Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Proprietary Data Fees for Top of PHLX Options (“TOPO”), PHLX Orders, and TOPO Plus Orders at Options 7, Section 10, 88197-88201 [2023-27924]
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Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Notices
an opportunity to transact in NDX or
separately execute options overlying
QQQ. Offering these products provides
market participants with a variety of
choices in selecting the product they
desire to use to gain exposure to the
Nasdaq 100 Index. Furthermore, the
proposed fee amount is in line with
customer transaction fees assessed on
other index products at another options
exchange.15
Further, the Exchange does not
believe that its proposal to begin
assessing a $0.25 per contract
transaction fee for Priority Customer
NDX orders will impose an undue
burden on intra-market competition
because Priority Customers will
continue to be assessed lower fees than
Non-Priority Customers for NDX orders.
As discussed above, Priority Customer
order flow enhances liquidity on the
Exchange for the benefit of all market
participants.
Finally, the Exchange believes that
the proposed changes in Options 7 to
add Non-Priority Customers as a defined
term, to capitalize the reference to ‘‘nonPriority Customer,’’ and to alphabetize
the Pricing Schedule definitions do not
impose an undue burden on
competition because these are noncompetitive changes that are intended to
bring clarity to the Exchange’s Pricing
Schedule.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
ddrumheller on DSK120RN23PROD with NOTICES1
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 16 and Rule
19b–4(f)(2) 17 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.
15 See
supra note 6.
U.S.C. 78s(b)(3)(A)(ii).
17 17 CFR 240.19b–4(f)(2).
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:
18:02 Dec 19, 2023
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–27915 Filed 12–19–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
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–
GEMX–2023–20 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–GEMX–2023–20. 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
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–GEMX–2023–20 and should be
submitted on or before January 10, 2024.
16 15
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[Release No. 34–99183; File No. SR–Phlx–
2023–57]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the
Exchange’s Proprietary Data Fees for
Top of PHLX Options (‘‘TOPO’’), PHLX
Orders, and TOPO Plus Orders at
Options 7, Section 10
December 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 December
5, 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 the
Exchange’s proprietary data fees for Top
of PHLX Options (‘‘TOPO’’), PHLX
Orders, and TOPO Plus Orders at
Options 7, Section 10, as described
further below.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/phlx/rules, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
18 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Notices
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.
Professional Subscriber,10 and $40 for a
Professional Subscriber.11 None of these
fees have changed for over a decade,
since January 2013.12
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
PHLX Orders is a real-time order book
feed with pricing information for
displayed orders on the PHLX order
book.13 The data provided for each
options series includes the symbols
(series and underlying security), a put or
call indicator, expiration date, and the
strike price of the series. It also provides
the real-time status of simple and
complex orders 14 on the order book,
including new orders and changes to
orders resting on the PHLX book for all
PHLX-listed options.15 The PHLX
Orders feed includes data on the
opening imbalance, Price Improvement
XL (PIXL),16 and Complex Order Live
1. Purpose
The purpose of the proposed rule
change is to amend the Exchange’s
proprietary data fees for Top of PHLX
Options (‘‘TOPO’’), PHLX Orders, and
TOPO Plus Orders at Options 7, Section
10.3
Top of PHLX Options (‘‘TOPO’’)
ddrumheller on DSK120RN23PROD with NOTICES1
TOPO is a direct data feed that
provides subscribers with PHLX Best
Bid and Offer (‘‘BBO’’) 4 and last sale
information.5 The data distributed on
TOPO is identical to the data
simultaneously sent to the Options Price
Reporting Authority (‘‘OPRA’’).6 The
TOPO feed also provides administrative
information to facilitate trading on the
Exchange such as, for example, the list
of symbols trading on a particular day.7
TOPO reduces the transmission and
processing latencies for top of book
information relative to the OPRA feed
by avoiding the latencies generated by
the latter in consolidating data.
Monthly fees for TOPO are currently
$2,000 for Internal Distributors,8 $2,500
for External Distributors,9 $1 for a Non3 The proposed changes were initially filed on
November 16, 2023, as SR–Phlx–2023–51. On
December 5, 2023, SR–Phlx–2023–51 was
withdrawn and replaced with the instant filing to
provide additional detail regarding the proposal.
4 The Best Bid and Offer includes aggregate size
information based on displayable order and quoting
interest on the Exchange.
5 See PHLX, ‘‘Top of Phlx Options,’’ available at
https://www.nasdaqtrader.com/Micro.aspx?id=
TOPO#:∼:text=Top%20of%20PHLX
%20Options%20(TOPO,in%20the%20
consolidated%20market%20feed.
6 See Options 3 (Options Trading Rules), Section
23(a)(1) (Data Feeds and Trade Information) (‘‘The
data contained in the TOPO data feed is identical
to the data simultaneously sent to the processor for
the OPRA and subscribers of the data feed.’’).
7 See, e.g., Nasdaq, ‘‘Top of Phlx Options Interface
Specifications, Version 3.4’’ Section 4.3 available at
https://www.nasdaqtrader.com/content/
technicalsupport/specifications/dataproducts/
topofphlx.pdf (describing the start of day options
directory message, which lists all symbols eligible
for the auction process).
8 See Options 7, Section 10 (Proprietary Data Feed
Fees) (Top of PHLX Options) (‘‘A ‘distributor’ of
Nasdaq PHLX data is any entity that receives a feed
or data file . . . directly from Nasdaq PHLX or
indirectly through another entity and then
distributes it either internally (within that entity) or
externally (outside that entity). All distributors
execute a Nasdaq PHLX distributor agreement.’’).
9 See id.
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PHLX Orders
10 See id. (‘‘A Non-Professional Subscriber is a
natural person who is neither: (i) registered or
qualified in any capacity with the Commission, the
Commodities Futures Trading Commission, any
state securities agency, any securities exchange or
association, or any commodities or futures contract
market or association; (ii) engaged as an ‘investment
adviser’ as that term is defined in Section 201(11)
of the Investment Advisors Act of 1940 (whether or
not registered or qualified under that Act); nor (iii)
employed by a bank or other organization exempt
from registration under federal or state securities
laws to perform functions that would require
registration or qualification if such functions were
performed for an organization not so exempt. A
Non-Professional Subscriber may only use the data
provided for personal purposes and not for any
commercial purpose.’’).
11 See id. (‘‘A Professional Subscriber is any
Subscriber that is not a Non-Professional
Subscriber. If the Nasdaq Subscriber agreement is
signed in the name of a business or commercial
entity, such entity would be considered a
Professional Subscriber.’’).
12 See Securities Exchange Act Release No. 68576
(January 3, 2013), 78 FR 1886 (January 9, 2013) (SR–
Phlx–2012–145).
13 See Options 3 (Options Trading Rules), Section
23(a)(2) (Data Feeds and Trade Information).
14 See Options 3 (Options Trading Rules), Section
23(a)(2) (Data Feeds and Trade Information);
Section 14(a)(i) (‘‘Complex Order. For purposes of
the electronic trading of Complex Orders, a
Complex Order is an order involving the
simultaneous purchase and/or sale of two or more
different options series in the same underlying
security, priced as a net debit or credit based on the
relative prices of the individual components, for the
same account, for the purpose of executing a
particular investment strategy.’’).
15 See Nasdaq, ‘‘PHLX Orders,’’ available at
https://www.nasdaqtrader.com/Micro.aspx?id=
PHLXOrders.
16 See Options 3 (Options Trading Rules), Section
23(a)(2); Section 13 (Price Improvement XL) (‘‘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 sub-paragraph
(a)(6) below) it represents as agent (an ‘Initiating
Order’) provided it submits the PIXL Order for
electronic execution into the PIXL Auction
(‘Auction’) pursuant to this Rule.’’).
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Auction (COLA).17 A notification
message is sent for symbols entering an
auction.18 PHLX Orders also furnishes
an historical record of all simple and
complex order message data from the
PHLX Orders data feed. PHLX Orders
information is not sent to OPRA.19
PHLX Orders is an alternative to
PHLX Depth of Market. It is an
optimized technical channel designed to
lower technology costs, reduce
processing time, and facilitate the
ingestion of data while still providing
customers insight beyond the top of
book by viewing active buy and sell
orders. PHLX Orders excludes
quotations by market makers and other
authorized entities that is included in
PHLX Depth of Market.20
In October 2023, the one millisecond
average peak for PHLX Depth of Market
was approximately 13.5 million
messages. PHLX Orders transmitted
only about 2.6 million messages on
average over the same period.21 In that
month, purchase of PHLX Orders in lieu
of PHLX Depth of Market would have
lowered the bandwidth required for
peak messaging by over 80 percent. This
would have decreased the load on the
customer’s information processing
infrastructure, reduced processing time,
and facilitated the ingestion of Exchange
information, while still providing the
customer with a view of active buy and
sell orders.
Purchase of PHLX Orders is optional.
Customers can obtain all of the data
contained in PHLX Orders from PHLX
Depth of Market feed, and may purchase
the latter if they do not realize the cost
savings offered by PHLX Orders.
17 See Options 3, Section 14(e) (describing the
process for the Complex Order Live Auction
(‘‘COLA’’)).
18 Nasdaq, ‘‘PHLX Orders Interface
Specification,’’ (Version 1.92) available at https://
www.nasdaqtrader.com/content/technicalsupport/
specifications/dataproducts/topoplusorders.pdf
(describing auction notification message).
19 See Limited Liability Company Agreement of
Options Price Reporting Authority, LLC Article V,
Section 5.2(c)(i) (January 1, 2010), available at
https://assets.website-files.com/5ba40927ac854d8
c97bc92d7/5d0bd57d87d3ccca102102d7_
OPRA%20Plan%20with%20Updated
%20Exhibit%20A%20-%2006-19-2019.pdf
(describing last sale and best bid and offer
information disseminated by OPRA).
20 See Options 3 (Options Trading Rules), Section
23(a)(3) (Data Feeds and Trade Information) (‘‘PHLX
Depth of Market is a data product that provides: (i)
order and quotation information for individual
quotes and orders on the order book . . .’’)
(emphasis added); Section 4(b) (Entry and display
of Quotes) (identifying the market participants
authorized to submit quotes to the Exchange).
21 See Nasdaq, ‘‘October 2023 Bandwidth,’’
available at https://view.officeapps.live.com/op/
view.aspx?src=http%3A%2F%2Fwww
.nasdaqtrader.com%2Fcontent%2Ftechnical
support%2Fspecifications%2Fdataproducts%2
Fbandwidthreport.xls&wdOrigin=BROWSELINK.
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PHLX Orders is a derivative product
designed as a lower-cost alternative to a
depth of book feed. It is not a
complement to any other product
offered by the Exchange or any of its
competitors. Customers are free to
purchase PHLX Orders or not, and can
reject the feed for any reason, including
the fee charged.
Current monthly fees for PHLX Orders
are $3,000 for Internal Distributors,
$3,500 for External Distributors, $1 for
a Non-Professional Subscriber, and $40
for a Professional Subscriber. None of
these fees have changes for over a
decade, since January 2013.22
TOPO Plus Orders
TOPO Plus is a direct market data
product that offers subscribers both
TOPO and PHLX Orders for a
consolidated fee that is less than the
combined fee of the two products.23
Monthly fees for TOPO Plus Orders
are currently $4,500 for Internal
Distributors, $5,000 for External
Distributors, $1 for a Non-Professional
Subscriber, and $40 for a Professional
Subscriber.
Internal Distributor fees for TOPO
Plus Orders were modified in January
2018, over five years ago,24 but the other
TOPO Plus Orders fees have not
changed since January 2013.25
ddrumheller on DSK120RN23PROD with NOTICES1
Proposed Changes
For TOPO, the Exchange proposes to
increase the monthly charge for Internal
Distributors from $2,000 to $2,500, and
the monthly charge for External
Distributors from $2,500 to $3,000. No
changes are proposed for NonProfessional and Professional Subscriber
fees.
For PHLX Orders, the Exchange
proposes to increase the monthly charge
for Internal Distributors from $3,000 to
$3,500, and the monthly charge for
External Distributors from $3,500 to
$4,000. No changes are proposed for
Non-Professional and Professional
Subscriber fees.
For TOPO Plus Orders, the Exchange
proposes to increase the monthly charge
for Internal Distributors from $4,500 to
$5,500, and the monthly charge for
External Distributors from $5,000 to
$6,000. No changes are proposed for
22 See Securities Exchange Act Release No. 68576
(January 3, 2013), 78 FR 1886 (January 9, 2013) (SR–
Phlx–2012–145).
23 See PHLX, TOPO Plus PHLX Orders, available
at https://www.nasdaqtrader.com/Micro.aspx?id=
TOPOPlusOrders.
24 See Securities Exchange Act Release No. 82495
(January 12, 2018), 83 FR 2839 (January 19, 2018)
(SR–Phlx–2018–08).
25 See Securities Exchange Act Release No. 68576
(January 3, 2013), 78 FR 1886 (January 9, 2013) (SR–
Phlx–2012–145).
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Non-Professional and Professional
Subscriber fees.
The proposed changes are designed to
update data fees to reflect their current
value, rather than their value when
these fees were set 5 or 10 years ago.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with section 6(b)
of the Act,26 in general, and furthers the
objectives of sections 6(b)(4) and 6(b)(5)
of the Act,27 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.
This belief is based on several factors.
First, exchange fees are constrained
because market participants can choose
among seventeen different venues for
options trading, and therefore no single
venue can charge excessive fees without
losing customers and market share.
Second, fees for TOPO are
constrained because the identical top of
book data is sent to OPRA, and certain
market participants may choose to rely
exclusively on OPRA rather than
purchasing the proprietary data product.
Third, the purchase of PHLX Orders is
optional. It is designed as a lower-cost
alternative to depth of book, and, as
such, is not a complement to any other
product offered by the Exchange or any
of its competitors. Customers may
purchase PHLX Orders or not, and can
reject the feed for any reason, including
the fee charged.
Fourth, the proposed fees are
comparable to, and in some cases less
than, those of similarly-situated
exchanges.
Fifth, the current fees do not properly
reflect the value of the underlying
product, as fees for the products in
question have been static in nominal
terms, and therefore falling in real terms
(due to inflation), while the amount of
information transmitted in those fees
have more than doubled in just the past
five years, reflecting a substantial
increase in customer value due to the
significantly higher levels of liquidity
currently available on the Exchange.
Sixth, higher fees for the external
distribution of TOPO, PHLX Orders, and
TOPO Plus Orders are based on the
additional value vendors receive from
distributing data to their own customers
and typically charging for the service.
26 15
27 15
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U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
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88199
Customers Have a Choice in Trading
Venue
Customers face many choices in
where to trade options. Until recently,
sixteen exchanges have offered options
trading services,28 and they are now
being joined by a 17th member.29 Not a
single options exchange trades more
than 11 percent of the options market by
volume.30 PHLX, the second largest
options exchange by volume, only has 9
percent of the options market.31 Only
one of the 17 options exchanges have a
market share over 10 percent.32 This
broad dispersion of market share
demonstrates that market participants
can and do exercise choice in options
trading venues. As the number of
exchanges continues to grow,
competition will become fiercer and
customer choice will continue to
expand.
In light of the number of trading
venues available to customers, the
Exchange must price its products,
including TOPO, PHLX Orders, and
TOPO Plus Orders (as well as other
products), competitively. If not,
customers would move to other venues.
‘‘If competitive forces are operative, the
self-interest of the exchanges themselves
will work powerfully to constrain
unreasonable or unfair behavior.’’ 33
Accordingly, ‘‘the existence of
significant competition provides a
substantial basis for finding that the
terms of an exchange’s fee proposal are
equitable, fair, reasonable, and not
unreasonably or unfairly
discriminatory.’’ 34
28 See OPRA Plan, list of OPRA Participant
Exchanges, available at https://www.opraplan.com/
faqs. (All options exchanges are members of the
OPRA Plan.).
29 See Securities Exchange Act Release No. 98388
(September 14, 2023), 88 FR 64963 (September 20,
2023) (File No. 4–443) (‘‘Joint Industry Plan; Notice
of Filing and Immediate Effectiveness of
Amendment to the Plan for the Purpose of
Developing and Implementing Procedures Designed
To Facilitate the Listing and Trading of
Standardized Options To Add MEMX LLC as a Plan
Sponsor’’).
30 See Nasdaq, Options Market Statistics (Last
updated November 3, 2023), available at https://
www.nasdaqtrader.com/Trader.aspx?id=
OptionsVolumeSummary. On November 3, 2023,
the total percentage of options market volume by
exchange was as follows: ARCA: 11%; PHLX: 9%;
CBOE: 9%; BOX: 8%; ISE: 7%; EDGX: 7%; AMEX:
7%; MIAX: 7%; MPRL: 7%; NOM: 6%; BATS: 6%;
C2: 5%; EMLD: 4%; MRX: 3%; GEMX: 3%; BXOP:
3%; MEMX: 0%.
31 See id.
32 See id.
33 See Securities Exchange Act Release No. 59039
(December 2, 2008), 73 FR 74,770 (December 9,
2008) (SR–NYSEArca–2006–21).
34 Id.
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ddrumheller on DSK120RN23PROD with NOTICES1
The Top of Book Data in TOPO Is Sent
to OPRA
The top of book data in TOPO is sent
to OPRA; under OPRA rules, proprietary
options information is available to
customers that have equivalent access to
OPRA information, and therefore is
supplementary to the OPRA feed.35
Specifically, Section 5.2(c)(iii) of the
OPRA Plan provides that ‘‘[a] Member
[of the OPRA Plan] may disseminate its
Proprietary Information,’’ provided that
‘‘such dissemination is limited to other
Members and to persons who also have
equivalent access to consolidated
Options Information disseminated by
OPRA for the same classes or series of
options that are included in the
Proprietary Information. . . .’’ 36
‘‘Consolidated Options Information’’
refers to ‘‘consolidated Last Sale Reports
combined with either consolidated
Quotation Information or the BBO
furnished by OPRA.’’ 37 Access is
deemed to be ‘‘equivalent’’ ‘‘if both if
both kinds of information are equally
accessible on the same terminal or work
station. . . .’’ 38
Any customer that purchases
proprietary options data from the
Exchange, including TOPO and TOPO
Plus Orders, must also have equivalent
access to the OPRA Plan. As noted
above, the best bid and offer and last
sale information available from TOPO
and TOPO Plus Orders fees is identical
to the information simultaneously sent
to OPRA by the Exchange.39 OPRA
provides NBBO and last sale
information on options transactions.
TOPO and TOPO Plus Orders provide
additional administrative information
unique to trading on the Exchange, and
also reduce the transmission and
processing latencies generated through
the process of consolidating data into
the OPRA feed.40 Because top of book
35 See Limited Liability Company Agreement of
Options Price Reporting Authority, LLC § 5.2(c)(iii)
(January 1, 2010), available at https://assets.websitefiles.com/5ba40927ac854d8c97bc92d7/
5d0bd57d87d3ccca102102d7_OPRA%20Plan%20
with%20Updated%20Exhibit%20A%20-%2006-192019.pdf (‘‘OPRA Plan’’).
36 Id.
37 Id.
38 Id.
39 As noted above, the TOPO feed includes
administrative information (but not data) that is not
provided on the OPRA feed, such as symbol
directory messages. See Nasdaq, ‘‘Top of Phlx
Options Interface Specifications, Version 3.4’’
Section 4.3 available at https://
www.nasdaqtrader.com/content/technicalsupport/
specifications/dataproducts/topofphlx.pdf
(describing the start of day options directory
message, which lists all symbols eligible for the
auction process).
40 The bid and offer and last sale information
provided with the TOPO Plus Orders product is
identical to the data sent to OPRA, although the
‘‘orders’’ component of TOPO Plus Orders is not.
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and last sale information is available on
OPRA as well as TOPO, and customers
who purchase TOPO have equivalent
access to the OPRA feed, certain
customers may choose to rely on the
OPRA feed in lieu of purchasing PHLX
data, thereby limiting the ability of the
Exchange from charging excessive fees
for its TOPO and TOPO Plus Orders
feeds.
The Purchase of PHLX Orders Is
Optional
Purchase of PHLX Orders is optional.
As explained above, customers can
obtain all of the data contained in PHLX
Orders from PHLX Depth of Market
feed, and may purchase the latter if they
do not realize the cost savings offered by
PHLX Orders. PHLX Orders is not a
complement to any other product
offered by the Exchange or any of its
competitors; customers are free to
purchase PHLX Orders or not, and can
reject the feed for any reason, including
the fee charged.
The Proposed Fees Are Comparable to
Those of Other Exchanges
The proposed fees are comparable to,
and in some cases less than, those of
other similarly-situated exchange fees.
Options market statistics show that
PHLX has a market share of
approximately 9%. ARCA, with an 11%
market share, and CBOE, with a 9%
market share, are its closest
competitors.41
To obtain top of book and depth of
book information for internal
distribution (including both simple and
complex options) from ARCA, a
customer would be required to pay an
Access Fee of $3,000 per month, a NonDisplay fee of at least $5,000 per month
for simple options, and a Non-Display
fee of $1,000 for Complex Options, for
a total of $9,000 per month.42 To obtain
the same information from PHLX under
the new proposal, a customer would pay
the Internal Distributor fee of $2,500 for
TOPO, and an Internal Distributor fee of
$4,000 for PHLX Depth Data,43 for a
total of $6,500 per month.
To obtain comparable information for
Cboe Options, a customer would be
41 See Nasdaq, Options Market Statistics (Last
updated November 3, 2023), available at https://
www.nasdaqtrader.com/Trader.aspx?id=Options
VolumeSummary.
42 See, NYSE Arca Options Proprietary Market
Data Fees (as of July 3, 2023), available at https://
www.nyse.com/publicdocs/nyse/data/NYSE_Arca_
Options_Proprietary_Data_Fee_Schedule.pdf.
43 See Options 7, Section 10 (Proprietary Data
Feed Fees) (PHLX Depth Data). ARCA does not
charge separately for top of book and depth of book.
Although PHLX is not proposing to change fees for
depth of book information, PHLX depth of book
information is included here to maintain
comparability.
PO 00000
Frm 00160
Fmt 4703
Sfmt 4703
required to pay a combined fee of
$9,000 per month.44 As noted above, a
PHLX customer would pay the Internal
Distributor fee of $2,500 for TOPO, and
an Internal Distributor fee of $4,000 for
PHLX Depth Data,45 for a total of $6,500
per month.
As such, the proposed fees are
comparable to fees charged by industry
peers, and therefore presumptively
reasonable.
Real Exchange Fees Have Fallen While
Traffic Has Increased
As explained above, the Internal
Distributor fee for TOPO Plus Orders
was increased in 2018,46 while none of
the other fees have changed for over a
decade, since January 2013.47 This
means that fees for TOPO, PHLX Orders,
and TOPO Plus Orders have fallen in
real terms due to inflation. At the same
time, the average daily message count of
PHLX has more than doubled in just
five years, from approximately 3.0
billion messages per day in 2018 to
approximately 8.2 billion messages in
2023.48 The proposal is reasonable in
light of the substantial increase in
customer value generate by the higher
levels of liquidity now available on the
Exchange.
External Distributors Receive Additional
Value
External Distributors receive
additional value not available to
Internal Distributors by disseminating
information externally and typically
charging for the service. This additional
value supports higher fees for external
distribution for TOPO, PHLX Orders,
and TOPO Plus Orders. Higher fees for
external distribution of data are
common throughout the industry, and
44 See Cboe Data Services (CDS), Market Data
Product Price List (updated July 1, 2023), available
at https://cdn.cboe.com/resources/membership/US_
Market_Data_Product_Price_List.pdf.
45 See Options 7, Section 10 (Proprietary Data
Feed Fees) (PHLX Depth Data). ARCA does not
charge separately for top of book and depth of book.
Although PHLX is not proposing to change fees for
depth of book information, PHLX depth of book
information is included here to ensure
comparability.
46 See Securities Exchange Act Release No. 82495
(January 12, 2018), 83 FR 2839 (January 19, 2018)
(SR–Phlx–2018–08).
47 See Securities Exchange Act Release No. 68576
(January 3, 2013), 78 FR 1886 (January 9, 2013) (SR–
Phlx–2012–145).
48 PHLX Data (Average Daily Message Count was
2,979,919,551.32 in 2018, and 8,243,516,029.17
thus far in 2023). The significant increases in data
traffic has also required technological upgrades to
manage the larger traffic volume and to respond to
overall technological change in the industry. See,
e.g., Securities Exchange Act Release No. 82495
(January 12, 2018), 83 FR 2839 (January 19, 2018)
(SR–Phlx–2018–08) (discussing a number of
functional enhancements to both TOPO and PHLX
Orders).
E:\FR\FM\20DEN1.SGM
20DEN1
Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Notices
nearly universal among exchanges. The
difference in value between internal and
external distribution is also reflected in
the current fee schedule, which has
previously been shown to be consistent
with the Exchange Act.
*
*
*
*
*
In summary, the proposal represents
an equitable allocation of reasonable
dues, fees and other charges because: (i)
customers have a choice in trading
venue, and will exercise that choice and
trade at another venue if exchange fees
are not set competitively; (ii) the top of
book data sent in the TOPO feed are also
sent to OPRA, and customers have the
option of relying on OPRA data; (iii) the
purchase of PHLX Orders is entirely
optional as it is a low-cost alternative to
the PHLX Depth of Market product; (iv)
the proposed fees are comparable to
those of other exchanges; (v) exchange
fees have fallen in real terms while the
amount of liquidity available on the
exchange has increased, and (vi)
external vendors receive additional
value from distributing data to their
own customers and typically charging
for the service, and therefore charging
higher fees for external distribution is
fair and reasonable.
ddrumheller on DSK120RN23PROD with NOTICES1
No Unfair Discrimination
The Proposal is not unfairly
discriminatory. The three market data
feeds at issue here—TOPO, PHLX
Orders, and TOPO Plus Orders—are
used by a variety of market participants
for a variety of purposes. Users include
regulators, market makers, competing
exchanges, media, retail, academics,
portfolio managers. Market data feeds
will be available to members of all of
these groups on a non-discriminatory
basis.
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.
Nothing in the Proposal burdens
inter-market competition (the
competition among self-regulatory
organizations) because approval of the
Proposal does not impose any burden
on the ability of other options exchanges
to compete. PHLX fees are comparable
to, and in some cases less than, those of
other exchanges, as discussed above.
Nothing in the Proposal burdens
intra-market competition (the
competition among consumers of
exchange data) because PHLX market
data is available to any customer under
the same fee schedule as any other
customer, and any market participant
VerDate Sep<11>2014
18:02 Dec 19, 2023
Jkt 262001
that wishes to purchase PHLX market
data can do so on a non-discriminatory
basis.
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.49
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–2023–57 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–2023–57. 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
49 15
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
Frm 00161
Fmt 4703
Sfmt 4703
88201
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–2023–57 and should be
submitted on or before January 10, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.50
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–27924 Filed 12–19–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99170; File No. SR–
NYSEARCA–2023–85]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rule 6.62P–O
December 14, 2023.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on December
8, 2023, NYSE Arca, Inc. (‘‘NYSE Arca’’
or the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
50 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
E:\FR\FM\20DEN1.SGM
20DEN1
Agencies
[Federal Register Volume 88, Number 243 (Wednesday, December 20, 2023)]
[Notices]
[Pages 88197-88201]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-27924]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99183; File No. SR-Phlx-2023-57]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Exchange's Proprietary Data Fees for Top of PHLX Options (``TOPO''),
PHLX Orders, and TOPO Plus Orders at Options 7, Section 10
December 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 December 5, 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 the Exchange's proprietary data fees
for Top of PHLX Options (``TOPO''), PHLX Orders, and TOPO Plus Orders
at Options 7, Section 10, as described further below.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/phlx/rules, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these
[[Page 88198]]
statements may be examined at the places specified in Item IV below.
The Exchange has prepared summaries, set forth in sections A, B, and C
below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the Exchange's
proprietary data fees for Top of PHLX Options (``TOPO''), PHLX Orders,
and TOPO Plus Orders at Options 7, Section 10.\3\
---------------------------------------------------------------------------
\3\ The proposed changes were initially filed on November 16,
2023, as SR-Phlx-2023-51. On December 5, 2023, SR-Phlx-2023-51 was
withdrawn and replaced with the instant filing to provide additional
detail regarding the proposal.
---------------------------------------------------------------------------
Top of PHLX Options (``TOPO'')
TOPO is a direct data feed that provides subscribers with PHLX Best
Bid and Offer (``BBO'') \4\ and last sale information.\5\ The data
distributed on TOPO is identical to the data simultaneously sent to the
Options Price Reporting Authority (``OPRA'').\6\ The TOPO feed also
provides administrative information to facilitate trading on the
Exchange such as, for example, the list of symbols trading on a
particular day.\7\ TOPO reduces the transmission and processing
latencies for top of book information relative to the OPRA feed by
avoiding the latencies generated by the latter in consolidating data.
---------------------------------------------------------------------------
\4\ The Best Bid and Offer includes aggregate size information
based on displayable order and quoting interest on the Exchange.
\5\ See PHLX, ``Top of Phlx Options,'' available at https://
www.nasdaqtrader.com/
Micro.aspx?id=TOPO#:~:text=Top%20of%20PHLX%20Options%20(TOPO,in%20the
%20consolidated%20market%20feed.
\6\ See Options 3 (Options Trading Rules), Section 23(a)(1)
(Data Feeds and Trade Information) (``The data contained in the TOPO
data feed is identical to the data simultaneously sent to the
processor for the OPRA and subscribers of the data feed.'').
\7\ See, e.g., Nasdaq, ``Top of Phlx Options Interface
Specifications, Version 3.4'' Section 4.3 available at https://www.nasdaqtrader.com/content/technicalsupport/specifications/dataproducts/topofphlx.pdf (describing the start of day options
directory message, which lists all symbols eligible for the auction
process).
---------------------------------------------------------------------------
Monthly fees for TOPO are currently $2,000 for Internal
Distributors,\8\ $2,500 for External Distributors,\9\ $1 for a Non-
Professional Subscriber,\10\ and $40 for a Professional Subscriber.\11\
None of these fees have changed for over a decade, since January
2013.\12\
---------------------------------------------------------------------------
\8\ See Options 7, Section 10 (Proprietary Data Feed Fees) (Top
of PHLX Options) (``A `distributor' of Nasdaq PHLX data is any
entity that receives a feed or data file . . . directly from Nasdaq
PHLX or indirectly through another entity and then distributes it
either internally (within that entity) or externally (outside that
entity). All distributors execute a Nasdaq PHLX distributor
agreement.'').
\9\ See id.
\10\ See id. (``A Non-Professional Subscriber is a natural
person who is neither: (i) registered or qualified in any capacity
with the Commission, the Commodities Futures Trading Commission, any
state securities agency, any securities exchange or association, or
any commodities or futures contract market or association; (ii)
engaged as an `investment adviser' as that term is defined in
Section 201(11) of the Investment Advisors Act of 1940 (whether or
not registered or qualified under that Act); nor (iii) employed by a
bank or other organization exempt from registration under federal or
state securities laws to perform functions that would require
registration or qualification if such functions were performed for
an organization not so exempt. A Non-Professional Subscriber may
only use the data provided for personal purposes and not for any
commercial purpose.'').
\11\ See id. (``A Professional Subscriber is any Subscriber that
is not a Non-Professional Subscriber. If the Nasdaq Subscriber
agreement is signed in the name of a business or commercial entity,
such entity would be considered a Professional Subscriber.'').
\12\ See Securities Exchange Act Release No. 68576 (January 3,
2013), 78 FR 1886 (January 9, 2013) (SR-Phlx-2012-145).
---------------------------------------------------------------------------
PHLX Orders
PHLX Orders is a real-time order book feed with pricing information
for displayed orders on the PHLX order book.\13\ The data provided for
each options series includes the symbols (series and underlying
security), a put or call indicator, expiration date, and the strike
price of the series. It also provides the real-time status of simple
and complex orders \14\ on the order book, including new orders and
changes to orders resting on the PHLX book for all PHLX-listed
options.\15\ The PHLX Orders feed includes data on the opening
imbalance, Price Improvement XL (PIXL),\16\ and Complex Order Live
Auction (COLA).\17\ A notification message is sent for symbols entering
an auction.\18\ PHLX Orders also furnishes an historical record of all
simple and complex order message data from the PHLX Orders data feed.
PHLX Orders information is not sent to OPRA.\19\
---------------------------------------------------------------------------
\13\ See Options 3 (Options Trading Rules), Section 23(a)(2)
(Data Feeds and Trade Information).
\14\ See Options 3 (Options Trading Rules), Section 23(a)(2)
(Data Feeds and Trade Information); Section 14(a)(i) (``Complex
Order. For purposes of the electronic trading of Complex Orders, a
Complex Order is an order involving the simultaneous purchase and/or
sale of two or more different options series in the same underlying
security, priced as a net debit or credit based on the relative
prices of the individual components, for the same account, for the
purpose of executing a particular investment strategy.'').
\15\ See Nasdaq, ``PHLX Orders,'' available at https://www.nasdaqtrader.com/Micro.aspx?id=PHLXOrders.
\16\ See Options 3 (Options Trading Rules), Section 23(a)(2);
Section 13 (Price Improvement XL) (``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 sub-paragraph (a)(6) below) it represents as agent (an
`Initiating Order') provided it submits the PIXL Order for
electronic execution into the PIXL Auction (`Auction') pursuant to
this Rule.'').
\17\ See Options 3, Section 14(e) (describing the process for
the Complex Order Live Auction (``COLA'')).
\18\ Nasdaq, ``PHLX Orders Interface Specification,'' (Version
1.92) available at https://www.nasdaqtrader.com/content/technicalsupport/specifications/dataproducts/topoplusorders.pdf
(describing auction notification message).
\19\ See Limited Liability Company Agreement of Options Price
Reporting Authority, LLC Article V, Section 5.2(c)(i) (January 1,
2010), available at https://assets.website-files.com/5ba40927ac854d8c97bc92d7/5d0bd57d87d3ccca102102d7_OPRA%20Plan%20with%20Updated%20Exhibit%20A%20-%2006-19-2019.pdf (describing last sale and best bid and offer
information disseminated by OPRA).
---------------------------------------------------------------------------
PHLX Orders is an alternative to PHLX Depth of Market. It is an
optimized technical channel designed to lower technology costs, reduce
processing time, and facilitate the ingestion of data while still
providing customers insight beyond the top of book by viewing active
buy and sell orders. PHLX Orders excludes quotations by market makers
and other authorized entities that is included in PHLX Depth of
Market.\20\
---------------------------------------------------------------------------
\20\ See Options 3 (Options Trading Rules), Section 23(a)(3)
(Data Feeds and Trade Information) (``PHLX Depth of Market is a data
product that provides: (i) order and quotation information for
individual quotes and orders on the order book . . .'') (emphasis
added); Section 4(b) (Entry and display of Quotes) (identifying the
market participants authorized to submit quotes to the Exchange).
---------------------------------------------------------------------------
In October 2023, the one millisecond average peak for PHLX Depth of
Market was approximately 13.5 million messages. PHLX Orders transmitted
only about 2.6 million messages on average over the same period.\21\ In
that month, purchase of PHLX Orders in lieu of PHLX Depth of Market
would have lowered the bandwidth required for peak messaging by over 80
percent. This would have decreased the load on the customer's
information processing infrastructure, reduced processing time, and
facilitated the ingestion of Exchange information, while still
providing the customer with a view of active buy and sell orders.
---------------------------------------------------------------------------
\21\ See Nasdaq, ``October 2023 Bandwidth,'' available at
https://view.officeapps.live.com/op/view.aspx?src=http%3A%2F%2Fwww.nasdaqtrader.com%2Fcontent%2Ftechnicalsupport%2Fspecifications%2Fdataproducts%2Fbandwidthreport.xls&wdOrigin=BROWSELINK.
---------------------------------------------------------------------------
Purchase of PHLX Orders is optional. Customers can obtain all of
the data contained in PHLX Orders from PHLX Depth of Market feed, and
may purchase the latter if they do not realize the cost savings offered
by PHLX Orders.
[[Page 88199]]
PHLX Orders is a derivative product designed as a lower-cost
alternative to a depth of book feed. It is not a complement to any
other product offered by the Exchange or any of its competitors.
Customers are free to purchase PHLX Orders or not, and can reject the
feed for any reason, including the fee charged.
Current monthly fees for PHLX Orders are $3,000 for Internal
Distributors, $3,500 for External Distributors, $1 for a Non-
Professional Subscriber, and $40 for a Professional Subscriber. None of
these fees have changes for over a decade, since January 2013.\22\
---------------------------------------------------------------------------
\22\ See Securities Exchange Act Release No. 68576 (January 3,
2013), 78 FR 1886 (January 9, 2013) (SR-Phlx-2012-145).
---------------------------------------------------------------------------
TOPO Plus Orders
TOPO Plus is a direct market data product that offers subscribers
both TOPO and PHLX Orders for a consolidated fee that is less than the
combined fee of the two products.\23\
---------------------------------------------------------------------------
\23\ See PHLX, TOPO Plus PHLX Orders, available at https://www.nasdaqtrader.com/Micro.aspx?id=TOPOPlusOrders.
---------------------------------------------------------------------------
Monthly fees for TOPO Plus Orders are currently $4,500 for Internal
Distributors, $5,000 for External Distributors, $1 for a Non-
Professional Subscriber, and $40 for a Professional Subscriber.
Internal Distributor fees for TOPO Plus Orders were modified in
January 2018, over five years ago,\24\ but the other TOPO Plus Orders
fees have not changed since January 2013.\25\
---------------------------------------------------------------------------
\24\ See Securities Exchange Act Release No. 82495 (January 12,
2018), 83 FR 2839 (January 19, 2018) (SR-Phlx-2018-08).
\25\ See Securities Exchange Act Release No. 68576 (January 3,
2013), 78 FR 1886 (January 9, 2013) (SR-Phlx-2012-145).
---------------------------------------------------------------------------
Proposed Changes
For TOPO, the Exchange proposes to increase the monthly charge for
Internal Distributors from $2,000 to $2,500, and the monthly charge for
External Distributors from $2,500 to $3,000. No changes are proposed
for Non-Professional and Professional Subscriber fees.
For PHLX Orders, the Exchange proposes to increase the monthly
charge for Internal Distributors from $3,000 to $3,500, and the monthly
charge for External Distributors from $3,500 to $4,000. No changes are
proposed for Non-Professional and Professional Subscriber fees.
For TOPO Plus Orders, the Exchange proposes to increase the monthly
charge for Internal Distributors from $4,500 to $5,500, and the monthly
charge for External Distributors from $5,000 to $6,000. No changes are
proposed for Non-Professional and Professional Subscriber fees.
The proposed changes are designed to update data fees to reflect
their current value, rather than their value when these fees were set 5
or 10 years ago.
2. Statutory Basis
The Exchange believes that its proposal is consistent with section
6(b) of the Act,\26\ in general, and furthers the objectives of
sections 6(b)(4) and 6(b)(5) of the Act,\27\ 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.
---------------------------------------------------------------------------
\26\ 15 U.S.C. 78f(b).
\27\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
This belief is based on several factors.
First, exchange fees are constrained because market participants
can choose among seventeen different venues for options trading, and
therefore no single venue can charge excessive fees without losing
customers and market share.
Second, fees for TOPO are constrained because the identical top of
book data is sent to OPRA, and certain market participants may choose
to rely exclusively on OPRA rather than purchasing the proprietary data
product.
Third, the purchase of PHLX Orders is optional. It is designed as a
lower-cost alternative to depth of book, and, as such, is not a
complement to any other product offered by the Exchange or any of its
competitors. Customers may purchase PHLX Orders or not, and can reject
the feed for any reason, including the fee charged.
Fourth, the proposed fees are comparable to, and in some cases less
than, those of similarly-situated exchanges.
Fifth, the current fees do not properly reflect the value of the
underlying product, as fees for the products in question have been
static in nominal terms, and therefore falling in real terms (due to
inflation), while the amount of information transmitted in those fees
have more than doubled in just the past five years, reflecting a
substantial increase in customer value due to the significantly higher
levels of liquidity currently available on the Exchange.
Sixth, higher fees for the external distribution of TOPO, PHLX
Orders, and TOPO Plus Orders are based on the additional value vendors
receive from distributing data to their own customers and typically
charging for the service.
Customers Have a Choice in Trading Venue
Customers face many choices in where to trade options. Until
recently, sixteen exchanges have offered options trading services,\28\
and they are now being joined by a 17th member.\29\ Not a single
options exchange trades more than 11 percent of the options market by
volume.\30\ PHLX, the second largest options exchange by volume, only
has 9 percent of the options market.\31\ Only one of the 17 options
exchanges have a market share over 10 percent.\32\ This broad
dispersion of market share demonstrates that market participants can
and do exercise choice in options trading venues. As the number of
exchanges continues to grow, competition will become fiercer and
customer choice will continue to expand.
---------------------------------------------------------------------------
\28\ See OPRA Plan, list of OPRA Participant Exchanges,
available at https://www.opraplan.com/faqs. (All options exchanges
are members of the OPRA Plan.).
\29\ See Securities Exchange Act Release No. 98388 (September
14, 2023), 88 FR 64963 (September 20, 2023) (File No. 4-443)
(``Joint Industry Plan; Notice of Filing and Immediate Effectiveness
of Amendment to the Plan for the Purpose of Developing and
Implementing Procedures Designed To Facilitate the Listing and
Trading of Standardized Options To Add MEMX LLC as a Plan
Sponsor'').
\30\ See Nasdaq, Options Market Statistics (Last updated
November 3, 2023), available at https://www.nasdaqtrader.com/Trader.aspx?id=OptionsVolumeSummary. On November 3, 2023, the total
percentage of options market volume by exchange was as follows:
ARCA: 11%; PHLX: 9%; CBOE: 9%; BOX: 8%; ISE: 7%; EDGX: 7%; AMEX: 7%;
MIAX: 7%; MPRL: 7%; NOM: 6%; BATS: 6%; C2: 5%; EMLD: 4%; MRX: 3%;
GEMX: 3%; BXOP: 3%; MEMX: 0%.
\31\ See id.
\32\ See id.
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In light of the number of trading venues available to customers,
the Exchange must price its products, including TOPO, PHLX Orders, and
TOPO Plus Orders (as well as other products), competitively. If not,
customers would move to other venues. ``If competitive forces are
operative, the self-interest of the exchanges themselves will work
powerfully to constrain unreasonable or unfair behavior.'' \33\
Accordingly, ``the existence of significant competition provides a
substantial basis for finding that the terms of an exchange's fee
proposal are equitable, fair, reasonable, and not unreasonably or
unfairly discriminatory.'' \34\
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\33\ See Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74,770 (December 9, 2008) (SR-NYSEArca-2006-21).
\34\ Id.
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[[Page 88200]]
The Top of Book Data in TOPO Is Sent to OPRA
The top of book data in TOPO is sent to OPRA; under OPRA rules,
proprietary options information is available to customers that have
equivalent access to OPRA information, and therefore is supplementary
to the OPRA feed.\35\ Specifically, Section 5.2(c)(iii) of the OPRA
Plan provides that ``[a] Member [of the OPRA Plan] may disseminate its
Proprietary Information,'' provided that ``such dissemination is
limited to other Members and to persons who also have equivalent access
to consolidated Options Information disseminated by OPRA for the same
classes or series of options that are included in the Proprietary
Information. . . .'' \36\ ``Consolidated Options Information'' refers
to ``consolidated Last Sale Reports combined with either consolidated
Quotation Information or the BBO furnished by OPRA.'' \37\ Access is
deemed to be ``equivalent'' ``if both if both kinds of information are
equally accessible on the same terminal or work station. . . .'' \38\
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\35\ See Limited Liability Company Agreement of Options Price
Reporting Authority, LLC Sec. 5.2(c)(iii) (January 1, 2010),
available at https://assets.website-files.com/5ba40927ac854d8c97bc92d7/5d0bd57d87d3ccca102102d7_OPRA%20Plan%20with%20Updated%20Exhibit%20A%20-%2006-19-2019.pdf (``OPRA Plan'').
\36\ Id.
\37\ Id.
\38\ Id.
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Any customer that purchases proprietary options data from the
Exchange, including TOPO and TOPO Plus Orders, must also have
equivalent access to the OPRA Plan. As noted above, the best bid and
offer and last sale information available from TOPO and TOPO Plus
Orders fees is identical to the information simultaneously sent to OPRA
by the Exchange.\39\ OPRA provides NBBO and last sale information on
options transactions. TOPO and TOPO Plus Orders provide additional
administrative information unique to trading on the Exchange, and also
reduce the transmission and processing latencies generated through the
process of consolidating data into the OPRA feed.\40\ Because top of
book and last sale information is available on OPRA as well as TOPO,
and customers who purchase TOPO have equivalent access to the OPRA
feed, certain customers may choose to rely on the OPRA feed in lieu of
purchasing PHLX data, thereby limiting the ability of the Exchange from
charging excessive fees for its TOPO and TOPO Plus Orders feeds.
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\39\ As noted above, the TOPO feed includes administrative
information (but not data) that is not provided on the OPRA feed,
such as symbol directory messages. See Nasdaq, ``Top of Phlx Options
Interface Specifications, Version 3.4'' Section 4.3 available at
https://www.nasdaqtrader.com/content/technicalsupport/specifications/dataproducts/topofphlx.pdf (describing the start of
day options directory message, which lists all symbols eligible for
the auction process).
\40\ The bid and offer and last sale information provided with
the TOPO Plus Orders product is identical to the data sent to OPRA,
although the ``orders'' component of TOPO Plus Orders is not.
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The Purchase of PHLX Orders Is Optional
Purchase of PHLX Orders is optional. As explained above, customers
can obtain all of the data contained in PHLX Orders from PHLX Depth of
Market feed, and may purchase the latter if they do not realize the
cost savings offered by PHLX Orders. PHLX Orders is not a complement to
any other product offered by the Exchange or any of its competitors;
customers are free to purchase PHLX Orders or not, and can reject the
feed for any reason, including the fee charged.
The Proposed Fees Are Comparable to Those of Other Exchanges
The proposed fees are comparable to, and in some cases less than,
those of other similarly-situated exchange fees. Options market
statistics show that PHLX has a market share of approximately 9%. ARCA,
with an 11% market share, and CBOE, with a 9% market share, are its
closest competitors.\41\
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\41\ See Nasdaq, Options Market Statistics (Last updated
November 3, 2023), available at https://www.nasdaqtrader.com/Trader.aspx?id=OptionsVolumeSummary.
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To obtain top of book and depth of book information for internal
distribution (including both simple and complex options) from ARCA, a
customer would be required to pay an Access Fee of $3,000 per month, a
Non-Display fee of at least $5,000 per month for simple options, and a
Non-Display fee of $1,000 for Complex Options, for a total of $9,000
per month.\42\ To obtain the same information from PHLX under the new
proposal, a customer would pay the Internal Distributor fee of $2,500
for TOPO, and an Internal Distributor fee of $4,000 for PHLX Depth
Data,\43\ for a total of $6,500 per month.
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\42\ See, NYSE Arca Options Proprietary Market Data Fees (as of
July 3, 2023), available at https://www.nyse.com/publicdocs/nyse/data/NYSE_Arca_Options_Proprietary_Data_Fee_Schedule.pdf.
\43\ See Options 7, Section 10 (Proprietary Data Feed Fees)
(PHLX Depth Data). ARCA does not charge separately for top of book
and depth of book. Although PHLX is not proposing to change fees for
depth of book information, PHLX depth of book information is
included here to maintain comparability.
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To obtain comparable information for Cboe Options, a customer would
be required to pay a combined fee of $9,000 per month.\44\ As noted
above, a PHLX customer would pay the Internal Distributor fee of $2,500
for TOPO, and an Internal Distributor fee of $4,000 for PHLX Depth
Data,\45\ for a total of $6,500 per month.
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\44\ See Cboe Data Services (CDS), Market Data Product Price
List (updated July 1, 2023), available at https://cdn.cboe.com/resources/membership/US_Market_Data_Product_Price_List.pdf.
\45\ See Options 7, Section 10 (Proprietary Data Feed Fees)
(PHLX Depth Data). ARCA does not charge separately for top of book
and depth of book. Although PHLX is not proposing to change fees for
depth of book information, PHLX depth of book information is
included here to ensure comparability.
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As such, the proposed fees are comparable to fees charged by
industry peers, and therefore presumptively reasonable.
Real Exchange Fees Have Fallen While Traffic Has Increased
As explained above, the Internal Distributor fee for TOPO Plus
Orders was increased in 2018,\46\ while none of the other fees have
changed for over a decade, since January 2013.\47\ This means that fees
for TOPO, PHLX Orders, and TOPO Plus Orders have fallen in real terms
due to inflation. At the same time, the average daily message count of
PHLX has more than doubled in just five years, from approximately 3.0
billion messages per day in 2018 to approximately 8.2 billion messages
in 2023.\48\ The proposal is reasonable in light of the substantial
increase in customer value generate by the higher levels of liquidity
now available on the Exchange.
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\46\ See Securities Exchange Act Release No. 82495 (January 12,
2018), 83 FR 2839 (January 19, 2018) (SR-Phlx-2018-08).
\47\ See Securities Exchange Act Release No. 68576 (January 3,
2013), 78 FR 1886 (January 9, 2013) (SR-Phlx-2012-145).
\48\ PHLX Data (Average Daily Message Count was 2,979,919,551.32
in 2018, and 8,243,516,029.17 thus far in 2023). The significant
increases in data traffic has also required technological upgrades
to manage the larger traffic volume and to respond to overall
technological change in the industry. See, e.g., Securities Exchange
Act Release No. 82495 (January 12, 2018), 83 FR 2839 (January 19,
2018) (SR-Phlx-2018-08) (discussing a number of functional
enhancements to both TOPO and PHLX Orders).
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External Distributors Receive Additional Value
External Distributors receive additional value not available to
Internal Distributors by disseminating information externally and
typically charging for the service. This additional value supports
higher fees for external distribution for TOPO, PHLX Orders, and TOPO
Plus Orders. Higher fees for external distribution of data are common
throughout the industry, and
[[Page 88201]]
nearly universal among exchanges. The difference in value between
internal and external distribution is also reflected in the current fee
schedule, which has previously been shown to be consistent with the
Exchange Act.
* * * * *
In summary, the proposal represents an equitable allocation of
reasonable dues, fees and other charges because: (i) customers have a
choice in trading venue, and will exercise that choice and trade at
another venue if exchange fees are not set competitively; (ii) the top
of book data sent in the TOPO feed are also sent to OPRA, and customers
have the option of relying on OPRA data; (iii) the purchase of PHLX
Orders is entirely optional as it is a low-cost alternative to the PHLX
Depth of Market product; (iv) the proposed fees are comparable to those
of other exchanges; (v) exchange fees have fallen in real terms while
the amount of liquidity available on the exchange has increased, and
(vi) external vendors receive additional value from distributing data
to their own customers and typically charging for the service, and
therefore charging higher fees for external distribution is fair and
reasonable.
No Unfair Discrimination
The Proposal is not unfairly discriminatory. The three market data
feeds at issue here--TOPO, PHLX Orders, and TOPO Plus Orders--are used
by a variety of market participants for a variety of purposes. Users
include regulators, market makers, competing exchanges, media, retail,
academics, portfolio managers. Market data feeds will be available to
members of all of these groups on a non-discriminatory basis.
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.
Nothing in the Proposal burdens inter-market competition (the
competition among self-regulatory organizations) because approval of
the Proposal does not impose any burden on the ability of other options
exchanges to compete. PHLX fees are comparable to, and in some cases
less than, those of other exchanges, as discussed above.
Nothing in the Proposal burdens intra-market competition (the
competition among consumers of exchange data) because PHLX market data
is available to any customer under the same fee schedule as any other
customer, and any market participant that wishes to purchase PHLX
market data can do so on a non-discriminatory basis.
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.\49\
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\49\ 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-2023-57 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-2023-57. 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
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-2023-57 and should be
submitted on or before January 10, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\50\
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\50\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27924 Filed 12-19-23; 8:45 am]
BILLING CODE 8011-01-P