Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, Section 4 Regarding Qualified Contingent Cross Rebates, 56675-56679 [2023-17760]
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Federal Register / Vol. 88, No. 159 / Friday, August 18, 2023 / Notices
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Additionally, the Exchange believes this
pricing will encourage Market Makers to
add liquidity on the MRX order book in
SPY, QQQ and IWM as the Tier 1
Market Maker Penny Symbol Maker Fee
of $0.10 per contract is being reduced to
$0.00 per contract. While Market
Makers that add liquidity in SPY, QQQ
and IWM will no longer receive the
Market Maker Tier 3 or Tier 4 Maker
Rebates in Penny Symbols, the proposed
pricing should overall continue to
attract order flow to MRX in these
symbols. Market Makers have different
requirements and additional obligations
to the Exchange that other market
participants do not (such as quoting
requirements).11 Increasing Market
Maker participation in SPY, QQQ and
IWM, by removing the Tier 1 Maker Fee
for Market Makers to add Penny Symbol
liquidity in SPY, QQQ and IWM, will
benefit all market participants.
Assessing Priority Customers no Penny
Symbol Taker Fees in SPY, QQQ and
IWM will benefit all market participants
as Priority Customer liquidity provides
more trading opportunities, which
attracts market makers. An increase in
the activity of these market participants
in turn facilitates tighter spreads, which
may cause an additional corresponding
increase in order flow from other market
participants, for the benefit of all market
participants. The Exchange believes
assessing different fees for options in
SPY, QQQ and IWM, as compared to
other symbols, does not impose an
undue burden on competition because
the Exchange would uniformly not
assess a Market Maker a Penny Symbol
Maker Fee or pay a Market Maker a
Penny Symbol Maker Rebate in SPY,
QQQ and IWM. Similarly, the Exchange
would uniformly not assess Priority
Customers a Penny Symbol Taker Fee in
SPY, QQQ and IWM.
In sum, if the changes proposed
herein are unattractive to market
participants, it is likely that the
Exchange will lose market share as a
result. Accordingly, the Exchange does
not believe that the proposed changes
will impair the ability of members or
competing order execution venues to
maintain their competitive standing in
the financial markets.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act 12 and Rule
19b–4(f)(2) 13 thereunder. At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is: (i)
necessary or appropriate in the public
interest; (ii) for the protection of
investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
MRX–2023–15 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–MRX–2023–15. 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
11 See
U.S.C. 78s(b)(3)(A)(ii).
13 17 CFR 240.19b–4(f)(2).
MRX Options 2, Section 5.
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Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–MRX–2023–15 and should be
submitted on or before September 8,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–17759 Filed 8–17–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98130; File No. SR–Phlx–
2023–36]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Options 7,
Section 4 Regarding Qualified
Contingent Cross Rebates
August 14, 2023.
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 August
10, 2023, Nasdaq PHLX LLC (‘‘Phlx’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Phlx’s Pricing Schedule at Options 7,
Section 4, ‘‘Multiply Listed Options
Fees (Includes options overlying
equities, ETFs, ETNs and indexes which
are Multiply Listed) (Excludes SPY and
14 17
12 15
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CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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broad-based index options symbols
listed within Options 7, Section 5.A).’’ 3
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
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1. Purpose
Phlx proposes to amend its Pricing
Schedule at Options 7, Section 4,
‘‘Multiply Listed Options Fees (Includes
options overlying equities, ETFs, ETNs
and indexes which are Multiply Listed)
(Excludes SPY and broad-based index
options symbols listed within Options
7, Section 5.A).’’ Specifically, Phlx
proposes to amend its Qualified
Contingent Cross (‘‘QCC’’) Rebates in
Section A, and remove the expired QCC
Growth Tier Rebate in Section B of
Options 7, Section 4.
Today, the Exchange assesses a $.20
per contract QCC Transaction Fee for a
Lead Market Maker,4 Market Maker,5
3 On August 2, 2023, SR–Phlx–2023–32 was
withdrawn and replaced with SR–Phlx–2023–33.
On August 10, 2023, SR–Phlx–2023–33 was
withdrawn and replaced with the instant filing.
4 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).
5 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
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Firm 6 and Broker-Dealer.7 Customers 8
and Professionals 9 are not assessed a
QCC Transaction Fee. QCC Transaction
Fees apply to electronic QCC Orders 10
and Floor QCC Orders.11
Part A: QCC Rebates
Today, in Part A of Options 7, Section
4, the Exchange describes several QCC
Rebates. Today, the Exchange pays a
QCC Rebate of $0.12 per contract on
electronic QCC Orders, as defined in
Options 3, Section 12, and Floor QCC
Orders, as defined in Options 8, Section
30(e), when a QCC Order is comprised
of a Customer or Professional order on
one side and a Lead Market Maker,
Market Maker, Broker-Dealer, or Firm
order on the other side. Today, the
Exchange also pays a rebate of $0.17 per
contract in the event that a member or
member organization executes greater
than 1,000,000 qualifying QCC contracts
in a given month. Additionally, today,
the Exchange pays a QCC Rebate of
$0.14 per contract on electronic QCC
Orders, as defined in Options 3, Section
12, and Floor QCC Orders, as defined in
Options 8, Section 30(e), when a QCC
Order is comprised of a Lead Market
Maker, Market Maker, Broker-Dealer, or
Firm order on one side and a Lead
Market Maker, Market Maker, BrokerDealer, or Firm order on the other side.
Today, the Exchange pays a rebate to
$0.19 per contract in the event that a
member or member organization
executes greater than 1,000,000
qualifying QCC contracts in a given
month.
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).
6 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).
7 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).
8 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).
9 The term ‘‘Professional’’ applies to transactions
for the accounts of Professionals, as defined in
Options 1, Section 1(b)(45) means any person or
entity that (i) is not a broker or dealer in securities,
and (ii) places more than 390 orders in listed
options per day on average during a calendar month
for its own beneficial account(s). See Options 7,
Section 1(c).
10 Electronic QCC Orders are described in
Options 3, Section 12.
11 Floor QCC Orders are described in Options 8,
Section 30(e).
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Today, these QCC rebates are paid on
all qualifying executed electronic QCC
Orders, as defined in Options 3, Section
12, and Floor QCC Orders, as defined in
Options 8, Section 30(e), except where
the transaction is either: (i) Customer-toCustomer; (ii) Customer-to-Professional;
(iii) Professional-to-Professional or (iv) a
dividend, merger, short stock interest,
reversal and conversion, jelly roll, and
box spread strategy executions (as
defined in Options 7, Section 4).
Further, today, volume resulting from
all executed electronic QCC Orders and
Floor QCC Orders, including Customerto-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 member or member
organization qualifying QCC contract
volume in a given month. Finally,
today, members and member
organizations are entitled to one QCC
Rebate in a given month, which would
be the greater of the QCC Rebate in
Section A or the QCC Growth Tier
Rebate in Section B in a given month,
but not both.
Proposal
At this time, the Exchange proposes to
offer two QCC Rebates in addition to the
current QCC Rebates described above.
The Exchange proposes to pay a rebate
of $0.22 per contract, when a QCC Order
is comprised of a Customer or
Professional order on one side and a
Lead Market Maker, Market Maker,
Broker-Dealer, or Firm order on the
other side, in the event that a member
or member organization executes (1)
greater than 1,000,000 qualifying QCC
contracts in a given month; (2) Floor
Originated Strategy 12 Executions in
excess of 3,500,000 contracts in a given
month; and (3) at least 40% of the
member or member organization’s QCC
executed contracts in that month are
comprised of a Lead Market Maker,
Market Maker, Broker-Dealer, or Firm
order on one side and Lead Market
Maker, Market Maker, Broker-Dealer, or
Firm order on the other side.
Additionally, the Exchange proposes
to pay a rebate of $0.27 per contract,
when a QCC Order is comprised of a
Lead Market Maker, Market Maker,
Broker-Dealer, or Firm order on one side
and a Lead Market Maker, Market
Maker, Broker-Dealer, or Firm order on
12 Floor Originated Strategy Executions are
defined as a dividend, merger, short stock interest,
reversal and conversion, jelly roll or box spread
strategy as described in Options 7, Section 4. The
Exchange proposes to add this defined term in the
Pricing Schedule at Part A of Options 7, Section 4.
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the other side, in the event that a
member or member organization
executes: (1) greater than 1,000,000
qualifying QCC contracts in a given
month; (2) Floor Originated Strategy
Executions in excess of 3,500,000
contracts in a given month and (3) at
least 40% of the member or member
organization’s QCC executed contracts
in that month are comprised of a Lead
Market Maker, Market Maker, BrokerDealer, or Firm order on one side and
Lead Market Maker, Market Maker,
Broker-Dealer, or Firm order on the
other side.
Additionally, the Exchange would
continue to pay QCC Rebates on all
qualifying executed electronic QCC
Orders, as defined in Options 3, Section
12, and Floor QCC Orders, as defined in
Options 8, Section 30(e), except where
the transaction is either: (i) Customer-toCustomer; (ii) Customer-to-Professional;
(iii) Professional-to-Professional; or (iv)
a dividend, merger, short stock interest,
reversal and conversion, jelly roll, and
box spread strategy executions (as
defined in Options 7, Section 4). Also,
the Exchange would continue to
aggregate volume resulting from all
executed electronic QCC Orders and
Floor QCC Orders, including Customerto-Customer, Customer-to-Professional,
and Professional-to-Professional
transactions and excluding dividend,
merger, short stock interest, reversal and
conversion, jelly roll, and box spread
strategy executions, in determining the
applicable member or member
organization qualifying QCC contract
volume in a given month.
Finally, the Exchange currently only
permits member and member
organizations to receive either the QCC
Rebate in Section A or the QCC Growth
Tier Rebate in Section B in a given
month, but not both. The Exchange is
removing this rule text from the Pricing
Schedule because the QCC Growth Tier
Rebate pricing was only available until
July 31, 2023 as explained further
below. The Exchange also proposes to
remove the Part ‘‘A’’ reference as there
is no longer a Part B.
The Exchange believes that the
proposed QCC Rebates in Part A will
encourage Phlx members and member
organizations to transact a greater
number of QCC Orders on the Exchange.
Part B: QCC Growth Tier Rebate
The Exchange offered a QCC Growth
Tier Rebate 13 to encourage Phlx
13 The QCC Growth Tier Rebate permitted Phlx
members and member organizations to qualify for
certain rebates by executing a certain amount of
floor transactions, electronic QCC Orders and Floor
QCC Orders volume in excess of the member’s or
member organization’s QCC transaction volume in
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members and member organizations to
transact a greater number of QCC Orders
on Phlx. The QCC Growth Tier Rebate
expired on July 31, 2023. The Exchange
proposes to remove the pricing from the
Pricing Schedule at this time.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,14 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,15 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.’’ 16
Likewise, in NetCoalition v. Securities
and Exchange Commission 17
(‘‘NetCoalition’’) the D.C. Circuit upheld
the Commission’s use of a market-based
approach in evaluating the fairness of
market data fees against a challenge
claiming that Congress mandated a costbased approach.18 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.’’ 19
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
January 2023. The Exchange also offered an
alternative qualification to achieve the QCC Growth
Tier Rebate by executing transactions in open
outcry along with QCC volume.
14 15 U.S.C. 78f(b).
15 15 U.S.C. 78f(b)(4) and (5).
16 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
17 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir.
2010).
18 See NetCoalition, at 534–535.
19 Id. at 537.
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56677
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’. . . .’’ 20 Although the court
and the SEC were discussing the cash
equities markets, the Exchange believes
that these views apply with equal force
to the options markets.
The Exchange’s proposal to offer two
new QCC Rebates in Section A of
Options 7, Section 4,21 in addition to
the current QCC Rebates, is reasonable
because the proposed QCC Rebates will
encourage Phlx members and member
organizations to transact a greater
number of qualifying QCC contracts and
Floor Originated Strategy Executions on
Phlx. The proposal would pay a new
rebate of $0.22 per contract, when a
QCC Order is comprised of a Customer
or Professional order on one side and a
Lead Market Maker, Market Maker,
Broker-Dealer, or Firm order on the
other side, and the proposal would pay
a new higher rebate of $0.27 per
contract, when the QCC Order is
comprised of a Lead Market Maker,
Market Maker, Broker-Dealer, or Firm
order on one side and a Lead Market
Maker, Market Maker, Broker-Dealer, or
Firm order on the other side. The
Exchange believes that the higher rebate
of $0.27 per contract, when the QCC
Order is comprised of a Lead Market
Maker, Market Maker, Broker-Dealer, or
Firm order on one side and a Lead
Market Maker, Market Maker, BrokerDealer, or Firm order on the other side,
is reasonable because the Exchange
assesses a QCC Transaction Fee of $0.20
per contract on Lead Market Makers,
Market Makers, Firms and BrokerDealers and does not assess a QCC
Transaction Fee on Customers and
Professionals. The third qualification,
20 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)).
21 The Exchange proposes to pay a rebate of $0.22
per contract, when a QCC Order is comprised of a
Customer or Professional order on one side and a
Lead Market Maker, Market Maker, Broker-Dealer,
or Firm order on the other side, in the event that
a member or member organization both executes
greater than 1,000,000 qualifying QCC contracts in
a given month and executes Floor Originated
Strategy Executions in excess of 3,500,000 contracts
in a given month. Additionally, the Exchange
proposes to pay a $0.27 per contract, when a QCC
Order is comprised of a Lead Market Maker, Market
Maker, Broker-Dealer, or Firm order on one side
and a Lead Market Maker, Market Maker, BrokerDealer, or Firm order on the other side, in the event
that a member or member organization both
executes greater than 1,000,000 qualifying QCC
contracts in a given month and executes Floor
Originated Strategy Executions in excess of
3,500,000 contracts in a given month.
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which requires that 40% of the QCC
executed contracts to have a Lead
Market Maker, Market Maker, BrokerDealer, or Firm on each side of the
transaction, will assist the Exchange in
funding the higher $0.27 per contract
QCC Rebate.
The Exchange’s proposal to offer two
new QCC Rebates in Section A of
Options 7, Section 4,22 in addition to
the current QCC Rebates, is equitable
and not unfairly discriminatory because
all members and member organizations
may qualify for QCC Rebates, provided
they transact the requisite volume. The
Exchange believes that the higher rebate
of $0.27 per contract, when the QCC
Order is comprised of a Lead Market
Maker, Market Maker, Broker-Dealer, or
Firm order on one side and a Lead
Market Maker, Market Maker, BrokerDealer, or Firm order on the other side,
is equitable and not unfairly
discriminatory because the Exchange
assesses a QCC Transaction Fee of $0.20
per contract for Lead Market Makers,
Market Makers, Firms and BrokerDealers and does not assess a QCC
Transaction Fee on Customers and
Professionals. The proposed rebate of
$0.22 per contract, when a QCC Order
is comprised of a Customer or
Professional order on one side and a
Lead Market Maker, Market Maker,
Broker-Dealer, or Firm order on the
other side, is lower as compared to the
$0.27 per contract rebate because
Customers and Professionals do not pay
a QCC Transaction Fee whereas Lead
Market Makers, Market Makers, BrokerDealers, and Firms pay a $0.20 per
contract QCC Transaction Fee.
The Exchange’s proposal to remove
the pricing for the QCC Growth Tier
Rebate in Section B of Options 7,
Section 4 as well as the rule text
concerning receiving either the QCC
Rebate in Section A or the QCC Growth
Tier Rebate in Section B in a given
month, but not both, is reasonable,
equitable and not unfairly
discriminatory because as noted in the
Pricing Schedule, the QCC Growth Tier
Rebate pricing was only available until
July 31, 2023. This pricing is no longer
available.
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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.
22 See
supra note 21.
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Inter-Market Competition
The proposal does not impose an
undue burden on inter-market
competition. The Exchange believes its
proposal remains competitive with
other options markets and will offer
market participants with another choice
of where to transact options. The
Exchange notes that it operates in a
highly competitive market in which
market participants can readily favor
competing venues if they deem fee
levels at a particular venue to be
excessive, or rebate opportunities
available at other venues to be more
favorable. In such an environment, the
Exchange must continually adjust its
fees to remain competitive with other
exchanges. Because competitors are free
to modify their own fees in response,
and because market participants may
readily adjust their order routing
practices, the Exchange believes that the
degree to which fee changes in this
market may impose any burden on
competition is extremely limited.
Intra-Market Competition
The proposed amendments do not
impose an undue burden on intramarket competition. In terms of intramarket competition, the Exchange’s
proposal to offer two new QCC Rebates
in Section A of Options 7, Section 4,23
in addition to the current QCC Rebates,
does not impose an undue burden on
competition because all members and
member organizations may qualify for
QCC Rebates, provided they transact the
requisite volume. The Exchange
believes that the higher rebate of $0.27
per contract, when the QCC Order is
comprised of a Lead Market Maker,
Market Maker, Broker-Dealer, or Firm
order on one side and a Lead Market
Maker, Market Maker, Broker-Dealer, or
Firm order on the other side, does not
impose an undue burden on
competition because the Exchange
assesses a QCC Transaction Fee of $0.20
per contract for Lead Market Makers,
Market Makers, Firms and BrokerDealers and does not assess a QCC
Transaction Fee on Customers and
Professionals. The proposed rebate of
$0.22 per contract, when a QCC Order
is comprised of a Customer or
Professional order on one side and a
Lead Market Maker, Market Maker,
Broker-Dealer, or Firm order on the
other side, is lower as compared to the
$0.27 per contract rebate because
Customers and Professionals do not pay
a QCC Transaction Fee whereas Lead
Market Makers, Market Makers, Broker23 See
Jkt 259001
PO 00000
supra note 21.
Frm 00091
Fmt 4703
Dealers, and Firms pay a $0.20 per
contract QCC Transaction Fee.
The Exchange’s proposal to remove
the pricing for the QCC Growth Tier
Rebate in Section B of Options 7,
Section 4, as well as the rule text
concerning receiving either the QCC
Rebate in Section A or the QCC Growth
Tier Rebate in Section B in a given
month, but not both, does not impose an
undue burden on competition because,
as noted in the Pricing Schedule, the
QCC Growth Tier Rebate pricing was
only available until July 31, 2023. This
pricing is no longer available.
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.24
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
Phlx–2023–36 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–Phlx–2023–36. This file
24 15
Sfmt 4703
E:\FR\FM\18AUN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
18AUN1
Federal Register / Vol. 88, No. 159 / Friday, August 18, 2023 / Notices
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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–Phlx–2023–36 and should be
submitted on or before September 8,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–17760 Filed 8–17–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98123; File No. SR–
CboeEDGX–2023–052]
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Its
Fee Schedule
lotter on DSK11XQN23PROD with NOTICES1
August 14, 2023.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on August 1,
2023, Cboe EDGX Exchange, Inc. (the
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
18:26 Aug 17, 2023
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) proposes to
amend its Fee Schedule. The text of the
proposed rule change is provided in
Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
options/regulation/rule_filings/edgx/),
at the Exchange’s Office of the
Secretary, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
Fee Schedule, effective August 1, 2023.
The Exchange first notes that it operates
in a highly competitive market in which
market participants can readily direct
order flow to competing venues if they
deem fee levels at a particular venue to
be excessive or incentives to be
insufficient. More specifically, the
Exchange is only one of 16 options
venues to which market participants
may direct their order flow. Based on
publicly available information, no single
options exchange has more than 17% of
the market share.3 Thus, in such a lowconcentrated and highly competitive
3 See Cboe Global Markets U.S. Options Market
Monthly Volume Summary (July 27, 2023),
available at https://markets.cboe.com/us/options/
market_statistics/.
25 17
VerDate Sep<11>2014
‘‘Exchange’’ or ‘‘EDGX’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
Jkt 259001
PO 00000
Frm 00092
Fmt 4703
Sfmt 4703
56679
market, no single options exchange,
including the Exchange, possesses
significant pricing power in the
execution of option order flow. The
Exchange believes that the ever-shifting
market share among the exchanges from
month to month demonstrates that
market participants can shift order flow
or discontinue to reduce use of certain
categories of products, in response to fee
changes. Accordingly, competitive
forces constrain the Exchange’s
transaction fees, and market participants
can readily trade on competing venues
if they deem pricing levels at those
other venues to be more favorable.
The Exchange assesses fees in
connection with orders routed away to
various exchanges. Currently, under the
Fee Codes and Associated Fees section
of the Fee Schedule, fee code RP is
appended to routed Customer orders to
NYSE American (‘‘AMEX’’), BOX
Options Exchange (‘‘BOX’’), Nasdaq BX
Options (‘‘BX’’), Cboe Exchange, Inc.
(‘‘Cboe’’), ISE Mercury, LLC (‘‘ISE
Mercury’’ or ‘‘MERC’’), MIAX Options
Exchange (‘‘MIAX’’) or Nasdaq PHLX
LLC (‘‘PHLX’’) (excluding orders in SPY
options) and assesses a charge of $0.25
per contract; fee code RQ is appended
to routed Customer orders in Penny
classes to NYSE Arca, Inc (‘‘ARCA’’),
Cboe BZX Exchange, Inc. (‘‘BZX
Options’’), Cboe C2 Exchange, Inc.
(‘‘C2’’), Nasdaq ISE (‘‘ISE’’), ISE Gemini,
LLC (‘‘ISE Gemini’’), MIAX Emerald
Exchange (‘‘MIAX Emerald’’), MIAX
Pearl Exchange (‘‘MIAX Pearl’’), or
Nasdaq Options Market LLC (‘‘NOM’’)
and assesses a charge of $0.85 per
contract; and fee code RR is appended
to routed Customer orders in Non-Penny
classes to ARCA, BZX Options, C2, ISE,
ISE Gemini, MIAX Emerald, MIAX Pearl
or NOM and assesses a charge of $1.25.
The Exchange notes that its current
approach to routing fees is to set forth
in a simple manner certain subcategories of fees that approximate the
cost of routing to other options
exchanges based on the cost of
transaction fees assessed by each venue
as well as costs to the Exchange for
routing (i.e., clearing fees, connectivity
and other infrastructure costs,
membership fees, etc.) (collectively,
‘‘Routing Costs’’). The Exchange then
monitors the fees charged as compared
to the costs of its routing services and
adjusts its routing fees and/or subcategories to ensure that the Exchange’s
fees do indeed result in a rough
approximation of overall Routing Costs,
and are not significantly higher or lower
in any area. The Exchange notes that
other options exchanges currently assess
routing fees in a similar manner as the
E:\FR\FM\18AUN1.SGM
18AUN1
]]>Agencies
[Federal Register Volume 88, Number 159 (Friday, August 18, 2023)]
[Notices]
[Pages 56675-56679]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-17760]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98130; File No. SR-Phlx-2023-36]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Options 7,
Section 4 Regarding Qualified Contingent Cross Rebates
August 14, 2023.
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 August 10, 2023, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I, II, and III, below,
which Items have been prepared by the Exchange. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Phlx's Pricing Schedule at Options
7, Section 4, ``Multiply Listed Options Fees (Includes options
overlying equities, ETFs, ETNs and indexes which are Multiply Listed)
(Excludes SPY and
[[Page 56676]]
broad-based index options symbols listed within Options 7, Section
5.A).'' \3\
---------------------------------------------------------------------------
\3\ On August 2, 2023, SR-Phlx-2023-32 was withdrawn and
replaced with SR-Phlx-2023-33. On August 10, 2023, SR-Phlx-2023-33
was withdrawn and replaced with the instant filing.
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/phlx/rules, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed 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, 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).'' Specifically, Phlx proposes to amend its Qualified Contingent
Cross (``QCC'') Rebates in Section A, and remove the expired QCC Growth
Tier Rebate in Section B of Options 7, Section 4.
Today, the Exchange assesses a $.20 per contract QCC Transaction
Fee for a Lead Market Maker,\4\ Market Maker,\5\ Firm \6\ and Broker-
Dealer.\7\ Customers \8\ and Professionals \9\ are not assessed a QCC
Transaction Fee. QCC Transaction Fees apply to electronic QCC Orders
\10\ and Floor QCC Orders.\11\
---------------------------------------------------------------------------
\4\ 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).
\5\ 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).
\6\ 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).
\7\ 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).
\8\ 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).
\9\ The term ``Professional'' applies to transactions for the
accounts of Professionals, as defined in Options 1, Section 1(b)(45)
means any person or entity that (i) is not a broker or dealer in
securities, and (ii) places more than 390 orders in listed options
per day on average during a calendar month for its own beneficial
account(s). See Options 7, Section 1(c).
\10\ Electronic QCC Orders are described in Options 3, Section
12.
\11\ Floor QCC Orders are described in Options 8, Section 30(e).
---------------------------------------------------------------------------
Part A: QCC Rebates
Today, in Part A of Options 7, Section 4, the Exchange describes
several QCC Rebates. Today, the Exchange pays a QCC Rebate of $0.12 per
contract on electronic QCC Orders, as defined in Options 3, Section 12,
and Floor QCC Orders, as defined in Options 8, Section 30(e), when a
QCC Order is comprised of a Customer or Professional order on one side
and a Lead Market Maker, Market Maker, Broker-Dealer, or Firm order on
the other side. Today, the Exchange also pays a rebate of $0.17 per
contract in the event that a member or member organization executes
greater than 1,000,000 qualifying QCC contracts in a given month.
Additionally, today, the Exchange pays a QCC Rebate of $0.14 per
contract on electronic QCC Orders, as defined in Options 3, Section 12,
and Floor QCC Orders, as defined in Options 8, Section 30(e), when a
QCC Order is comprised of a Lead Market Maker, Market Maker, Broker-
Dealer, or Firm order on one side and a Lead Market Maker, Market
Maker, Broker-Dealer, or Firm order on the other side. Today, the
Exchange pays a rebate to $0.19 per contract in the event that a member
or member organization executes greater than 1,000,000 qualifying QCC
contracts in a given month.
Today, these QCC rebates are paid on all qualifying executed
electronic QCC Orders, as defined in Options 3, Section 12, and Floor
QCC Orders, as defined in Options 8, Section 30(e), except 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, reversal and conversion, jelly roll, and
box spread strategy executions (as defined in Options 7, Section 4).
Further, today, 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 member or member organization qualifying QCC contract volume
in a given month. Finally, today, members and member organizations are
entitled to one QCC Rebate in a given month, which would be the greater
of the QCC Rebate in Section A or the QCC Growth Tier Rebate in Section
B in a given month, but not both.
Proposal
At this time, the Exchange proposes to offer two QCC Rebates in
addition to the current QCC Rebates described above. The Exchange
proposes to pay a rebate of $0.22 per contract, when a QCC Order is
comprised of a Customer or Professional order on one side and a Lead
Market Maker, Market Maker, Broker-Dealer, or Firm order on the other
side, in the event that a member or member organization executes (1)
greater than 1,000,000 qualifying QCC contracts in a given month; (2)
Floor Originated Strategy \12\ Executions in excess of 3,500,000
contracts in a given month; and (3) at least 40% of the member or
member organization's QCC executed contracts in that month are
comprised of a Lead Market Maker, Market Maker, Broker-Dealer, or Firm
order on one side and Lead Market Maker, Market Maker, Broker-Dealer,
or Firm order on the other side.
---------------------------------------------------------------------------
\12\ Floor Originated Strategy Executions are defined as a
dividend, merger, short stock interest, reversal and conversion,
jelly roll or box spread strategy as described in Options 7, Section
4. The Exchange proposes to add this defined term in the Pricing
Schedule at Part A of Options 7, Section 4.
---------------------------------------------------------------------------
Additionally, the Exchange proposes to pay a rebate of $0.27 per
contract, when a QCC Order is comprised of a Lead Market Maker, Market
Maker, Broker-Dealer, or Firm order on one side and a Lead Market
Maker, Market Maker, Broker-Dealer, or Firm order on
[[Page 56677]]
the other side, in the event that a member or member organization
executes: (1) greater than 1,000,000 qualifying QCC contracts in a
given month; (2) Floor Originated Strategy Executions in excess of
3,500,000 contracts in a given month and (3) at least 40% of the member
or member organization's QCC executed contracts in that month are
comprised of a Lead Market Maker, Market Maker, Broker-Dealer, or Firm
order on one side and Lead Market Maker, Market Maker, Broker-Dealer,
or Firm order on the other side.
Additionally, the Exchange would continue to pay QCC Rebates on all
qualifying executed electronic QCC Orders, as defined in Options 3,
Section 12, and Floor QCC Orders, as defined in Options 8, Section
30(e), except 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,
reversal and conversion, jelly roll, and box spread strategy executions
(as defined in Options 7, Section 4). Also, the Exchange would continue
to aggregate 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, reversal and
conversion, jelly roll, and box spread strategy executions, in
determining the applicable member or member organization qualifying QCC
contract volume in a given month.
Finally, the Exchange currently only permits member and member
organizations to receive either the QCC Rebate in Section A or the QCC
Growth Tier Rebate in Section B in a given month, but not both. The
Exchange is removing this rule text from the Pricing Schedule because
the QCC Growth Tier Rebate pricing was only available until July 31,
2023 as explained further below. The Exchange also proposes to remove
the Part ``A'' reference as there is no longer a Part B.
The Exchange believes that the proposed QCC Rebates in Part A will
encourage Phlx members and member organizations to transact a greater
number of QCC Orders on the Exchange.
Part B: QCC Growth Tier Rebate
The Exchange offered a QCC Growth Tier Rebate \13\ to encourage
Phlx members and member organizations to transact a greater number of
QCC Orders on Phlx. The QCC Growth Tier Rebate expired on July 31,
2023. The Exchange proposes to remove the pricing from the Pricing
Schedule at this time.
---------------------------------------------------------------------------
\13\ The QCC Growth Tier Rebate permitted Phlx members and
member organizations to qualify for certain rebates by executing a
certain amount of floor transactions, electronic QCC Orders and
Floor QCC Orders volume in excess of the member's or member
organization's QCC transaction volume in January 2023. The Exchange
also offered an alternative qualification to achieve the QCC Growth
Tier Rebate by executing transactions in open outcry along with QCC
volume.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\14\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\15\ 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.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \16\
---------------------------------------------------------------------------
\16\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
---------------------------------------------------------------------------
Likewise, in NetCoalition v. Securities and Exchange Commission
\17\ (``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.\18\ 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.'' \19\
---------------------------------------------------------------------------
\17\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\18\ See NetCoalition, at 534-535.
\19\ Id. at 537.
---------------------------------------------------------------------------
Further, ``[n]o one disputes that competition for order flow is
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market
system, buyers and sellers of securities, and the broker-dealers that
act as their order-routing agents, have a wide range of choices of
where to route orders for execution'; [and] `no exchange can afford to
take its market share percentages for granted' because `no exchange
possesses a monopoly, regulatory or otherwise, in the execution of
order flow from broker dealers'. . . .'' \20\ Although the court and
the SEC were discussing the cash equities markets, the Exchange
believes that these views apply with equal force to the options
markets.
---------------------------------------------------------------------------
\20\ Id. at 539 (quoting Securities Exchange Act Release No.
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008)
(SR-NYSEArca-2006-21)).
---------------------------------------------------------------------------
The Exchange's proposal to offer two new QCC Rebates in Section A
of Options 7, Section 4,\21\ in addition to the current QCC Rebates, is
reasonable because the proposed QCC Rebates will encourage Phlx members
and member organizations to transact a greater number of qualifying QCC
contracts and Floor Originated Strategy Executions on Phlx. The
proposal would pay a new rebate of $0.22 per contract, when a QCC Order
is comprised of a Customer or Professional order on one side and a Lead
Market Maker, Market Maker, Broker-Dealer, or Firm order on the other
side, and the proposal would pay a new higher rebate of $0.27 per
contract, when the QCC Order is comprised of a Lead Market Maker,
Market Maker, Broker-Dealer, or Firm order on one side and a Lead
Market Maker, Market Maker, Broker-Dealer, or Firm order on the other
side. The Exchange believes that the higher rebate of $0.27 per
contract, when the QCC Order is comprised of a Lead Market Maker,
Market Maker, Broker-Dealer, or Firm order on one side and a Lead
Market Maker, Market Maker, Broker-Dealer, or Firm order on the other
side, is reasonable because the Exchange assesses a QCC Transaction Fee
of $0.20 per contract on Lead Market Makers, Market Makers, Firms and
Broker- Dealers and does not assess a QCC Transaction Fee on Customers
and Professionals. The third qualification,
[[Page 56678]]
which requires that 40% of the QCC executed contracts to have a Lead
Market Maker, Market Maker, Broker-Dealer, or Firm on each side of the
transaction, will assist the Exchange in funding the higher $0.27 per
contract QCC Rebate.
---------------------------------------------------------------------------
\21\ The Exchange proposes to pay a rebate of $0.22 per
contract, when a QCC Order is comprised of a Customer or
Professional order on one side and a Lead Market Maker, Market
Maker, Broker-Dealer, or Firm order on the other side, in the event
that a member or member organization both executes greater than
1,000,000 qualifying QCC contracts in a given month and executes
Floor Originated Strategy Executions in excess of 3,500,000
contracts in a given month. Additionally, the Exchange proposes to
pay a $0.27 per contract, when a QCC Order is comprised of a Lead
Market Maker, Market Maker, Broker-Dealer, or Firm order on one side
and a Lead Market Maker, Market Maker, Broker-Dealer, or Firm order
on the other side, in the event that a member or member organization
both executes greater than 1,000,000 qualifying QCC contracts in a
given month and executes Floor Originated Strategy Executions in
excess of 3,500,000 contracts in a given month.
---------------------------------------------------------------------------
The Exchange's proposal to offer two new QCC Rebates in Section A
of Options 7, Section 4,\22\ in addition to the current QCC Rebates, is
equitable and not unfairly discriminatory because all members and
member organizations may qualify for QCC Rebates, provided they
transact the requisite volume. The Exchange believes that the higher
rebate of $0.27 per contract, when the QCC Order is comprised of a Lead
Market Maker, Market Maker, Broker-Dealer, or Firm order on one side
and a Lead Market Maker, Market Maker, Broker-Dealer, or Firm order on
the other side, is equitable and not unfairly discriminatory because
the Exchange assesses a QCC Transaction Fee of $0.20 per contract for
Lead Market Makers, Market Makers, Firms and Broker-Dealers and does
not assess a QCC Transaction Fee on Customers and Professionals. The
proposed rebate of $0.22 per contract, when a QCC Order is comprised of
a Customer or Professional order on one side and a Lead Market Maker,
Market Maker, Broker-Dealer, or Firm order on the other side, is lower
as compared to the $0.27 per contract rebate because Customers and
Professionals do not pay a QCC Transaction Fee whereas Lead Market
Makers, Market Makers, Broker-Dealers, and Firms pay a $0.20 per
contract QCC Transaction Fee.
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\22\ See supra note 21.
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The Exchange's proposal to remove the pricing for the QCC Growth
Tier Rebate in Section B of Options 7, Section 4 as well as the rule
text concerning receiving either the QCC Rebate in Section A or the QCC
Growth Tier Rebate in Section B in a given month, but not both, is
reasonable, equitable and not unfairly discriminatory because as noted
in the Pricing Schedule, the QCC Growth Tier Rebate pricing was only
available until July 31, 2023. This pricing is no longer available.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
Inter-Market Competition
The proposal does not impose an undue burden on inter-market
competition. The Exchange believes its proposal remains competitive
with other options markets and will offer market participants with
another choice of where to transact options. The Exchange notes that it
operates in a highly competitive market in which market participants
can readily favor competing venues if they deem fee levels at a
particular venue to be excessive, or rebate opportunities available at
other venues to be more favorable. In such an environment, the Exchange
must continually adjust its fees to remain competitive with other
exchanges. Because competitors are free to modify their own fees in
response, and because market participants may readily adjust their
order routing practices, the Exchange believes that the degree to which
fee changes in this market may impose any burden on competition is
extremely limited.
Intra-Market Competition
The proposed amendments do not impose an undue burden on intra-
market competition. In terms of intra-market competition, the
Exchange's proposal to offer two new QCC Rebates in Section A of
Options 7, Section 4,\23\ in addition to the current QCC Rebates, does
not impose an undue burden on competition because all members and
member organizations may qualify for QCC Rebates, provided they
transact the requisite volume. The Exchange believes that the higher
rebate of $0.27 per contract, when the QCC Order is comprised of a Lead
Market Maker, Market Maker, Broker-Dealer, or Firm order on one side
and a Lead Market Maker, Market Maker, Broker-Dealer, or Firm order on
the other side, does not impose an undue burden on competition because
the Exchange assesses a QCC Transaction Fee of $0.20 per contract for
Lead Market Makers, Market Makers, Firms and Broker-Dealers and does
not assess a QCC Transaction Fee on Customers and Professionals. The
proposed rebate of $0.22 per contract, when a QCC Order is comprised of
a Customer or Professional order on one side and a Lead Market Maker,
Market Maker, Broker-Dealer, or Firm order on the other side, is lower
as compared to the $0.27 per contract rebate because Customers and
Professionals do not pay a QCC Transaction Fee whereas Lead Market
Makers, Market Makers, Broker-Dealers, and Firms pay a $0.20 per
contract QCC Transaction Fee.
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\23\ See supra note 21.
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The Exchange's proposal to remove the pricing for the QCC Growth
Tier Rebate in Section B of Options 7, Section 4, as well as the rule
text concerning receiving either the QCC Rebate in Section A or the QCC
Growth Tier Rebate in Section B in a given month, but not both, does
not impose an undue burden on competition because, as noted in the
Pricing Schedule, the QCC Growth Tier Rebate pricing was only available
until July 31, 2023. This pricing is no longer available.
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.\24\
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\24\ 15 U.S.C. 78s(b)(3)(A)(ii).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-Phlx-2023-36 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-Phlx-2023-36. This file
[[Page 56679]]
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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-Phlx-2023-36 and should be
submitted on or before September 8, 2023.
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\25\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-17760 Filed 8-17-23; 8:45 am]
BILLING CODE 8011-01-P
