of
SPY Complex PIXL Orders in a month.
As is the case today, when the PIXL
Order is contra to other than the
Initiating Order, the PIXL Order is
assessed $0.00 per contract, unless the
PIXL Order is a Customer, in which case
the Customer receives a rebate of $0.40
per contract.
Below is an example of the proposed
change which presumes the market
participant has met the qualifications
for the rebate.
6 Today, Firms are subject to a Monthly Firm Fee
Cap of $75,000. See Options 7, Section 4.
7 A member may electronically submit for
execution an order it represents as agent on behalf
of a public customer, broker-dealer, or any other
entity (‘‘PIXL Order’’) against principal interest or
against any other order (except as provided in
Options 3, Section 13(a)(6)) it represents as agent
(‘‘Initiating Order’’) provided it submits the PIXL
order for electronic execution into the PIXL Auction
(‘‘Auction’’) pursuant to Options 3, Section 13.
8 When the PIXL Order is contra to the Initiating
Order, a Customer PIXL Order is assessed $0.00 per
contract and all other Non-Customer market
participants are assessed a $0.38 per contract fee
when contra to an Initiating Order. Further, when
the PIXL Order is contra to other than the Initiating
Order, the PIXL Order is assessed $0.00 per
contract, unless the PIXL Order is a Customer, in
which case the Customer receives a rebate of $0.40
per contract. Finally, all other Non-Customer contra
parties to the PIXL Order that are not the Initiating
Order are assessed a Fee for Removing Liquidity of
$0.50 per contract or are entitled to receive the
Rebate for Adding Liquidity. When the PIXL Order
is contra to a Lead Market Maker or Market Maker
quote, which was established at the initiation of a
PIXL auction, the Customer PIXL Order is not be
eligible for a rebate. See Options 7, Section 3.
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Federal Register / Vol. 87, No. 214 / Monday, November 7, 2022 / Notices
Assume:
NBBO and PHLX are both $1.00 × $1.50
Initiator sends PIXL Complex Order in
SPY to buy 500 spreads (1000
contracts) for $1.45 (Market Maker not
assigned in SPY is contra-side)
Responder fee = $0.50 per contract—
$300.00
Break-Up rebate = ($0.40) per contract
($240.00)
PIXL Order rebate = $0.12 per contract
($120.00)
Instance 1
When no outside response to interact
with the PIXL order—no change from
Sep to Oct in pricing.
Oct 3 Pricing
Oct 3 Pricing
Public Customer fee to execute PIXL
Complex Order = $0.00 per contract
Initiating Order fee = $0.05 fee—$50.00
PIXL Order rebate = $0.12 per contract
($120.00)
The rebate is achieved because the
PIXL Order trades against the Initiating
Order in its entirety.
Instance 2
Assume:
Responders to the PIXL Complex Order
indicate the following allocation
process:
Initiating Order = 40% (400 contracts)
Auction Responders = 60% (600
contracts)
Sept Pricing
Public Customer fee to execute PIXL
Complex Order = $0.00
(paired) = $0.05 fee—$20.00 ($0.05 ×
400 contracts)
Public Customer Charge to execute PIXL
Complex Order = $0.00
Initiating Order (paired) = $0.05 fee—
$20.00 ($0.05 × 400 contracts)
Responder fee = $0.50 per contract—
$300.00
Break-Up rebate = ($0.40) per contract
($240.00)
Additional PIXL Order rebate = ($0.12)
per contract ($48.00) ($0.12 × 400
contracts contra PIXL order)
With this change the rebate would be
paid only to PIXL Complex Order
contracts that were executed against the
Initiating Order. The prior pricing rebate
was for $120 (1000 contracts × $0.12)
and the October pricing would be $48
(400 contracts × $0.12).
The Exchange desires to continue to
incentivize members and member
organizations to transact a greater
number of SPY Complex PIXL Orders
while also incentivizing members and
member organizations to submit
Customer order flow on Phlx. While the
proposal no longer offers the $0.12 per
contract rebate that is available today for
the PIXL Agency Order when that PIXL
Order is contra to other than the
Initiating Order, the Exchange believes
that market participants will continue to
be incentivized to submit PIXL Agency
Orders to Phlx because the Exchange
continues to offer a rebate of $0.40 per
contract when the PIXL Order is contra
to other than the Initiating Order.
Options 7, Section 4
QCC
The Exchange proposes to amend
Options 7, Section 4, Multiply Listed
Options Fees (Includes options
overlying equities, ETFs, ETNs and
indexes which are Multiply Listed)
(Excludes SPY and broad-based index
options symbols listed within Options
7, Section 5.A) with respect to its QCC
Rebates.
Today, the Exchange assesses a $0.20
per contract QCC Transaction Fees 9 to
a Lead Market Maker,10 Market Maker,11
Firm 12 and Broker-Dealer.13 Customers
and Professionals 14 are not assessed a
QCC Transaction Fee. QCC Transaction
Fees apply to electronic QCC Orders 15
and Floor QCC Orders.16 Rebates are
paid on all qualifying executed
electronic QCC Orders and Floor QCC
Orders based on the following six tier
rebate schedule:17
QCC REBATE SCHEDULE
Tier
khammond on DSKJM1Z7X2PROD with NOTICES
Tier
Tier
Tier
Tier
Tier
Tier
1
2
3
4
5
6
Threshold
............................
............................
............................
............................
............................
............................
Rebate per contract
0 to 99,999 contracts in a month .................................................................................................
100,000 to 299,999 contracts in a month ....................................................................................
300,000 to 499,999 contracts in a month ....................................................................................
500,000 to 699,999 contracts in a month ....................................................................................
700,000 to 999,999 contracts in a month ....................................................................................
Over 1,000,000 contracts in a month ..........................................................................................
$0.00
0.05
0.07
0.08
0.09
0.11
The Exchange does not pay a QCC
Rebate where the transaction is either:
(i) Customer-to-Customer; (ii) Customer-
to-Professional; (iii) Professional-toProfessional; or (iv) a dividend, merger,
short stock interest or reversal or
conversion strategy execution (as
defined in Options 7, Section 4).
9 QCC Transaction Fees apply to electronic QCC
Orders, as defined in Options 3, Section 12, and
Floor QCC Orders, as defined in Options 8, Section
30(e).
10 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 Options 2, Section 12(a). 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. See Options 7, Section 1(c). 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 Options 8, Section 2(a)(3).
11 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 Floor
Market Makers. See Options 7, Section 1(c). 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
Options 8, Section 2(a)(4).
12 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. See Options 7, Section 1(c).
13 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 Options 7, Section 1(c).
14 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 Options 7,
Section 1(c).
15 Electronic QCC Orders are described in
Options 3, Section 12.
16 Floor QCC Orders are described in Options 8,
Section 30(e).
17 Volume resulting from all executed electronic
QCC Orders and Floor QCC Orders, including
Customer-to-Customer, Customer-to-Professional,
and Professional-to-Professional transactions and
excluding dividend, merger, short stock interest or
reversal or conversion strategy executions, is
aggregated in determining the applicable volume
tier.
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Federal Register / Vol. 87, No. 214 / Monday, November 7, 2022 / Notices
67093
At this time, the Exchange proposes to
reduce the six tier rebate schedule to a
two tier schedule as follows:
QCC REBATE SCHEDULE
Tier
Threshold
Tier 1 ............................
Tier 2 ............................
0 to 999,999 contracts in a month ...............................................................................................
1,000,000 contracts or more in a month ......................................................................................
khammond on DSKJM1Z7X2PROD with NOTICES
The Exchange would pay a Tier 1
QCC Rebate of $0.09 per contract on all
qualifying executed electronic QCC
Orders and Floor QCC Orders up to
999,999 contracts in a month. The
Exchange would pay a Tier 2 QCC
Rebate of $0.17 per contract on all
qualifying executed electronic QCC
Orders and Floor QCC Orders of
$1,000,000 contracts or more in a
month. With this change, the Exchange
would pay a $0.09 per contract QCC
Rebate for each contract from the first
execution up to 999,999 contracts in a
month. Today, Members that execute 0
to 99,999 contracts in a month do not
receive a QCC Tier 1 Rebate.
Additionally, while today the Exchange
pays a Tier 5 QCC Rebate of $0.09 per
contract for 700,000 to 999,999 contracts
in a month, with this proposal the
proposed $0.09 per contract Tier 1 QCC
Rebate may be up to 999,999 contracts
in a month. Also, while today, the
Exchange pays a Tier 6 QCC Rebate of
$0.11 per contract for qualifying
executed electronic QCC Orders and
Floor QCC Orders over $1,000,000
contracts in a month, the proposed Tier
2 QCC Rebate would be increased to
$0.17 per contract for $1,000,000
contracts or more in a month.
The Exchange believes that its
proposal will incentivize members and
member organizations to submit a
greater amount of QCC Orders to Phlx
in order to obtain a rebate.
Monthly Firm Fee Cap
The Exchange proposes to amend
Options 7, Section 4, Multiply Listed
Options Fees (Includes options
overlying equities, ETFs, ETNs and
indexes which are Multiply Listed)
(Excludes SPY and broad-based index
options symbols listed within Options
7, Section 5.A), with respect to its
Monthly Firm Fee Cap. Today, Firms
are subject to a maximum fee of $75,000
known as the ‘‘Monthly Firm Fee Cap’’.
Firm Floor Option Transaction Charges
and QCC Transaction Fees, as defined in
Options 7, Section 4, in the aggregate,
for one billing month may not exceed
the Monthly Firm Fee Cap per member
organization when such members are
trading in their own proprietary
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Rebate per contract
account. The following pricing is
excluded from the Monthly Firm Fee
Cap: (1) all dividend, merger, and short
stock interest strategy executions, as
defined in Options 7, Section 4; (2)
transactions in broad-based index
options symbols listed within Options
7, Section 5.A.; and (3) reversal and
conversion, jelly roll and box spread
strategy executions as defined in this
Options 7, Section 4. QCC Transaction
Fees are included in the calculation of
the Monthly Firm Fee Cap.18
At this time, the Exchange proposes to
amend the Monthly Firm Fee Cap from
$75,000 to $150,000. The Monthly Firm
Fee Cap has remained at $75,000 since
2010.19 The Exchange believes that
while this cap is being increased, Firms
will continue to be incentivized by the
cap.
Options 7, Section 6
The Exchange proposes to amend
Options 7, Section 6, Other Transaction
Fees, at A. PIXL Pricing with respect to
PIXL pricing other than options in SPY.
Today, an Initiating Order in PIXL is
assessed a $0.07 per contract fee, with
the exception of SPY PIXL Orders
which are assessed the pricing within
Options 7, Section 4. Today, if the
member or member organization
qualifies for the Tier 3, 4 or 5 Customer
Rebate in Options 7, Section 2 the
member or member organization is
assessed $0.05 per contract. If the
member or member organization
executes equal to or greater than 3.00%
of National Customer Volume in
Multiply-Listed equity and ETF Options
Classes (excluding SPY Options) in a
given month, the member or member
organization is not assessed a fee for
Complex PIXL Orders. Any member or
member organization under Common
Ownership with another member or
member organization that qualifies for a
Customer Rebate Tier 4 or 5 in Options
18 Member organizations are required to notify the
Exchange in writing of all accounts in which the
member is not trading in its own proprietary
account.
19 The Monthly Firm Fee Cap was previously
called the Firm Related Equity Option Cap. See
Securities Exchange Act Release No. 65888
(December 5, 2011), 76 FR 77046 (December 9,
2011) (SR–Phlx–2011–160).
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$0.09
0.17
7, Section 2, or executes equal to or
greater than 3.00% of National
Customer Volume in Multiply-Listed
equity and ETF Options Classes
(excluding SPY Options) in a given
month receives one of the PIXL
Initiating Order discounts noted herein.
Finally, members or member
organizations that qualify for Customer
Rebate Tiers 2 through 6 or qualify for
the Monthly Firm Fee Cap are eligible
for a rebate of $0.12 per contract for all
Complex PIXL Orders (excluding SPY
Options) greater than 499 contracts,
provided the member or member
organization executes an average of
2,500 contracts per day of Complex
PIXL Orders in a month.
Similar to the change proposed for
SPY PIXL within Options 7, Section 3,
the Exchange proposes to amend
Options 7, 6A. to provide that members
or member organizations that qualify for
Customer Rebate Tiers 2 through 6 or
qualify for the Monthly Firm Fee Cap
are eligible for a rebate of $0.12 per
contract for all Complex PIXL Orders
(excluding SPY Options) greater than
499 contracts when contra to an
Initiating Order, provided the member
executes an average of 2,500 contracts
per day of Complex PIXL Orders in a
month.
Below is an example of the proposed
change which presumes the market
participant has met the qualifications
for the rebate.
Assume for Options 7, Section 6A:
NBBO and PHLX are both $1.00 × $1.50
Initiator sends PIXL Complex Order in
AAPL to buy 500 spreads (1000
contracts) for $1.45 (Market Maker not
assigned in AAPL is contra-side)
PIXL Agency Order qualifies for
Customer Rebate Tier 5
Instance 1
When no outside response to interact
with the PIXL order—no change from
Sep to Oct in pricing.
Oct 3 Pricing
Public Customer fee to execute PIXL
Complex Order = $0.00 per contract
Initiating Order fee = $0.07 fee—$70.00
PIXL Order rebate = $0.12 per contract
($120.00)
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The rebate is achieved because the
PIXL Complex Order trades against the
Initiating Order in its entirety.
Instance 2
Assume:
Responders to the PIXL Complex Order
indicate the following allocation
process:
Initiating Order = 40% (400 contracts)
Auction Responders = 60% (600
contracts)
PIXL Agency Order qualifies for
Customer Rebate Tier 5
Sept Pricing
Public Customer fee to execute PIXL
Complex Order = $0.00
(paired) = $0.07 fee—$28.00 ($0.07 ×
400 contracts)
Market Maker Responder Penny Symbol
fee = $0.25 per contract ($0.25 × 600
contracts)—$150.00
PIXL Order rebate = $0.12 per contract
($0.12 × 1000 = $120.00)
PIXL Agency Order qualifies for $0.22
per contract rebate ($132.00) for
Category C Customer Rebate which
applies to PIXL Complex Orders
($0.22 × 600 contracts)
khammond on DSKJM1Z7X2PROD with NOTICES
Oct 3 Pricing
Public Customer Charge to execute PIXL
Complex Order = $0.00
Initiating Order (paired) = $0.07 fee—
$28.00 ($0.07 × 400 contracts)
Market Maker Responder Penny Symbol
fee = $0.25 per contract ($0.25 × 600
contracts)—$150.00
PIXL Order rebate = $0.12 per contract
($0.12 × 400 = $48.00)
PIXL Agency Order qualifies for $0.22
per contract rebate ($132.00) for
Category C Customer Rebate which
applies to PIXL Complex Orders
($0.22 × 600 contracts)
With this change the rebate would be
paid only to PIXL Complex Order
contracts that were executed against the
Initiating Order. The prior pricing rebate
was for $120 (1,000 contracts × $0.12)
and the October pricing would be $48
(400 contracts × $0.12).
The Exchange desires to continue to
incentivize members and member
organizations to transact a greater
number of Complex PIXL Orders while
also incentivizing members and member
organizations to submit Customer order
flow on Phlx. While the proposal no
longer offers the $0.12 per contract
rebate that is available today for the
PIXL Agency Order when that PIXL
Order is contra to other than the
Initiating Order, the Exchange believes
that market participants will continue to
be incentivized to submit PIXL Agency
Orders to Phlx because the Exchange
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continues to offer Category C and D
rebate for Complex Orders when the
PIXL Order is contra to other than the
Initiating Order.20
Technical Amendments
The Exchange proposes to add the
terms ‘‘member’’ and member
organization,’’ where applicable, within
the proposed rule text. Pursuant to
General 1, Section 1(16), the term
‘‘member’’ means:
a permit holder which has not been
terminated in accordance with the By-Laws
and these Rules of the Exchange. A member
is a natural person and must be a person
associated with a member organization. Any
references in the rules of the Exchange to the
rights or obligations of an associated person
or person associated with a member
organization also includes a member.
Pursuant to General 1, Section 1(17)
the term ‘‘member organization’’ means:
a corporation, partnership (general or
limited), limited liability partnership, limited
liability company, business trust or similar
organization, transacting business as a broker
or a dealer in securities and which has the
status of a member organization by virtue of
(i) admission to membership given to it by
the Membership Department pursuant to the
provisions of General 3, Sections 5 and 10 or
the By-Laws or (ii) the transitional rules
adopted by the Exchange pursuant to Section
6–4 of the By-Laws. References herein to
officer or partner, when used in the context
of a member organization, shall include any
person holding a similar position in any
organization other than a corporation or
partnership that has the status of a member
organization.
An entity may be either a member or
member organization on Phlx and
therefore both terms apply when
describing transaction fees and caps
applicable to entities that have been
approved for membership on Phlx.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,21 in general, and furthers the
20 When a PIXL Order is contra to a PIXL Auction
Responder, a Customer PIXL Order will be assessed
$0.00 per contract, other Non-Customer PIXL
Orders will be assessed $0.30 per contract in Penny
Symbols or $0.38 per contract in Non-Penny
Symbols. A Responder that is a Lead Market Maker
or a Market Maker will be assessed $0.25 per
contract in Penny Symbols or $0.40 per contract in
Non-Penny Symbols. Other Non-Customer
Responders will be assessed $0.48 per contract in
Penny Symbols or $0.70 per contract in Non-Penny
Symbols when contra to a PIXL Order. A Responder
that is a Customer will be assessed $0.00 per
contract in Penny Symbols and Non-Penny Symbol.
When a PIXL Order is contra to a resting order or
quote a Customer PIXL Order will be assessed $0.00
per contract, other Non-Customer will be assessed
$0.30 per contract and the resting order or quote
will be assessed the appropriate Options
Transaction Charge in Options 7, Section 4.
21 15 U.S.C. 78f(b).
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objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,22 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.’’ 23
Likewise, in NetCoalition v. Securities
and Exchange Commission 24
(‘‘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.25 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.’’ 26
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’. . . .’’ 27 Although the court
and the SEC were discussing the cash
equities markets, the Exchange believes
22 15
U.S.C. 78f(b)(4) and (5).
Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
24 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir.
2010).
25 See NetCoalition, at 534–535.
26 Id. at 537.
27 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)).
23 Securities
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that these views apply with equal force
to the options markets.
Options 7, Section 3
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The Exchange’s proposal to amend
Options 7, Section 3, with respect to its
PIXL pricing for SPY options is
reasonable because it will continue to
incentivize members and member
organizations to transact a greater
number of SPY Complex PIXL Orders
while also incentivizing members and
member organizations to submit
Customer order flow on Phlx. While the
proposal no longer offers the $0.12 per
contract rebate that is available today for
the PIXL Agency Order when that PIXL
Order is contra to other than the
Initiating Order, the Exchange believes
that market participants will continue to
be incentivized to submit PIXL Agency
Orders to Phlx because the Exchange
continues to offer a rebate of $0.40 per
contract when the PIXL Order is contra
to other than the Initiating Order.
Requiring SPY Complex PIXL Orders
greater than 499 contracts to be contra
to an Initiating Order to receive the
rebate, provided the member or member
organization executes an average of
2,500 contracts per day of SPY Complex
PIXL Orders in a month, will continue
to encourage members and member
organizations to submit order flow to
Phlx to obtain the rebate. As is the case
today, when the PIXL Order is contra to
other than the Initiating Order, the PIXL
Order is assessed $0.00 per contract,
unless the PIXL Order is a Customer, in
which case the Customer receives a
rebate of $0.40 per contract.
The Exchange’s proposal to amend
Options 7, Section 3, Rebates and Fees
for Adding and Removing Liquidity in
SPY, with respect to its PIXL pricing for
SPY options is equitable and not
unfairly discriminatory because all
members and member organizations are
eligible for the proposed rebate,
provided they met the requisite
qualifications. Any member or member
organization may enter a qualifying
order into the PIXL Auction. Members
and member organizations would be
uniformly paid the applicable rebate.
Additionally, all market participants
may interact with order flow which
members and member organizations
must transact in connection with this
rebate.
Options 7, Section 4
QCC
The Exchange’s proposal to amend
Options 7, Section 4, with respect to its
QCC Rebates, to reduce the current six
tier rebate schedule to a proposed two
tier schedule is reasonable because the
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proposal will incentivize members and
member organizations to submit a
greater amount of QCC Orders to Phlx.
With this proposal, the Exchange would
pay a Tier 1 QCC Rebate of $0.09 on all
qualifying executed electronic QCC
Orders and Floor QCC Orders up to
999,999 contracts in a month. The QCC
Rebate would be paid for each contract
from the first execution up to 999,999
contracts in a month. Today, a Member
will not receive a Tier 1 QCC Rebate if
they enter 99,999 contracts or fewer in
a month, however once a Member enters
100,000 or more contracts, the Member
would qualify for the current Tier 2
QCC Rebate for all 100,000 contracts.
With this proposal all qualifying
executed electronic QCC Orders and
Floor QCC Orders up to 999,999
contracts in a month would be entitled
to the proposed $0.09 per contract Tier
1 QCC Rebate. Additionally, while
today the Exchange pays a Tier 5 QCC
rebate of $0.09 per contract for
qualifying executed electronic QCC
Orders and Floor QCC Orders from
700,000 to 999,999 contracts in a month,
with this proposal the $0.09 per contract
Tier 1 QCC Rebate would be paid to
Members who submit up to 999,999
contracts in a month. Also, the
Exchange would pay a Tier 2 QCC
Rebate of $0.17 per contract on all
qualifying executed electronic QCC
Orders and Floor QCC Orders of
$1,000,000 contracts or more in a
month. Today, the Exchange pays a Tier
6 QCC Rebate of $0.11 per contract for
qualifying executed electronic QCC
Orders and Floor QCC Orders over
$1,000,000 contracts in a month. The
proposed Tier 2 QCC Rebate would be
increased to $0.17 per contract for
$1,000,000 contracts or more in a
month.
The Exchange’s proposal to amend
Options 7, Section 4, with respect to its
QCC Rebates, to reduce the current six
tier rebate schedule to a proposed two
tier schedule is equitable and not
unfairly discriminatory because all
members and member organizations
may qualify for a QCC Rebate provided
the member or member organization
executed qualifying electronic QCC
Orders and Floor QCC Orders.
Monthly Firm Fee Cap
The Exchange’s proposal to amend
Options 7, Section 4, with respect to the
Monthly Firm Fee Cap, to increase the
Monthly Firm Fee Cap from $75,000 to
$150,000 is reasonable because despite
the increase, the Exchange believes
Firms will continue to be incentivized
by the opportunity to pay no fees
beyond the $150,000 cap. The Monthly
Firm Fee Cap has remained at $75,000
PO 00000
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Sfmt 4703
67095
since 2010. Other members and member
organizations may interact with the
order flow submitted by Firms to Phlx
to reach the cap.
The Exchange’s proposal to amend
Options 7, Section 4, with respect to the
Monthly Firm Fee Cap, to increase the
Monthly Firm Fee Cap from $75,000 to
$150,000 is equitable and not unfairly
discriminatory as other market
participants benefit from an opportunity
to pay reduced fees on Phlx as do Firms.
Today, Customers are not assessed an
Options Transaction Charge in multiplylisted Penny or non-Penny Symbols.28
Customer liquidity benefits all market
participants by providing more trading
opportunities. 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. Today, Lead Market
Makers and Market Makers are subject
to a Monthly Market Maker Cap of
$500,000 for: (i) electronic Option
Transaction Charges, excluding
surcharges and excluding options
overlying broad-based index options
symbols listed within Options 7,
Section 5.A; and (ii) QCC Transaction
Fees (as defined in Exchange Options 3,
Section 12 and Floor QCC Orders, as
defined in Options 8, Section 30(e)).29
With respect to Broker-Dealers, today,
the Exchange waives the Floor Options
Transaction Charge for Broker-Dealers
executing facilitation orders pursuant to
Options 8, Section 30 when such
members would otherwise incur this
charge for trading in their own
proprietary account contra to a
Customer (‘‘BD-Customer Facilitation’’),
if the member’s BD-Customer
Facilitation average daily volume
28 See
Options 7, Section 4.
Options 7, Section 4. The trading activity
of separate Lead Market Maker and Market Maker
member organizations is aggregated in calculating
the Monthly Market Maker Cap if there is Common
Ownership between the member organizations. All
dividend, merger, short stock interest, reversal and
conversion, jelly roll and box spread strategy
executions (as defined in Options 7, Section 4) are
excluded from the Monthly Market Maker Cap.
Lead Market Makers or Market Makers that (i) are
on the contra-side of an electronically-delivered
and executed Customer order, excluding responses
to a PIXL auction; and (ii) have reached the
Monthly Market Maker Cap will be assessed fees as
follows: $0.05 per contract Fee for Adding Liquidity
in Penny Symbols; $0.18 per contract Fee for
Removing Liquidity in Penny Symbols; $0.18 per
contract in Non-Penny Symbols; and $0.18 per
contract in a non-Complex electronic auction,
including the Quote Exhaust auction and, for
purposes of this fee, the opening process. A
Complex electronic auction includes, but is not
limited to, the Complex Order Live Auction
(‘‘COLA’’). Transactions which execute against an
order for which the Exchange broadcast an order
exposure alert in an electronic auction will be
subject to this fee.
29 See
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Federal Register / Vol. 87, No. 214 / Monday, November 7, 2022 / Notices
(including both FLEX and non-FLEX
transactions) exceeds 10,000 contracts
per day in a given month.30 Finally,
today, Professional Floor Options
Transaction Charges are less favorable
than Customers but more favorable than
Firms as Broker-Dealers are assessed a
lower Options Transaction Charge as
compared to Floor Lead Market Makers,
Floor Market Makers. Additionally, the
Exchange believes that the proposal is
equitable and not unfairly
discriminatory because members and
member organizations that are JBOs 31
could be subject to the Firm Related
Equity Option Cap, as are other
members, as long as the JBO trades for
their own proprietary account.
Additionally, the proposed change
would encourage JBOs that are not
members or member organizations to
seek to become members or member
organizations to further reduce their
transaction fees.
khammond on DSKJM1Z7X2PROD with NOTICES
Options 7, Section 6
The Exchange’s proposal to amend
Options 7, Section 6, with respect to its
PIXL pricing 32 is reasonable because it
will continue to incentivize members
and member organizations to transact a
greater number of Complex PIXL Orders
while also incentivizing members and
member organizations to submit
Customer order flow on Phlx. While the
proposal no longer offers the $0.12 per
contract rebate that is available today for
the PIXL Agency Order when that PIXL
Order is contra to other than the
Initiating Order, the Exchange believes
that market participants will continue to
be incentivized to submit PIXL Agency
Orders to Phlx because the Exchange
continues to offer Category C and D
30 See Options 7, Section 4, which states, ‘‘. . .
In addition, the Broker-Dealer Floor Options
Transaction Charge (including Cabinet Options
Transaction Charges) will be waived for members
executing facilitation orders pursuant to Options 8,
Section 30 when such members would otherwise
incur this charge for trading in their own
proprietary account contra to a Customer (‘BDCustomer Facilitation’), if the member’s BDCustomer Facilitation average daily volume
(including both FLEX and non-FLEX transactions)
exceeds 10,000 contracts per day in a given month.
NDX, NDXP, and XND Options Transactions will be
excluded from each of the waivers set forth in the
above paragraph.’’
31 The term ‘‘Joint Back Office’’ or ‘‘JBO’’ applies
to any transaction that is identified by a member or
member organization for clearing in the Firm range
at OCC and is identified with an origin code as a
JBO. A JBO will be priced the same as a BrokerDealer. A JBO participant is a member, member
organization or non-member organization that
maintains a JBO arrangement with a clearing
broker-dealer (‘‘JBO Broker’’) subject to the
requirements of Regulation T Section 220.7 of the
Federal Reserve System as further discussed at
Options 6D, Section 1. See Options 7, Section 1(c).
32 The PIXL pricing in Options 7, Section
excludes SPY options.
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rebates for Complex Orders when the
PIXL Order is contra to other than the
Initiating Order.33 Requiring Complex
PIXL Orders greater than 499 contracts
to be contra to an Initiating Order to
receive the rebate, provided the member
or member organization executes an
average of 2,500 contracts per day of
Complex PIXL Orders in a month, will
continue to encourage members and
member organizations to submit order
flow to Phlx to obtain the rebate.
The Exchange’s proposal to amend
Options 7, Section 6, with respect to its
PIXL pricing is equitable and not
unfairly discriminatory because all
members and member organizations are
eligible for the proposed rebate,
provided they met the requisite
qualifications. Any member or member
organization may enter a qualifying
order into the PIXL Auction. Members
and member organizations would be
uniformly paid the applicable rebate.
Additionally, all market participants
may interact with order flow which
members or member organizations must
transact in connection with this rebate.
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.
Intermarket Competition
The proposal does not impose an
undue burden on intermarket
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
33 When
a PIXL Order is contra to a PIXL Auction
Responder, a Customer PIXL Order will be assessed
$0.00 per contract, other Non-Customer PIXL
Orders will be assessed $0.30 per contract in Penny
Symbols or $0.38 per contract in Non-Penny
Symbols. A Responder that is a Lead Market Maker
or a Market Maker will be assessed $0.25 per
contract in Penny Symbols or $0.40 per contract in
Non-Penny Symbols. Other Non-Customer
Responders will be assessed $0.48 per contract in
Penny Symbols or $0.70 per contract in Non-Penny
Symbols when contra to a PIXL Order. A Responder
that is a Customer will be assessed $0.00 per
contract in Penny Symbols and Non-Penny Symbol.
When a PIXL Order is contra to a resting order or
quote a Customer PIXL Order will be assessed $0.00
per contract, other Non-Customer will be assessed
$0.30 per contract and the resting order or quote
will be assessed the appropriate Options
Transaction Charge in Options 7, Section 4.
PO 00000
Frm 00090
Fmt 4703
Sfmt 4703
favorable. In such an environment, the
Exchange must continually adjust its
fees to remain competitive with other
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.
Intramarket Competition
The proposed amendments do not
impose an undue burden on intramarket
competition.
Options 7, Section 3
The Exchange’s proposal to amend
Options 7, Section 3, Rebates and Fees
for Adding and Removing Liquidity in
SPY, with respect to its PIXL pricing for
SPY options does not impose an undue
burden on competition because all
members and member organizations are
eligible for the proposed rebate,
provided they met the requisite
qualifications. Any member or member
organization may enter a qualifying
order into the PIXL Auction. Members
and member organizations would be
uniformly paid the applicable rebate.
Additionally, all market participants
may interact with order flow which
members and member organizations
must transact in connection with this
rebate.
Options 7, Section 4
QCC
The Exchange’s proposal to amend
Options 7, Section 4, with respect to its
QCC Rebates, to reduce the current six
tier rebate schedule to a proposed two
tier schedule does not impose an undue
burden on competition because all
members and member organizations
may qualify for a QCC Rebate provided
the member or member organization
executed qualifying electronic QCC
Orders and Floor QCC Orders.
Monthly Firm Fee Cap
The Exchange’s proposal to amend
Options 7, Section 4, with respect to the
Monthly Firm Fee Cap, to increase the
Monthly Firm Fee Cap from $75,000 to
$150,000 does not impose an undue
burden on competition as other market
participants benefit from an opportunity
to pay reduced fees on Phlx as do Firms.
Today, Customers are not assessed an
Options Transaction Charge in multiplylisted Penny or non-Penny Symbols.34
Customer liquidity benefits all market
participants by providing more trading
opportunities. An increase in the
34 See
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khammond on DSKJM1Z7X2PROD with NOTICES
activity of these market participants in
turn facilitates tighter spreads, which
may cause an additional corresponding
increase in order flow from other market
participants. Today, Lead Market
Makers and Market Makers are subject
to a Monthly Market Maker Cap of
$500,000 for: (i) electronic Option
Transaction Charges, excluding
surcharges and excluding options
overlying broad-based index options
symbols listed within Options 7,
Section 5.A; and (ii) QCC Transaction
Fees (as defined in Exchange Options 3,
Section 12 and Floor QCC Orders, as
defined in Options 8, Section 30(e)).35
With respect to Broker-Dealers, today,
the Exchange waives the Floor Options
Transaction Charge for Broker-Dealers
executing facilitation orders pursuant to
Options 8, Section 30 when such
members would otherwise incur this
charge for trading in their own
proprietary account contra to a
Customer (‘‘BD-Customer Facilitation’’),
if the member’s BD-Customer
Facilitation average daily volume
(including both FLEX and non-FLEX
transactions) exceeds 10,000 contracts
per day in a given month.36 Finally,
today, Professional Floor Options
Transaction Charges are less favorable
than Customers but more favorable than
Firms as Broker-Dealers are assessed a
35 See Options 7, Section 4. The trading activity
of separate Lead Market Maker and Market Maker
member organizations is aggregated in calculating
the Monthly Market Maker Cap if there is Common
Ownership between the member organizations. All
dividend, merger, short stock interest, reversal and
conversion, jelly roll and box spread strategy
executions (as defined in Options 7, Section 4) are
excluded from the Monthly Market Maker Cap.
Lead Market Makers or Market Makers that (i) are
on the contra-side of an electronically-delivered
and executed Customer order, excluding responses
to a PIXL auction; and (ii) have reached the
Monthly Market Maker Cap will be assessed fees as
follows: $0.05 per contract Fee for Adding Liquidity
in Penny Symbols; $0.18 per contract Fee for
Removing Liquidity in Penny Symbols; $0.18 per
contract in Non-Penny Symbols; and $0.18 per
contract in a non-Complex electronic auction,
including the Quote Exhaust auction and, for
purposes of this fee, the opening process. A
Complex electronic auction includes, but is not
limited to, the Complex Order Live Auction
(‘‘COLA’’). Transactions which execute against an
order for which the Exchange broadcast an order
exposure alert in an electronic auction will be
subject to this fee.
36 See Options 7, Section 4, which states, ‘‘. . .
In addition, the Broker-Dealer Floor Options
Transaction Charge (including Cabinet Options
Transaction Charges) will be waived for members
executing facilitation orders pursuant to Options 8,
Section 30 when such members would otherwise
incur this charge for trading in their own
proprietary account contra to a Customer (‘BDCustomer Facilitation’), if the member’s BDCustomer Facilitation average daily volume
(including both FLEX and non-FLEX transactions)
exceeds 10,000 contracts per day in a given month.
NDX, NDXP, and XND Options Transactions will be
excluded from each of the waivers set forth in the
above paragraph.’’
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16:45 Nov 04, 2022
Jkt 259001
lower Options Transaction Charge as
compared to Floor Lead Market Makers,
Floor Market Makers. Additionally, the
Exchange believes that the proposal is
equitable and not unfairly
discriminatory because members and
member organizations that are JBOs 37
could be subject to the Firm Related
Equity Option Cap, as are other
members, as long as the JBO trades for
their own proprietary account.
Additionally, the proposed change
would encourage JBOs that are not
members or member organizations to
seek to become members or member
organizations to further reduce their
transaction fees.
Options 7, Section 6
The Exchange’s proposal to amend
Options 7, Section 6, with respect to its
PIXL pricing does not impose an undue
burden on competition because all
members and member organizations are
eligible for the proposed rebate,
provided they met the requisite
qualifications. Any member or member
organization may enter a qualifying
order into the PIXL Auction. Members
and member organizations would be
uniformly paid the applicable rebate.
Additionally, all market participants
may interact with order flow which
members and member organizations
must transact in connection with this
rebate.
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.38
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
37 The term ‘‘Joint Back Office’’ or ‘‘JBO’’ applies
to any transaction that is identified by a member or
member organization for clearing in the Firm range
at OCC and is identified with an origin code as a
JBO. A JBO will be priced the same as a BrokerDealer. A JBO participant is a member, member
organization or non-member organization that
maintains a JBO arrangement with a clearing
broker-dealer (‘‘JBO Broker’’) subject to the
requirements of Regulation T Section 220.7 of the
Federal Reserve System as further discussed at
Options 6D, Section 1. See Options 7, Section 1(c).
38 15 U.S.C. 78s(b)(3)(A)(ii).
PO 00000
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Sfmt 4703
67097
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–2022–41 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–2022–41. 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–2022–41 and should
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Federal Register / Vol. 87, No. 214 / Monday, November 7, 2022 / Notices
be submitted on or before November 28,
2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.39
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022–24142 Filed 11–4–22; 8:45 am]
BILLING CODE 8011–01–P
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96201; File No. SR–MIAX–
2022–40]
Self-Regulatory Organizations: Notice
of Filing and Immediate Effectiveness
of a Proposed Rule Change by Miami
International Securities Exchange, LLC
To Remove the Fill-Or-Kill (‘‘FOK’’)
Order Type and Fill Or Kill (‘‘FOK’’)
eQuotes From the Exchange
November 1, 2022.
Pursuant to the provisions of section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 notice is hereby given that
on October 27, 2022, Miami
International Securities Exchange, LLC
(‘‘MIAX Options’’ or the ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) a
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.
khammond on DSKJM1Z7X2PROD with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
remove the fill-or-kill (‘‘FOK’’) 3 order
type and fill or kill (‘‘FOK’’) eQuotes 4
from the Exchange.
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings/ at MIAX Options’ principal
office, and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
17 CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Exchange Rule 516(b)(2).
4 See Exchange Rule 517(a)(2)(v).
39
1 15
VerDate Sep<11>2014
16:45 Nov 04, 2022
Jkt 259001
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 offers a number of
different order types for use on the
Exchange.5 One of the order types the
Exchange offers to Members 6 is a fill-orkill (‘‘FOK’’) order. A fill-or-kill order is
a limit order that is to be executed in its
entirety at a single price as soon as it is
received and, if not so executed is
cancelled. A fill-or-kill order is not valid
during the opening rotation process
described in Rule 503.7 Similarly, the
Exchange offers a fill or kill (‘‘FOK’’)
eQuote which is an eQuote submitted
by a Market Maker 8 that must be
matched with another quote or order for
an execution in its entirety at a single
price upon receipt into the System or
will be immediately cancelled. An FOK
eQuote does not automatically cancel or
replace the Market Maker’s previous
Standard quote or eQuote. An FOK
eQuote is not valid during the opening
rotation process described in Rule 503.9
In Rule 516, Order Types Defined, the
Exchange states it will issue a
Regulatory Circular listing which order
types, among the order types set forth in
the Rule, are available.10 Additionally,
the rule provides that Regulatory
Circulars will also be issued when an
order type that had been in usage on the
Exchange will no longer be available for
use. Similarly, in Rule 517, Quote Types
Defined, the Exchange states it will
issue a Regulatory Circular listing which
quote types, among those quote types
set forth in the Rule, are available.11
Additionally, the rule provides that
Regulatory Circulars will also be issued
when a quote type that had been in
Exchange Rule 516.
term ‘‘Member’’ means an individual or
organization approved to exercise the trading rights
associated with a Trading Permit. Members are
deemed ‘‘members’’ under the Exchange Act. See
Exchange Rule 100.
7 See Exchange Rule 516(b)(2).
8 The term ‘‘Market-Makers’’ refers to ‘‘Lead
Market Makers’’, ‘‘Primary Lead Market-Makers’’
and ‘‘Registered Market Makers’’ collectively. See
Exchange Rule 100.
9 See supra note 4.
10 See Exchange Rule 516.
11 See Exchange Rule 517.
usage on the Exchange will no longer be
available for use. The Exchange
determined that FOK orders and FOK
eQuotes were not order types or eQuote
types that were being regularly used by
Members on the Exchange. In April of
2021, the Exchange issued Regulatory
Circulars to announce that FOK
orders 12 and FOK eQuotes 13 would no
longer be available for use on the
Exchange. Prior to undertaking the effort
to remove FOK orders and FOK eQuotes
completely from the System,14 the
Exchange wanted to ensure that there
were no unforeseen consequences from
disabling FOK orders and FOK eQuotes,
hence the delay between disabling usage
via Regulatory Circular and formally
removing the order type from use on the
Exchange.
The Exchange now proposes to
permanently remove the functionality
from the Exchange’s System and to also
remove references to FOK orders and
FOK eQuotes from the Exchange’s
Rulebook. Specifically, the Exchange
proposes to eliminate references to FOK
orders and FOK eQuotes in the
following Exchange Rules: Exchange
Rule 308, Exemptions from Position
Limits; Rule 515, Execution of Orders
and Quotes; Rule 516, Order Types
Defined; Rule 517, Quote Types
Defined; Rule 529, Order Routing to
Other Exchanges; Rule 605, Market
Maker Orders; and Rule 612, Aggregate
Risk Manager (ARM). In connection
with the proposed change to remove
references to FOK orders and FOK
eQuotes from the Rulebook, the
Exchange also proposes to amend crossreferences to other rules that need to be
updated for accuracy as a result of the
removal of FOK orders and FOK
eQuotes. These proposed changes are
non-substantive edits that are intended
to harmonize the Rulebook with the
System functionality and provide
consistency and clarity throughout the
Rulebook.
First, the Exchange proposes to
amend Exchange Rule 308(c)(vi)(A), to
remove paragraph (A) which contains a
reference to a fill-or-kill instruction. The
Exchange then proposes to amend
subparagraph (c)(vi)(B) to be
5 See
6 The
PO 00000
Frm 00092
Fmt 4703
Sfmt 4703
12 See MIAX Regulatory Circular 2021–20, Fill-orKill Orders Will No Longer Be Supported on the
MIAX Options Exchange (April 8, 2021), available
at https://www.miaxoptions.com/sites/default/files/
circular-files/MIAX_Options_RC_2021_20.pdf.
13 See MIAX Regulatory Circular 2021–21, Fill-orKill eQuotes Will No Longer Be Supported on the
MIAX Options Exchange (April 9, 2021), available
at https://www.miaxoptions.com/sites/default/files/
circular-files/MIAX_Options_RC_2021_21.pdf.
14 The term ‘‘System’’ means the automated
trading system used by the Exchange for the trading
of securities. See Exchange Rule 100.
E:\FR\FM\07NON1.SGM
07NON1
]]>Agencies
[Federal Register Volume 87, Number 214 (Monday, November 7, 2022)]
[Notices]
[Pages 67091-67098]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-24142]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96197; File No. SR-Phlx-2022-41]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Phlx's
Pricing Schedule
November 1, 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 October 17, 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.\3\
---------------------------------------------------------------------------
\3\ The Exchange initially filed the proposed pricing changes on
October 3, 2022 as SR-Phlx-2022-40. The instant filing replaced SR-
Phlx-2022-40 which was withdrawn on October 17, 2022.
---------------------------------------------------------------------------
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 Schedule at Options 7.
Specifically, Phlx proposes to amend: (1) Options 7, Section 3, Rebates
and Fees for Adding and Removing Liquidity in SPY, with respect to its
pricing for Price Improvement XL (``PIXL'') executions in SPY; (2)
Options 7, Section 4, Multiply Listed Options Fees (Includes options
overlying equities, ETFs, ETNs and indexes which are Multiply Listed)
(Excludes SPY and broad-based index options symbols listed within
Options 7, Section 5.A), with respect to its Qualified Contingent Cross
(``QCC'') Rebates and Monthly Firm Fee Cap; and (3) Options 7, Section
6, Other Transaction Fees, with respect to PIXL pricing other than
options in SPY. Each change will be described below.
Options 7, Section 3
The Exchange proposes to amend Options 7, Section 3, Rebates and
Fees for Adding and Removing Liquidity in SPY, with respect to its PIXL
executions in SPY. Today, SPY PIXL Initiating Orders \4\ are assessed a
$0.05 per contract fee, however, members or member organizations that
qualify for Options 7, Section 2, Customer \5\ Rebate Tiers 2 through 6
or qualify for the Monthly Firm Fee Cap \6\ are eligible for a rebate
of $0.12 per contract for all SPY Complex PIXL Orders greater than 499
contracts, provided the member or member organization executes an
average of 2,500 contracts per day of SPY Complex PIXL Orders in a
month.\7\ The Exchange separately assesses fees for PIXL Orders contra
the Initiating Order \8\ which are not being amended at this time.
---------------------------------------------------------------------------
\4\ An order entered into a PIXL Auction mechanism shall be
comprised of two orders, a PIXL agency order and a contra-side
Initiating Order. See Options 3, Section 13.
\5\ The term ``Customer'' applies to any transaction that is
identified by a member or member organization for clearing in the
Customer range at The Options Clearing Corporation (``OCC'') which
is not for the account of a broker or dealer or for the account of a
``Professional'' (as that term is defined in Options 1, Section
1(b)(45)). See Options 7, Section 1(c).
\6\ Today, Firms are subject to a Monthly Firm Fee Cap of
$75,000. See Options 7, Section 4.
\7\ A member may electronically submit for execution an order it
represents as agent on behalf of a public customer, broker-dealer,
or any other entity (``PIXL Order'') against principal interest or
against any other order (except as provided in Options 3, Section
13(a)(6)) it represents as agent (``Initiating Order'') provided it
submits the PIXL order for electronic execution into the PIXL
Auction (``Auction'') pursuant to Options 3, Section 13.
\8\ When the PIXL Order is contra to the Initiating Order, a
Customer PIXL Order is assessed $0.00 per contract and all other
Non-Customer market participants are assessed a $0.38 per contract
fee when contra to an Initiating Order. Further, when the PIXL Order
is contra to other than the Initiating Order, the PIXL Order is
assessed $0.00 per contract, unless the PIXL Order is a Customer, in
which case the Customer receives a rebate of $0.40 per contract.
Finally, all other Non-Customer contra parties to the PIXL Order
that are not the Initiating Order are assessed a Fee for Removing
Liquidity of $0.50 per contract or are entitled to receive the
Rebate for Adding Liquidity. When the PIXL Order is contra to a Lead
Market Maker or Market Maker quote, which was established at the
initiation of a PIXL auction, the Customer PIXL Order is not be
eligible for a rebate. See Options 7, Section 3.
---------------------------------------------------------------------------
At this time, the Exchange proposes to continue to assess SPY PIXL
Initiating Orders a $0.05 per contract fee. Members or member
organizations that qualify for Options 7, Section 2, Customer Rebate
Tiers 2 through 6 or qualify for the Monthly Firm Fee Cap will continue
to be eligible for a rebate of $0.12 per contract for all SPY Complex
PIXL Orders greater than 499 contracts when contra to an Initiating
Order, provided the member or member organization executes an average
of 2,500 contracts per day of SPY Complex PIXL Orders in a month. The
Exchange's proposal to further qualify that the SPY Complex PIXL Orders
greater than 499 contracts must be contra to an Initiating Order, in
addition to the member or member organization having executed an
average of 2,500 contracts per day of SPY Complex PIXL Orders in a
month. As is the case today, when the PIXL Order is contra to other
than the Initiating Order, the PIXL Order is assessed $0.00 per
contract, unless the PIXL Order is a Customer, in which case the
Customer receives a rebate of $0.40 per contract.
Below is an example of the proposed change which presumes the
market participant has met the qualifications for the rebate.
[[Page 67092]]
Assume:
NBBO and PHLX are both $1.00 x $1.50
Initiator sends PIXL Complex Order in SPY to buy 500 spreads (1000
contracts) for $1.45 (Market Maker not assigned in SPY is contra-side)
Instance 1
When no outside response to interact with the PIXL order--no change
from Sep to Oct in pricing.
Oct 3 Pricing
Public Customer fee to execute PIXL Complex Order = $0.00 per contract
Initiating Order fee = $0.05 fee--$50.00
PIXL Order rebate = $0.12 per contract ($120.00)
The rebate is achieved because the PIXL Order trades against the
Initiating Order in its entirety.
Instance 2
Assume:
Responders to the PIXL Complex Order indicate the following allocation
process:
Initiating Order = 40% (400 contracts)
Auction Responders = 60% (600 contracts)
Sept Pricing
Public Customer fee to execute PIXL Complex Order = $0.00
(paired) = $0.05 fee--$20.00 ($0.05 x 400 contracts)
Responder fee = $0.50 per contract--$300.00
Break-Up rebate = ($0.40) per contract ($240.00)
PIXL Order rebate = $0.12 per contract ($120.00)
Oct 3 Pricing
Public Customer Charge to execute PIXL Complex Order = $0.00
Initiating Order (paired) = $0.05 fee--$20.00 ($0.05 x 400 contracts)
Responder fee = $0.50 per contract--$300.00
Break-Up rebate = ($0.40) per contract ($240.00)
Additional PIXL Order rebate = ($0.12) per contract ($48.00) ($0.12 x
400 contracts contra PIXL order)
With this change the rebate would be paid only to PIXL Complex
Order contracts that were executed against the Initiating Order. The
prior pricing rebate was for $120 (1000 contracts x $0.12) and the
October pricing would be $48 (400 contracts x $0.12).
The Exchange desires to continue to incentivize members and member
organizations to transact a greater number of SPY Complex PIXL Orders
while also incentivizing members and member organizations to submit
Customer order flow on Phlx. While the proposal no longer offers the
$0.12 per contract rebate that is available today for the PIXL Agency
Order when that PIXL Order is contra to other than the Initiating
Order, the Exchange believes that market participants will continue to
be incentivized to submit PIXL Agency Orders to Phlx because the
Exchange continues to offer a rebate of $0.40 per contract when the
PIXL Order is contra to other than the Initiating Order.
Options 7, Section 4
QCC
The Exchange proposes to amend Options 7, Section 4, Multiply
Listed Options Fees (Includes options overlying equities, ETFs, ETNs
and indexes which are Multiply Listed) (Excludes SPY and broad-based
index options symbols listed within Options 7, Section 5.A) with
respect to its QCC Rebates.
Today, the Exchange assesses a $0.20 per contract QCC Transaction
Fees \9\ to a Lead Market Maker,\10\ Market Maker,\11\ Firm \12\ and
Broker-Dealer.\13\ Customers and Professionals \14\ are not assessed a
QCC Transaction Fee. QCC Transaction Fees apply to electronic QCC
Orders \15\ and Floor QCC Orders.\16\ Rebates are paid on all
qualifying executed electronic QCC Orders and Floor QCC Orders based on
the following six tier rebate schedule:\17\
---------------------------------------------------------------------------
\9\ QCC Transaction Fees apply to electronic QCC Orders, as
defined in Options 3, Section 12, and Floor QCC Orders, as defined
in Options 8, Section 30(e).
\10\ 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 Options 2, Section
12(a). 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. See Options 7, Section 1(c). 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 Options 8, Section
2(a)(3).
\11\ 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 Floor Market Makers. See Options
7, Section 1(c). 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 Options 8, Section 2(a)(4).
\12\ 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. See Options 7,
Section 1(c).
\13\ 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 Options 7, Section 1(c).
\14\ 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 Options 7, Section 1(c).
\15\ Electronic QCC Orders are described in Options 3, Section
12.
\16\ Floor QCC Orders are described in Options 8, Section 30(e).
\17\ Volume resulting from all executed electronic QCC Orders
and Floor QCC Orders, including Customer-to-Customer, Customer-to-
Professional, and Professional-to-Professional transactions and
excluding dividend, merger, short stock interest or reversal or
conversion strategy executions, is aggregated in determining the
applicable volume tier.
QCC Rebate Schedule
----------------------------------------------------------------------------------------------------------------
Tier Threshold Rebate per contract
----------------------------------------------------------------------------------------------------------------
Tier 1................................ 0 to 99,999 contracts in a month.................. $0.00
Tier 2................................ 100,000 to 299,999 contracts in a month........... 0.05
Tier 3................................ 300,000 to 499,999 contracts in a month........... 0.07
Tier 4................................ 500,000 to 699,999 contracts in a month........... 0.08
Tier 5................................ 700,000 to 999,999 contracts in a month........... 0.09
Tier 6................................ Over 1,000,000 contracts in a month............... 0.11
----------------------------------------------------------------------------------------------------------------
The Exchange does not pay a QCC Rebate where the transaction is
either: (i) Customer-to-Customer; (ii) Customer-to-Professional; (iii)
Professional-to-Professional; or (iv) a dividend, merger, short stock
interest or reversal or conversion strategy execution (as defined in
Options 7, Section 4).
[[Page 67093]]
At this time, the Exchange proposes to reduce the six tier rebate
schedule to a two tier schedule as follows:
QCC Rebate Schedule
----------------------------------------------------------------------------------------------------------------
Tier Threshold Rebate per contract
----------------------------------------------------------------------------------------------------------------
Tier 1................................ 0 to 999,999 contracts in a month................. $0.09
Tier 2................................ 1,000,000 contracts or more in a month............ 0.17
----------------------------------------------------------------------------------------------------------------
The Exchange would pay a Tier 1 QCC Rebate of $0.09 per contract on
all qualifying executed electronic QCC Orders and Floor QCC Orders up
to 999,999 contracts in a month. The Exchange would pay a Tier 2 QCC
Rebate of $0.17 per contract on all qualifying executed electronic QCC
Orders and Floor QCC Orders of $1,000,000 contracts or more in a month.
With this change, the Exchange would pay a $0.09 per contract QCC
Rebate for each contract from the first execution up to 999,999
contracts in a month. Today, Members that execute 0 to 99,999 contracts
in a month do not receive a QCC Tier 1 Rebate. Additionally, while
today the Exchange pays a Tier 5 QCC Rebate of $0.09 per contract for
700,000 to 999,999 contracts in a month, with this proposal the
proposed $0.09 per contract Tier 1 QCC Rebate may be up to 999,999
contracts in a month. Also, while today, the Exchange pays a Tier 6 QCC
Rebate of $0.11 per contract for qualifying executed electronic QCC
Orders and Floor QCC Orders over $1,000,000 contracts in a month, the
proposed Tier 2 QCC Rebate would be increased to $0.17 per contract for
$1,000,000 contracts or more in a month.
The Exchange believes that its proposal will incentivize members
and member organizations to submit a greater amount of QCC Orders to
Phlx in order to obtain a rebate.
Monthly Firm Fee Cap
The Exchange proposes to amend Options 7, Section 4, Multiply
Listed Options Fees (Includes options overlying equities, ETFs, ETNs
and indexes which are Multiply Listed) (Excludes SPY and broad-based
index options symbols listed within Options 7, Section 5.A), with
respect to its Monthly Firm Fee Cap. Today, Firms are subject to a
maximum fee of $75,000 known as the ``Monthly Firm Fee Cap''. Firm
Floor Option Transaction Charges and QCC Transaction Fees, as defined
in Options 7, Section 4, in the aggregate, for one billing month may
not exceed the Monthly Firm Fee Cap per member organization when such
members are trading in their own proprietary account. The following
pricing is excluded from the Monthly Firm Fee Cap: (1) all dividend,
merger, and short stock interest strategy executions, as defined in
Options 7, Section 4; (2) transactions in broad-based index options
symbols listed within Options 7, Section 5.A.; and (3) reversal and
conversion, jelly roll and box spread strategy executions as defined in
this Options 7, Section 4. QCC Transaction Fees are included in the
calculation of the Monthly Firm Fee Cap.\18\
---------------------------------------------------------------------------
\18\ Member organizations are required to notify the Exchange in
writing of all accounts in which the member is not trading in its
own proprietary account.
---------------------------------------------------------------------------
At this time, the Exchange proposes to amend the Monthly Firm Fee
Cap from $75,000 to $150,000. The Monthly Firm Fee Cap has remained at
$75,000 since 2010.\19\ The Exchange believes that while this cap is
being increased, Firms will continue to be incentivized by the cap.
---------------------------------------------------------------------------
\19\ The Monthly Firm Fee Cap was previously called the Firm
Related Equity Option Cap. See Securities Exchange Act Release No.
65888 (December 5, 2011), 76 FR 77046 (December 9, 2011) (SR-Phlx-
2011-160).
---------------------------------------------------------------------------
Options 7, Section 6
The Exchange proposes to amend Options 7, Section 6, Other
Transaction Fees, at A. PIXL Pricing with respect to PIXL pricing other
than options in SPY. Today, an Initiating Order in PIXL is assessed a
$0.07 per contract fee, with the exception of SPY PIXL Orders which are
assessed the pricing within Options 7, Section 4. Today, if the member
or member organization qualifies for the Tier 3, 4 or 5 Customer Rebate
in Options 7, Section 2 the member or member organization is assessed
$0.05 per contract. If the member or member organization executes equal
to or greater than 3.00% of National Customer Volume in Multiply-Listed
equity and ETF Options Classes (excluding SPY Options) in a given
month, the member or member organization is not assessed a fee for
Complex PIXL Orders. Any member or member organization under Common
Ownership with another member or member organization that qualifies for
a Customer Rebate Tier 4 or 5 in Options 7, Section 2, or executes
equal to or greater than 3.00% of National Customer Volume in Multiply-
Listed equity and ETF Options Classes (excluding SPY Options) in a
given month receives one of the PIXL Initiating Order discounts noted
herein. Finally, members or member organizations that qualify for
Customer Rebate Tiers 2 through 6 or qualify for the Monthly Firm Fee
Cap are eligible for a rebate of $0.12 per contract for all Complex
PIXL Orders (excluding SPY Options) greater than 499 contracts,
provided the member or member organization executes an average of 2,500
contracts per day of Complex PIXL Orders in a month.
Similar to the change proposed for SPY PIXL within Options 7,
Section 3, the Exchange proposes to amend Options 7, 6A. to provide
that members or member organizations that qualify for Customer Rebate
Tiers 2 through 6 or qualify for the Monthly Firm Fee Cap are eligible
for a rebate of $0.12 per contract for all Complex PIXL Orders
(excluding SPY Options) greater than 499 contracts when contra to an
Initiating Order, provided the member executes an average of 2,500
contracts per day of Complex PIXL Orders in a month.
Below is an example of the proposed change which presumes the
market participant has met the qualifications for the rebate.
Assume for Options 7, Section 6A:
NBBO and PHLX are both $1.00 x $1.50
Initiator sends PIXL Complex Order in AAPL to buy 500 spreads (1000
contracts) for $1.45 (Market Maker not assigned in AAPL is contra-side)
PIXL Agency Order qualifies for Customer Rebate Tier 5
Instance 1
When no outside response to interact with the PIXL order--no change
from Sep to Oct in pricing.
Oct 3 Pricing
Public Customer fee to execute PIXL Complex Order = $0.00 per contract
Initiating Order fee = $0.07 fee--$70.00
PIXL Order rebate = $0.12 per contract ($120.00)
[[Page 67094]]
The rebate is achieved because the PIXL Complex Order trades
against the Initiating Order in its entirety.
Instance 2
Assume:
Responders to the PIXL Complex Order indicate the following allocation
process:
Initiating Order = 40% (400 contracts)
Auction Responders = 60% (600 contracts)
PIXL Agency Order qualifies for Customer Rebate Tier 5
Sept Pricing
Public Customer fee to execute PIXL Complex Order = $0.00
(paired) = $0.07 fee--$28.00 ($0.07 x 400 contracts)
Market Maker Responder Penny Symbol fee = $0.25 per contract ($0.25 x
600 contracts)--$150.00
PIXL Order rebate = $0.12 per contract ($0.12 x 1000 = $120.00)
PIXL Agency Order qualifies for $0.22 per contract rebate ($132.00) for
Category C Customer Rebate which applies to PIXL Complex Orders ($0.22
x 600 contracts)
Oct 3 Pricing
Public Customer Charge to execute PIXL Complex Order = $0.00
Initiating Order (paired) = $0.07 fee--$28.00 ($0.07 x 400 contracts)
Market Maker Responder Penny Symbol fee = $0.25 per contract ($0.25 x
600 contracts)--$150.00
PIXL Order rebate = $0.12 per contract ($0.12 x 400 = $48.00)
PIXL Agency Order qualifies for $0.22 per contract rebate ($132.00) for
Category C Customer Rebate which applies to PIXL Complex Orders ($0.22
x 600 contracts)
With this change the rebate would be paid only to PIXL Complex
Order contracts that were executed against the Initiating Order. The
prior pricing rebate was for $120 (1,000 contracts x $0.12) and the
October pricing would be $48 (400 contracts x $0.12).
The Exchange desires to continue to incentivize members and member
organizations to transact a greater number of Complex PIXL Orders while
also incentivizing members and member organizations to submit Customer
order flow on Phlx. While the proposal no longer offers the $0.12 per
contract rebate that is available today for the PIXL Agency Order when
that PIXL Order is contra to other than the Initiating Order, the
Exchange believes that market participants will continue to be
incentivized to submit PIXL Agency Orders to Phlx because the Exchange
continues to offer Category C and D rebate for Complex Orders when the
PIXL Order is contra to other than the Initiating Order.\20\
---------------------------------------------------------------------------
\20\ When a PIXL Order is contra to a PIXL Auction Responder, a
Customer PIXL Order will be assessed $0.00 per contract, other Non-
Customer PIXL Orders will be assessed $0.30 per contract in Penny
Symbols or $0.38 per contract in Non-Penny Symbols. A Responder that
is a Lead Market Maker or a Market Maker will be assessed $0.25 per
contract in Penny Symbols or $0.40 per contract in Non-Penny
Symbols. Other Non-Customer Responders will be assessed $0.48 per
contract in Penny Symbols or $0.70 per contract in Non-Penny Symbols
when contra to a PIXL Order. A Responder that is a Customer will be
assessed $0.00 per contract in Penny Symbols and Non-Penny Symbol.
When a PIXL Order is contra to a resting order or quote a Customer
PIXL Order will be assessed $0.00 per contract, other Non-Customer
will be assessed $0.30 per contract and the resting order or quote
will be assessed the appropriate Options Transaction Charge in
Options 7, Section 4.
---------------------------------------------------------------------------
Technical Amendments
The Exchange proposes to add the terms ``member'' and member
organization,'' where applicable, within the proposed rule text.
Pursuant to General 1, Section 1(16), the term ``member'' means:
a permit holder which has not been terminated in accordance with the
By-Laws and these Rules of the Exchange. A member is a natural
person and must be a person associated with a member organization.
Any references in the rules of the Exchange to the rights or
obligations of an associated person or person associated with a
member organization also includes a member.
Pursuant to General 1, Section 1(17) the term ``member
organization'' means:
a corporation, partnership (general or limited), limited liability
partnership, limited liability company, business trust or similar
organization, transacting business as a broker or a dealer in
securities and which has the status of a member organization by
virtue of (i) admission to membership given to it by the Membership
Department pursuant to the provisions of General 3, Sections 5 and
10 or the By-Laws or (ii) the transitional rules adopted by the
Exchange pursuant to Section 6-4 of the By-Laws. References herein
to officer or partner, when used in the context of a member
organization, shall include any person holding a similar position in
any organization other than a corporation or partnership that has
the status of a member organization.
An entity may be either a member or member organization on Phlx and
therefore both terms apply when describing transaction fees and caps
applicable to entities that have been approved for membership on Phlx.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\21\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\22\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees and
other charges among members and issuers and other persons using any
facility, and is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\21\ 15 U.S.C. 78f(b).
\22\ 15 U.S.C. 78f(b)(4) and (5).
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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.'' \23\
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\23\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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Likewise, in NetCoalition v. Securities and Exchange Commission
\24\ (``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.\25\ 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.'' \26\
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\24\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\25\ See NetCoalition, at 534-535.
\26\ Id. at 537.
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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'. . . .'' \27\ Although the court and
the SEC were discussing the cash equities markets, the Exchange
believes
[[Page 67095]]
that these views apply with equal force to the options markets.
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\27\ Id. at 539 (quoting Securities Exchange Act Release No.
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008)
(SR-NYSEArca-2006-21)).
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Options 7, Section 3
The Exchange's proposal to amend Options 7, Section 3, with respect
to its PIXL pricing for SPY options is reasonable because it will
continue to incentivize members and member organizations to transact a
greater number of SPY Complex PIXL Orders while also incentivizing
members and member organizations to submit Customer order flow on Phlx.
While the proposal no longer offers the $0.12 per contract rebate that
is available today for the PIXL Agency Order when that PIXL Order is
contra to other than the Initiating Order, the Exchange believes that
market participants will continue to be incentivized to submit PIXL
Agency Orders to Phlx because the Exchange continues to offer a rebate
of $0.40 per contract when the PIXL Order is contra to other than the
Initiating Order. Requiring SPY Complex PIXL Orders greater than 499
contracts to be contra to an Initiating Order to receive the rebate,
provided the member or member organization executes an average of 2,500
contracts per day of SPY Complex PIXL Orders in a month, will continue
to encourage members and member organizations to submit order flow to
Phlx to obtain the rebate. As is the case today, when the PIXL Order is
contra to other than the Initiating Order, the PIXL Order is assessed
$0.00 per contract, unless the PIXL Order is a Customer, in which case
the Customer receives a rebate of $0.40 per contract.
The Exchange's proposal to amend Options 7, Section 3, Rebates and
Fees for Adding and Removing Liquidity in SPY, with respect to its PIXL
pricing for SPY options is equitable and not unfairly discriminatory
because all members and member organizations are eligible for the
proposed rebate, provided they met the requisite qualifications. Any
member or member organization may enter a qualifying order into the
PIXL Auction. Members and member organizations would be uniformly paid
the applicable rebate. Additionally, all market participants may
interact with order flow which members and member organizations must
transact in connection with this rebate.
Options 7, Section 4
QCC
The Exchange's proposal to amend Options 7, Section 4, with respect
to its QCC Rebates, to reduce the current six tier rebate schedule to a
proposed two tier schedule is reasonable because the proposal will
incentivize members and member organizations to submit a greater amount
of QCC Orders to Phlx. With this proposal, the Exchange would pay a
Tier 1 QCC Rebate of $0.09 on all qualifying executed electronic QCC
Orders and Floor QCC Orders up to 999,999 contracts in a month. The QCC
Rebate would be paid for each contract from the first execution up to
999,999 contracts in a month. Today, a Member will not receive a Tier 1
QCC Rebate if they enter 99,999 contracts or fewer in a month, however
once a Member enters 100,000 or more contracts, the Member would
qualify for the current Tier 2 QCC Rebate for all 100,000 contracts.
With this proposal all qualifying executed electronic QCC Orders and
Floor QCC Orders up to 999,999 contracts in a month would be entitled
to the proposed $0.09 per contract Tier 1 QCC Rebate. Additionally,
while today the Exchange pays a Tier 5 QCC rebate of $0.09 per contract
for qualifying executed electronic QCC Orders and Floor QCC Orders from
700,000 to 999,999 contracts in a month, with this proposal the $0.09
per contract Tier 1 QCC Rebate would be paid to Members who submit up
to 999,999 contracts in a month. Also, the Exchange would pay a Tier 2
QCC Rebate of $0.17 per contract on all qualifying executed electronic
QCC Orders and Floor QCC Orders of $1,000,000 contracts or more in a
month. Today, the Exchange pays a Tier 6 QCC Rebate of $0.11 per
contract for qualifying executed electronic QCC Orders and Floor QCC
Orders over $1,000,000 contracts in a month. The proposed Tier 2 QCC
Rebate would be increased to $0.17 per contract for $1,000,000
contracts or more in a month.
The Exchange's proposal to amend Options 7, Section 4, with respect
to its QCC Rebates, to reduce the current six tier rebate schedule to a
proposed two tier schedule is equitable and not unfairly discriminatory
because all members and member organizations may qualify for a QCC
Rebate provided the member or member organization executed qualifying
electronic QCC Orders and Floor QCC Orders.
Monthly Firm Fee Cap
The Exchange's proposal to amend Options 7, Section 4, with respect
to the Monthly Firm Fee Cap, to increase the Monthly Firm Fee Cap from
$75,000 to $150,000 is reasonable because despite the increase, the
Exchange believes Firms will continue to be incentivized by the
opportunity to pay no fees beyond the $150,000 cap. The Monthly Firm
Fee Cap has remained at $75,000 since 2010. Other members and member
organizations may interact with the order flow submitted by Firms to
Phlx to reach the cap.
The Exchange's proposal to amend Options 7, Section 4, with respect
to the Monthly Firm Fee Cap, to increase the Monthly Firm Fee Cap from
$75,000 to $150,000 is equitable and not unfairly discriminatory as
other market participants benefit from an opportunity to pay reduced
fees on Phlx as do Firms. Today, Customers are not assessed an Options
Transaction Charge in multiply-listed Penny or non-Penny Symbols.\28\
Customer liquidity benefits all market participants by providing more
trading opportunities. 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. Today, Lead Market Makers and Market Makers are subject
to a Monthly Market Maker Cap of $500,000 for: (i) electronic Option
Transaction Charges, excluding surcharges and excluding options
overlying broad-based index options symbols listed within Options 7,
Section 5.A; and (ii) QCC Transaction Fees (as defined in Exchange
Options 3, Section 12 and Floor QCC Orders, as defined in Options 8,
Section 30(e)).\29\ With respect to Broker-Dealers, today, the Exchange
waives the Floor Options Transaction Charge for Broker-Dealers
executing facilitation orders pursuant to Options 8, Section 30 when
such members would otherwise incur this charge for trading in their own
proprietary account contra to a Customer (``BD-Customer
Facilitation''), if the member's BD-Customer Facilitation average daily
volume
[[Page 67096]]
(including both FLEX and non-FLEX transactions) exceeds 10,000
contracts per day in a given month.\30\ Finally, today, Professional
Floor Options Transaction Charges are less favorable than Customers but
more favorable than Firms as Broker-Dealers are assessed a lower
Options Transaction Charge as compared to Floor Lead Market Makers,
Floor Market Makers. Additionally, the Exchange believes that the
proposal is equitable and not unfairly discriminatory because members
and member organizations that are JBOs \31\ could be subject to the
Firm Related Equity Option Cap, as are other members, as long as the
JBO trades for their own proprietary account. Additionally, the
proposed change would encourage JBOs that are not members or member
organizations to seek to become members or member organizations to
further reduce their transaction fees.
---------------------------------------------------------------------------
\28\ See Options 7, Section 4.
\29\ See Options 7, Section 4. The trading activity of separate
Lead Market Maker and Market Maker member organizations is
aggregated in calculating the Monthly Market Maker Cap if there is
Common Ownership between the member organizations. All dividend,
merger, short stock interest, reversal and conversion, jelly roll
and box spread strategy executions (as defined in Options 7, Section
4) are excluded from the Monthly Market Maker Cap. Lead Market
Makers or Market Makers that (i) are on the contra-side of an
electronically-delivered and executed Customer order, excluding
responses to a PIXL auction; and (ii) have reached the Monthly
Market Maker Cap will be assessed fees as follows: $0.05 per
contract Fee for Adding Liquidity in Penny Symbols; $0.18 per
contract Fee for Removing Liquidity in Penny Symbols; $0.18 per
contract in Non-Penny Symbols; and $0.18 per contract in a non-
Complex electronic auction, including the Quote Exhaust auction and,
for purposes of this fee, the opening process. A Complex electronic
auction includes, but is not limited to, the Complex Order Live
Auction (``COLA''). Transactions which execute against an order for
which the Exchange broadcast an order exposure alert in an
electronic auction will be subject to this fee.
\30\ See Options 7, Section 4, which states, ``. . . In
addition, the Broker-Dealer Floor Options Transaction Charge
(including Cabinet Options Transaction Charges) will be waived for
members executing facilitation orders pursuant to Options 8, Section
30 when such members would otherwise incur this charge for trading
in their own proprietary account contra to a Customer (`BD-Customer
Facilitation'), if the member's BD-Customer Facilitation average
daily volume (including both FLEX and non-FLEX transactions) exceeds
10,000 contracts per day in a given month. NDX, NDXP, and XND
Options Transactions will be excluded from each of the waivers set
forth in the above paragraph.''
\31\ The term ``Joint Back Office'' or ``JBO'' applies to any
transaction that is identified by a member or member organization
for clearing in the Firm range at OCC and is identified with an
origin code as a JBO. A JBO will be priced the same as a Broker-
Dealer. A JBO participant is a member, member organization or non-
member organization that maintains a JBO arrangement with a clearing
broker-dealer (``JBO Broker'') subject to the requirements of
Regulation T Section 220.7 of the Federal Reserve System as further
discussed at Options 6D, Section 1. See Options 7, Section 1(c).
---------------------------------------------------------------------------
Options 7, Section 6
The Exchange's proposal to amend Options 7, Section 6, with respect
to its PIXL pricing \32\ is reasonable because it will continue to
incentivize members and member organizations to transact a greater
number of Complex PIXL Orders while also incentivizing members and
member organizations to submit Customer order flow on Phlx. While the
proposal no longer offers the $0.12 per contract rebate that is
available today for the PIXL Agency Order when that PIXL Order is
contra to other than the Initiating Order, the Exchange believes that
market participants will continue to be incentivized to submit PIXL
Agency Orders to Phlx because the Exchange continues to offer Category
C and D rebates for Complex Orders when the PIXL Order is contra to
other than the Initiating Order.\33\ Requiring Complex PIXL Orders
greater than 499 contracts to be contra to an Initiating Order to
receive the rebate, provided the member or member organization executes
an average of 2,500 contracts per day of Complex PIXL Orders in a
month, will continue to encourage members and member organizations to
submit order flow to Phlx to obtain the rebate.
---------------------------------------------------------------------------
\32\ The PIXL pricing in Options 7, Section excludes SPY
options.
\33\ When a PIXL Order is contra to a PIXL Auction Responder, a
Customer PIXL Order will be assessed $0.00 per contract, other Non-
Customer PIXL Orders will be assessed $0.30 per contract in Penny
Symbols or $0.38 per contract in Non-Penny Symbols. A Responder that
is a Lead Market Maker or a Market Maker will be assessed $0.25 per
contract in Penny Symbols or $0.40 per contract in Non-Penny
Symbols. Other Non-Customer Responders will be assessed $0.48 per
contract in Penny Symbols or $0.70 per contract in Non-Penny Symbols
when contra to a PIXL Order. A Responder that is a Customer will be
assessed $0.00 per contract in Penny Symbols and Non-Penny Symbol.
When a PIXL Order is contra to a resting order or quote a Customer
PIXL Order will be assessed $0.00 per contract, other Non-Customer
will be assessed $0.30 per contract and the resting order or quote
will be assessed the appropriate Options Transaction Charge in
Options 7, Section 4.
---------------------------------------------------------------------------
The Exchange's proposal to amend Options 7, Section 6, with respect
to its PIXL pricing is equitable and not unfairly discriminatory
because all members and member organizations are eligible for the
proposed rebate, provided they met the requisite qualifications. Any
member or member organization may enter a qualifying order into the
PIXL Auction. Members and member organizations would be uniformly paid
the applicable rebate. Additionally, all market participants may
interact with order flow which members or member organizations must
transact in connection with this rebate.
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.
Intermarket Competition
The proposal does not impose an undue burden on intermarket
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. 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.
Intramarket Competition
The proposed amendments do not impose an undue burden on
intramarket competition.
Options 7, Section 3
The Exchange's proposal to amend Options 7, Section 3, Rebates and
Fees for Adding and Removing Liquidity in SPY, with respect to its PIXL
pricing for SPY options does not impose an undue burden on competition
because all members and member organizations are eligible for the
proposed rebate, provided they met the requisite qualifications. Any
member or member organization may enter a qualifying order into the
PIXL Auction. Members and member organizations would be uniformly paid
the applicable rebate. Additionally, all market participants may
interact with order flow which members and member organizations must
transact in connection with this rebate.
Options 7, Section 4
QCC
The Exchange's proposal to amend Options 7, Section 4, with respect
to its QCC Rebates, to reduce the current six tier rebate schedule to a
proposed two tier schedule does not impose an undue burden on
competition because all members and member organizations may qualify
for a QCC Rebate provided the member or member organization executed
qualifying electronic QCC Orders and Floor QCC Orders.
Monthly Firm Fee Cap
The Exchange's proposal to amend Options 7, Section 4, with respect
to the Monthly Firm Fee Cap, to increase the Monthly Firm Fee Cap from
$75,000 to $150,000 does not impose an undue burden on competition as
other market participants benefit from an opportunity to pay reduced
fees on Phlx as do Firms. Today, Customers are not assessed an Options
Transaction Charge in multiply-listed Penny or non-Penny Symbols.\34\
Customer liquidity benefits all market participants by providing more
trading opportunities. An increase in the
[[Page 67097]]
activity of these market participants in turn facilitates tighter
spreads, which may cause an additional corresponding increase in order
flow from other market participants. Today, Lead Market Makers and
Market Makers are subject to a Monthly Market Maker Cap of $500,000
for: (i) electronic Option Transaction Charges, excluding surcharges
and excluding options overlying broad-based index options symbols
listed within Options 7, Section 5.A; and (ii) QCC Transaction Fees (as
defined in Exchange Options 3, Section 12 and Floor QCC Orders, as
defined in Options 8, Section 30(e)).\35\ With respect to Broker-
Dealers, today, the Exchange waives the Floor Options Transaction
Charge for Broker-Dealers executing facilitation orders pursuant to
Options 8, Section 30 when such members would otherwise incur this
charge for trading in their own proprietary account contra to a
Customer (``BD-Customer Facilitation''), if the member's BD-Customer
Facilitation average daily volume (including both FLEX and non-FLEX
transactions) exceeds 10,000 contracts per day in a given month.\36\
Finally, today, Professional Floor Options Transaction Charges are less
favorable than Customers but more favorable than Firms as Broker-
Dealers are assessed a lower Options Transaction Charge as compared to
Floor Lead Market Makers, Floor Market Makers. Additionally, the
Exchange believes that the proposal is equitable and not unfairly
discriminatory because members and member organizations that are JBOs
\37\ could be subject to the Firm Related Equity Option Cap, as are
other members, as long as the JBO trades for their own proprietary
account. Additionally, the proposed change would encourage JBOs that
are not members or member organizations to seek to become members or
member organizations to further reduce their transaction fees.
---------------------------------------------------------------------------
\34\ See Options 7, Section 4.
\35\ See Options 7, Section 4. The trading activity of separate
Lead Market Maker and Market Maker member organizations is
aggregated in calculating the Monthly Market Maker Cap if there is
Common Ownership between the member organizations. All dividend,
merger, short stock interest, reversal and conversion, jelly roll
and box spread strategy executions (as defined in Options 7, Section
4) are excluded from the Monthly Market Maker Cap. Lead Market
Makers or Market Makers that (i) are on the contra-side of an
electronically-delivered and executed Customer order, excluding
responses to a PIXL auction; and (ii) have reached the Monthly
Market Maker Cap will be assessed fees as follows: $0.05 per
contract Fee for Adding Liquidity in Penny Symbols; $0.18 per
contract Fee for Removing Liquidity in Penny Symbols; $0.18 per
contract in Non-Penny Symbols; and $0.18 per contract in a non-
Complex electronic auction, including the Quote Exhaust auction and,
for purposes of this fee, the opening process. A Complex electronic
auction includes, but is not limited to, the Complex Order Live
Auction (``COLA''). Transactions which execute against an order for
which the Exchange broadcast an order exposure alert in an
electronic auction will be subject to this fee.
\36\ See Options 7, Section 4, which states, ``. . . In
addition, the Broker-Dealer Floor Options Transaction Charge
(including Cabinet Options Transaction Charges) will be waived for
members executing facilitation orders pursuant to Options 8, Section
30 when such members would otherwise incur this charge for trading
in their own proprietary account contra to a Customer (`BD-Customer
Facilitation'), if the member's BD-Customer Facilitation average
daily volume (including both FLEX and non-FLEX transactions) exceeds
10,000 contracts per day in a given month. NDX, NDXP, and XND
Options Transactions will be excluded from each of the waivers set
forth in the above paragraph.''
\37\ The term ``Joint Back Office'' or ``JBO'' applies to any
transaction that is identified by a member or member organization
for clearing in the Firm range at OCC and is identified with an
origin code as a JBO. A JBO will be priced the same as a Broker-
Dealer. A JBO participant is a member, member organization or non-
member organization that maintains a JBO arrangement with a clearing
broker-dealer (``JBO Broker'') subject to the requirements of
Regulation T Section 220.7 of the Federal Reserve System as further
discussed at Options 6D, Section 1. See Options 7, Section 1(c).
---------------------------------------------------------------------------
Options 7, Section 6
The Exchange's proposal to amend Options 7, Section 6, with respect
to its PIXL pricing does not impose an undue burden on competition
because all members and member organizations are eligible for the
proposed rebate, provided they met the requisite qualifications. Any
member or member organization may enter a qualifying order into the
PIXL Auction. Members and member organizations would be uniformly paid
the applicable rebate. Additionally, all market participants may
interact with order flow which members and member organizations must
transact in connection with this rebate.
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.\38\
---------------------------------------------------------------------------
\38\ 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-2022-41 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-2022-41. 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-2022-41 and
should
[[Page 67098]]
be submitted on or before November 28, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\39\
---------------------------------------------------------------------------
\39\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-24142 Filed 11-4-22; 8:45 am]
BILLING CODE 8011-01-P
