Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, Section 4, 20739-20744 [2024-06175]
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Federal Register / Vol. 89, No. 58 / Monday, March 25, 2024 / Notices
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–
FICC–2024–004 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549.
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All submissions should refer to File
Number SR–FICC–2024–004. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
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business days between the hours of
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submissions should refer to File
Number SR–FICC–2024–004 and should
be submitted on or before April 15,
2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–06163 Filed 3–22–24; 8:45 am]
BILLING CODE 8011–01–P
26 17
CFR 200.30–3(a)(12).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99770; File No. SR–PHLX–
2024–14]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Options 7,
Section 4
March 19, 2024.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 15,
2024, 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 4.3
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.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 The Exchange initially filed the proposed
pricing change on February 29, 2024 to be operative
on March 1, 2024 (SR–Phlx–2024–07). On March
12, 2024, the Exchange withdrew SR–Phlx–2024–07
and submitted SR–Phlx–2024–11. On March 15,
2024, the Exchange withdrew SR–Phlx–2024–11
and submitted this filing.
2 17
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Phlx proposes to amend its Pricing
Schedule within Options 7, Section 4,
‘‘Multiply Listed Options Fees (Includes
options overlying equities, ETFs, ETNs
and indexes which are Multiply Listed)
(Excludes SPY and broad-based index
options symbols listed within Options
7, Section 5.A).’’ Specifically, Phlx
proposes to: (1) lower the Professional 4
Floor 5 Options Transaction Charges 6 in
Multiply Listed Penny and Non-Penny
Symbols; 7 (2) increase the Lead Market
Maker 8 and Market Maker 9 Floor
Options Transaction Charges in
Multiply Listed Penny and Non-Penny
Symbols; and (3) increase the Monthly
Firm Fee Cap. Each change will be
described below.
Floor Options Transaction Charges
Today, the Exchange assesses Options
Transaction Charges in Multiply Listed
options, including options overlying
equities, ETFs, ETNs and indexes and
excluding options in SPY 10 and broad4 The term ‘‘Professional’’ applies to transactions
for the accounts of Professionals, as defined in
Options 1, Section 1(b)(45) means any person or
entity that (i) is not a broker or dealer in securities,
and (ii) places more than 390 orders in listed
options per day on average during a calendar month
for its own beneficial account(s). See Phlx’s Pricing
Schedule at Options 7, Section 1(c).
5 The term ‘‘floor transaction’’ is a transaction that
is effected in open outcry on the Exchange’s
Trading Floor. See Phlx’s Pricing Schedule at
Options 7, Section 1(c).
6 Options Transaction Charges are per contract.
Floor transaction fees apply to any ‘‘as of’’ or
‘‘reversal’’ adjustments for manually processed
trades originally submitted electronically or
through FBMS. See Phlx’s Pricing Schedule at
Options 7, Section 4, footnote 8.
7 For consistency, the Exchange proposes to
capitalize the term ‘‘non-Penny’’ in the table in
Options 7, Section 4 of the Pricing Schedule.
8 The term ‘‘Floor Lead Market Maker’’ is a
member who is registered as an options Lead
Market Maker pursuant to Options 2, Section 12(a)
and has a physical presence on the Exchange’s
Trading Floor. See Phlx’s Pricing Schedule at
Options 7, Section 1(c).
9 The term ‘‘Floor Market Maker’’ is a Market
Maker who is neither an SQT or an RSQT. A Floor
Market Maker may provide a quote in open outcry.
See Phlx’s Pricing Schedule at Options 7, Section
1(c).
10 Transactions in SPY originating on the
Exchange floor are subject to the Multiply Listed
Options Fees (see Multiply Listed Options Fees in
Options 7, Section 4). However, if one side of the
transaction originates on the Exchange floor and
any other side of the trade was the result of an
electronically submitted order or a quote, then these
fees will apply to the transactions which originated
on the Exchange floor and contracts that are
executed electronically on all sides of the
transaction. The one side of the transaction which
originates on the Exchange floor will count toward
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Federal Register / Vol. 89, No. 58 / Monday, March 25, 2024 / Notices
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based index options symbols listed
within Options 7, Section 5.A. The
Exchange currently assesses the
following Floor Options Transaction
Charges in Multiply Listed Penny and
Non-Penny Symbols: $0.05 per contract
for a Professional, $0.35 per contract for
a Lead Market Maker and Market Maker,
and $0.25 per contract for a BrokerDealer 11 and Firm.12 Customers 13 are
not assessed an Options Transaction
Charge in Multiply Listed Penny or
Non-Penny Symbols.
At this time, the Exchange proposes to
decrease the Professional Floor Options
Transaction Charges in Penny and NonPenny Symbols from $0.05 to $0.00 per
contract. The Exchange believes the
decreased Professional Options
Transaction Charges will attract a
greater amount of Professional orders to
Phlx’s Trading Floor. The Exchange
notes that NYSE Arca, Inc. (‘‘NYSE
Arca’’) also assesses no Professional
Customer fee for manual executions.14
At this time, the Exchange proposes to
increase the Lead Market Maker and
Market Maker Floor Options
Transaction Charges in Penny and NonPenny Symbols from $0.35 to $0.50 per
contract. While the Exchange is
increasing the Lead Market Maker and
Market Maker Floor Options
Transaction Charge by $0.15 per
contract (increase from $0.35 to $0.50
per contract), the Exchange believes that
the volume which qualifies a participant for the
Simple Order Rebate for Adding Liquidity for Lead
Market Makers and Market Makers in SPY. See
Options 7, Section 3, Part C.
11 The term ‘‘Broker-Dealer’’ applies to any
transaction which is not subject to any of the other
transaction fees applicable within a particular
category. See Phlx’s Pricing Schedule at Options 7,
Section 1(c).
12 The term ‘‘Firm’’ applies to any transaction that
is identified by a member or member organization
for clearing in the Firm range at The Options
Clearing Corporation (‘‘OCC’’). See Phlx’s Pricing
Schedule at Options 7, Section 1(c).
13 The term ‘‘Customer’’ applies to any
transaction that is identified by a member or
member organization for clearing in the Customer
range at OCC which is not for the account of a
broker or dealer or for the account of a
‘‘Professional’’ (as that term is defined in Options
1, Section 1(b)(45)). See Phlx’s Pricing Schedule at
Options 7, Section 1(c).
14 NYSE Arca modified its fees for Professional
Customer manual executions from a $0.25 per
contract fee for such executions, which fee had
been waived for the period August 1, 2022 to
December 31, 2022, to $0.00 per contract. NYSE
Arca stated that the proposed change was intended
to continue to attract manually executed
Professional Customer orders to the Exchange, and
the Exchange believed that all market participants
stood to benefit from an increase in such volume,
which would promote market depth, facilitate
tighter spreads and enhance price discovery, and
may lead to a corresponding increase in order flow
from other market participants as well. See
Securities Exchange Act Release No. 96763 (January
27, 2023), 88 FR 7119 (February 2, 2023) (S (SR–
NYSEARCA–2023–09).
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its pricing will continue to attract order
flow to the Exchange. Today, Lead
Market Makers and Market Makers are
subject to a ‘‘Monthly Market Maker
Cap’’ of $500,000 for: (i) electronic
Option Transaction Charges, excluding
surcharges and excluding options
overlying broad-based index options
symbols listed within Options 7,
Section 5.A; and (ii) Qualified
Contingent Cross or ‘‘QCC’’ Transaction
Fees (as defined in Exchange Options 3,
Section 12 and Floor QCC Orders, as
defined in Options 8, Section 30(e)).15
The Exchange proposes this increased
fee for business reasons and to
encourage competition on its trading
floor. The Exchange believes Lead
Market Makers and Market Makers will
continue to quote aggressively, adding
liquidity to the trading floor, so that
they may participate in transactions as
they do today. Lead Market Makers and
Market Makers have a time and place
advantage in the trading crowd which
the Exchange believes increases
competition on its trading floor to the
benefit of other floor participants.
Monthly Firm Fee Cap
Today, Firms are subject to a $200,000
‘‘Monthly Firm Fee Cap.’’ Today, Firm
Floor Option Transaction Charges and
QCC Transaction Fees, in the aggregate,
for one billing month that exceed the
Monthly Firm Fee Cap per member or
member organization, when such
members or member organizations are
trading in their own proprietary
account, are subject to a reduced
transaction fee of $0.02 per capped
contract unless there is no fee or the fee
is waived. Today, all dividend, merger,
short stock interest, reversal and
conversion, jelly roll, and box spread
strategy executions (as defined in this
Options 7, Section 4) are excluded from
15 The trading activity of separate Lead Market
Maker and Market Maker member organizations are
aggregated in calculating the Monthly Market Maker
Cap if there is Common Ownership between the
member organizations. All dividend, merger, short
stock interest, reversal and conversion, jelly roll
and box spread strategy executions (as defined in
this Options 7, Section 4) are excluded from the
Monthly Market Maker Cap. Floor Lead Market
Makers or Floor Market Makers that (i) are on the
contra-side of an electronically-delivered and
executed Customer order, excluding responses to a
PIXL auction; and (ii) have reached the Monthly
Market Maker Cap are assessed: $0.05 per contract
Fee for Adding Liquidity in Penny Symbols; $0.18
per contract Fee for Removing Liquidity in Penny
Symbols; $0.18 per contract in Non-Penny Symbols;
and $0.18 per contract in a non-Complex electronic
auction, including the Quote Exhaust auction and,
for purposes of this fee, the opening process. A
Complex electronic auction includes, but is not
limited to, the Complex Order Live Auction
(‘‘COLA’’). Transactions which execute against an
order for which the Exchange broadcast an order
exposure alert in an electronic auction will be
assessed $0.18 per contract.
PO 00000
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the Monthly Firm Fee Cap. Transactions
in broad-based index options symbols
listed within Options 7, Section 5.A. are
excluded from the Monthly Firm Fee
Cap and QCC Transaction Fees are
included in the calculation of the
Monthly Firm Fee Cap.16
At this time, the Exchange proposes to
increase the Monthly Firm Fee Cap from
a cap of $200,000 to a monthly cap of
$250,000 as a competitive response to a
similar change on NYSE Arca.17 The
Exchange believes that aligning its firm
cap with NYSE Arca’s firm cap will
allow it to compete for transactions on
its trading floor. The Exchange believes
that increasing the Monthly Firm Fee
Cap will continue to lower fees for
Firms that transact certain qualifying
volume on Phlx, thus enabling these
Firms the ability to lower costs while
continuing to incentivize Firms to
transact volume on the Exchange.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,18 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,19 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
16 For purposes of the Monthly Firm Fee Cap,
members and member organizations must notify the
Exchange in writing of all accounts in which the
member or member organization is not trading in
its own proprietary account. The Exchange will not
make adjustments to billing invoices where
transactions are commingled in accounts which are
not subject to the Monthly Firm Fee Cap. See
Options 7, Section 4.
17 NYSE Arca modified its Monthly Fee Cap in
November 2023 by raising the cap from $200,000
to $250,000. See Securities Exchange Act Release
No. 99021 (December 1, 2023), 88 FR 84030
(November 27, 2023 (SR–NYSEArca–2023–80).
18 15 U.S.C. 78f(b).
19 15 U.S.C. 78f(b)(4) and (5).
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broader forms that are most important to
investors and listed companies.’’ 20
Likewise, in NetCoalition v. Securities
and Exchange Commission 21
(‘‘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.22 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.’’ 23
Further, ‘‘[n]o one disputes that
competition for order flow is ‘fierce.’
. . . As the SEC explained, ‘[i]n the U.S.
national market system, buyers and
sellers of securities, and the brokerdealers that act as their order-routing
agents, have a wide range of choices of
where to route orders for execution’;
[and] ‘no exchange can afford to take its
market share percentages for granted’
because ‘no exchange possesses a
monopoly, regulatory or otherwise, in
the execution of order flow from broker
dealers’. . . .’’ 24 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.
Options Transaction Charges
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The Exchange’s proposal to decrease
the Professional Floor Options
Transaction Charges in Multiply Listed
Penny and Non-Penny Symbols in
Penny and Non-Penny Symbols from
$0.05 to $0.00 per contract is reasonable
because the decreased fee should attract
a greater amount of Professional orders
to Phlx’s Trading Floor. Today, Phlx
assesses Professionals a lower Floor
Options Transaction Charge as
compared to Lead Market Makers,
Broker-Dealers and Firms with respect
to Floor Options Transaction Charges.
Similarly, today, BOX Exchange LLC
(‘‘BOX’’) assesses Professionals lower
manual transaction fees as compared to
Broker Dealers and Market Makers.25 By
20 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
21 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir.
2010).
22 See NetCoalition, at 534—535.
23 Id. at 537.
24 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)).
25 BOX assesses Professional Customers a $0.10
per contract manual transaction fee in Penny and
Non-Penny Symbols. A Broker Dealer is assessed a
$0.025 per contract manual transaction fee in Penny
and Non-Penny Symbols and a Market Maker is
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decreasing its Professional Floor
Options Transaction Charge, the
Exchange believes it will be able to
compete more effectively for options
order flow because of the lower
Professional fee. Also, the Exchange
believes the decreased Professional
Options Transaction Charges will attract
a greater number of Professional orders
to Phlx’s Trading Floor. The Exchange
notes that NYSE Arca, Inc. (‘‘NYSE
Arca’’) also assesses no Professional
Customer fee for manual executions.26
The Exchange’s proposal to decrease
the Professional Floor Options
Transaction Charges in Multiply Listed
Penny and Non-Penny Symbols in
Penny and Non-Penny Symbols from
$0.05 to $0.00 per contract is equitable
and not unfairly discriminatory. Today,
Customers are not assessed an Options
Transaction Charge in Multiply Listed
Penny or Non-Penny Symbols because
Customer order flow is unique.
Customer liquidity benefits all market
participants by providing more trading
opportunities, which attracts Lead
Marker Makers and 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. The
Exchange believes that lowering the
Professional Floor Options Transaction
Charges is similarly beneficial as the
lower fees may cause market
participants to select Phlx’s Trading
Floor as a venue to send Professional
order flow, which benefits all market
participants by attracting valuable
liquidity to the market and thereby
enhancing the trading quality and
efficiency for all market participants.
Today, Lead Market Makers and Market
Makers are assessed the highest Penny
and Non-Penny Floor Options
Transaction Charges. Customers are not
assessed a Penny or Non-Penny Options
assessed a $0.35 per contract manual transaction fee
in Penny and Non-Penny Symbols. BOX does not
assess Public Customers or Broker Dealers
facilitating a Public Customer a Penny and NonPenny Interval Classes manual transactions fee. See
BOX’s Fee Schedule at Section V.
26 NYSE Arca modified its fees for Professional
Customer manual executions from a $0.25 per
contract fee for such executions, which fee had
been waived for the period August 1, 2022 to
December 31, 2022, to $0.00 per contract. NYSE
Arca stated that the proposed change is intended to
continue to attract manually executed Professional
Customer orders to the Exchange, and the Exchange
believes that all market participants stand to benefit
from an increase in such volume, which would
promote market depth, facilitate tighter spreads and
enhance price discovery, and may lead to a
corresponding increase in order flow from other
market participants as well. See Securities
Exchange Act Release No. 96763 (January 27, 2023),
88 FR 7119 (February 2, 2023) (S (SR–NYSEARCA–
2023–09).
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20741
Transaction Charge. With this proposal,
Professionals would continue to be
assessed a lower Floor Options
Transaction Charges in Multiply Listed
Penny and Non-Penny Symbols as
compared to Lead Market Makers and
Market Makers. Lead Market Makers
and Market Makers have a time and
place advantage on the Trading Floor
with respect to orders, unlike other
market participants. A Professional,
Broker-Dealer or a Firm would
necessarily require a Floor Broker to
represent their trading interest on the
Trading Floor as compared to a Lead
Market Maker or Market Maker that
could directly transact such orders on
the Trading Floor. Further, the
Exchange believes that to attract orders
from Professionals, Broker-Dealers, or
Firms, via a Floor Broker, the rates must
be competitive with rates at other
trading floors. With respect to Firms, the
Exchange notes that Firms are subject to
a Monthly Firm Fee Cap. Firm Floor
Option Transaction Charges along with
Qualified Contingent Cross Transaction
Fees, in the aggregate, for one billing
month may not exceed the Monthly
Firm Fee Cap per member organization
when such members are trading in their
own proprietary account.27 Finally,
with respect to Broker-Dealers, today
the Exchange waives the Floor Options
Transaction Charge for Broker-Dealers
executing facilitation orders pursuant to
Options 8, Section 30 when such
members would otherwise incur this
charge for trading in their own
proprietary account contra to a
Customer (‘‘BD-Customer Facilitation’’),
if the member’s BD-Customer
Facilitation average daily volume
(including both FLEX and non-FLEX
transactions) exceeds 10,000 contracts
per day in a given month.28 The
Exchange notes that both Firms and
Broker-Dealers have the ability to
reduce their Options Transaction
Charges as compared to Professionals.
The Exchange believes it is equitable
and not unfairly discriminatory to
assess Professionals no Floor Options
Transaction Charge the same as a
Customer and more favorable than
Firms, and Broker-Dealers, Lead Market
Makers, and Market Makers. The
potential increased volume would
create better trading opportunities that
benefit all market participants.
Specifically, greater volume and
liquidity from increased order flow
could create more trading opportunities
and tighter spreads. Assessing lower
Floor Options Transaction Charges for
Professional Customers compared to
27 See
28 See
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Options 7, Section 4.
Options 7, Section 4.
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Lead Market Makers, Market Makers,
Firms, and Broker-Dealers is not novel
as BOX currently assesses lower fees for
Professional Customers as compared to
Broker Dealers and Market Makers.29
The Exchange’s proposal to increase
the Lead Market Maker and the Market
Maker Floor Options Transaction
Charges in Multiply Listed Penny and
Non-Penny Symbols from $0.35 to $0.50
per contract is reasonable, equitable and
not unfairly discriminatory because
Lead Market Makers and Market Makers
benefit from having access to interact
with orders that are made available in
open outcry on the Trading Floor. Lead
Market Makers and Market Makers have
a time and place advantage on the
Trading Floor with respect to orders,
unlike other market participants.
Further, Lead Market Makers and
Market Makers have the benefit of
trading on any Trading Floor or in any
electronic venue if they so choose. The
Exchange believes that it has set its
Floor Options Transaction Charges for
Lead Market Makers and Market Makers
in such a way as to balance the need to
attract additional orders to the trading
floor while continuing to attract Lead
Market Makers and Market Makers to its
Trading Floor. The Exchange proposes
this increased fee for business reasons
and to encourage competition on its
trading floor. The Exchange believes
Lead Market Makers and Market Makers
will continue to quote aggressively,
adding liquidity to the trading floor, so
that they may participate in transactions
as they do today. Today, Lead Market
Makers and Market Makers are subject
to a ‘‘Monthly Market Maker Cap’’ of
$500,000 for: (i) electronic Option
Transaction Charges, excluding
surcharges and excluding options
overlying broad-based index options
symbols listed within Options 7,
Section 5.A; and (ii) QCC Transaction
Fees (as defined in Exchange Options 3,
Section 12 and Floor QCC Orders, as
defined in Options 8, Section 30(e)).30
29 See
supra 25 above.
trading activity of separate Lead Market
Maker and Market Maker member organizations are
aggregated in calculating the Monthly Market Maker
Cap if there is Common Ownership between the
member organizations. All dividend, merger, short
stock interest, reversal and conversion, jelly roll
and box spread strategy executions (as defined in
this Options 7, Section 4) are excluded from the
Monthly Market Maker Cap. Floor Lead Market
Makers or Floor Market Makers that (i) are on the
contra-side of an electronically-delivered and
executed Customer order, excluding responses to a
PIXL auction; and (ii) have reached the Monthly
Market Maker Cap are assessed: $0.05 per contract
Fee for Adding Liquidity in Penny Symbols; $0.18
per contract Fee for Removing Liquidity in Penny
Symbols; $0.18 per contract in Non-Penny Symbols;
and $0.18 per contract in a non-Complex electronic
auction, including the Quote Exhaust auction and,
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30 The
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The Exchange is not proposing to
amend the Monthly Market Maker Cap,
which affords Lead Market Makers and
Market Makers the ability to pay lower
Floor Options Transaction Charges as
compared to Non-Customers 31 once
they have capped for the month. To the
extent that Phlx’s increased fee for Lead
Market Makers and Maker Makers was
priced too high, the Exchange would
lose liquidity providers on its Trading
Floor. Competitive forces would serve to
constrain the Exchange’s ability to
overprice certain services on its market.
Monthly Firm Fee Cap
The Exchange’s proposal to increase
the Monthly Firm Fee Cap from a cap
of $200,000 to a monthly cap of
$250,000 is reasonable because, despite
the increase, the Monthly Firm Fee Cap
will continue to lower fees for Firms
that transact certain qualifying volume
on Phlx, thus enabling these Firms the
ability to lower costs while continuing
to incentivize Firms to direct order flow
to the Exchange to achieve the benefits
of reducing their fees. Further,
increasing the monthly firm cap to
$250,000 is a competitive response to a
similar change on NYSE Arca.32 The
Exchange believes that aligning its firm
cap with NYSE Arca’s firm cap will
allow it to compete for transactions on
its trading floor.
The Exchange’s proposal to increase
the Monthly Firm Fee Cap from a cap
of $200,000 to a monthly cap of
$250,000 is equitable and not unfairly
discriminatory as other market
participants benefit from an opportunity
to pay reduced fees on Phlx as do Firms.
Today, Customers are not assessed an
Options Transaction Charge in Multiply
Listed Penny or Non-Penny Symbols.33
Customer liquidity benefits all market
participants by providing more trading
opportunities. An increase in the
activity of these market participants in
turn facilitates tighter spreads, which
may cause an additional corresponding
increase in order flow from other market
participants. Today, Lead Market
for purposes of this fee, the opening process. A
Complex electronic auction includes, but is not
limited to, the Complex Order Live Auction
(‘‘COLA’’). Transactions which execute against an
order for which the Exchange broadcast an order
exposure alert in an electronic auction will be
assessed $0.18 per contract.
31 The term ‘‘Non-Customer’’ applies to
transactions for the accounts of Lead Market
Makers, Market Makers, Firms, Professionals,
Broker-Dealers and JBOs. See Options 7, Section
1(c).
32 NYSE Arca modified its Monthly Fee Cap in
November 2023 by raising the cap from $200,000
to $250,000. See Securities Exchange Act Release
No. 99021 (December 1, 2023), 88 FR 84030
(November 27, 2023 (SR–NYSEArca–2023–80).
33 See Options 7, Section 4.
PO 00000
Frm 00114
Fmt 4703
Sfmt 4703
Makers and Market Makers are subject
to a Monthly Market Maker Cap.34 With
respect to Broker-Dealers, today, the
Exchange waives the Floor Options
Transaction Charge for Broker-Dealers
executing facilitation orders pursuant to
Options 8, Section 30 when such
members would otherwise incur this
charge for trading in their own
proprietary account contra to a
Customer (‘‘BD-Customer Facilitation’’),
if the member’s BD-Customer
Facilitation average daily volume
(including both FLEX and non-FLEX
transactions) exceeds 10,000 contracts
per day in a given month.35 Finally,
today, Professional Floor Options
Transaction Charges are proposed to be
$0.00 per contract, similar to Customers
and more favorable than Firms.36
Additionally, the Exchange believes that
the proposal is equitable and not
unfairly discriminatory because
members and member organizations that
are JBOs 37 could be subject to the
34 See Options 7, Section 4. Lead Market Makers
and Market Makers are subject to a ‘‘Monthly
Market Maker Cap’’ of $500,000 for: (i) electronic
Option Transaction Charges, excluding surcharges
and excluding options overlying broad-based index
options symbols listed within Options 7, Section
5.A; and (ii) QCC Transaction Fees (as defined in
Exchange Options 3, Section 12 and Floor QCC
Orders, as defined in Options 8, Section 30(e)). The
trading activity of separate Lead Market Maker and
Market Maker member organizations is aggregated
in calculating the Monthly Market Maker Cap if
there is Common Ownership between the member
organizations. All dividend, merger, short stock
interest, reversal and conversion, jelly roll and box
spread strategy executions (as defined in this
Options 7, Section 4) is excluded from the Monthly
Market Maker Cap. Lead Market Makers or Market
Makers that (i) are on the contra-side of an
electronically-delivered and executed Customer
order, excluding responses to a PIXL auction; and
(ii) have reached the Monthly Market Maker Cap
will be assessed fees as follows: $0.05 per contract
Fee for Adding Liquidity in Penny Symbols; $0.18
per contract Fee for Removing Liquidity in Penny
Symbols; $0.18 per contract in Non-Penny Symbols;
and $0.18 per contract in a non-Complex electronic
auction, including the Quote Exhaust auction and,
for purposes of this fee, the opening process. A
Complex electronic auction includes, but is not
limited to, the Complex Order Live Auction
(‘‘COLA’’). Transactions which execute against an
order for which the Exchange broadcast an order
exposure alert in an electronic auction will be
subject to this fee.
35 See Options 7, Section 4.
36 See Options 7, Section 4. Professional Floor
Options Transaction Charges for Penny and NonPenny Symbols are $0.05 per contract whereas Firm
Floor Options Transaction Charges for Penny and
Non-Penny Symbols are $0.25 per contract. The
Exchange is proposing to reduce the Floor Options
Transaction Charges to $0.00 per contract.
37 The term ‘‘Joint Back Office’’ or ‘‘JBO’’ applies
to any transaction that is identified by a member or
member organization for clearing in the Firm range
at OCC and is identified with an origin code as a
JBO. A JBO is priced the same as a Broker-Dealer.
A JBO participant is a member, member
organization or non-member organization that
maintains a JBO arrangement with a clearing
broker-dealer (‘‘JBO Broker’’) subject to the
requirements of Regulation T Section 220.7 of the
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Federal Register / Vol. 89, No. 58 / Monday, March 25, 2024 / Notices
Monthly Firm Fee Cap, as are other
members, as long as the JBO trades for
their own proprietary account.
Additionally, the proposed change
would encourage JBOs that are not
members or member organizations to
seek to become members or member
organizations to further reduce their
transaction fees. Finally, other market
participants may interact with the order
flow submitted by Firms to Phlx to
reach the Monthly Firm Fee Cap.
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 venue
in which to submit orders. 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.
khammond on DSKJM1Z7X2PROD with NOTICES
Intra-Market Competition
Floor Options Transaction Charges
The Exchange’s proposal to decrease
the Professional Floor Options
Transaction Charges in Multiply Listed
Penny and Non-Penny Symbols in
Penny and Non-Penny Symbols from
$0.05 to $0.00 per contract does not
impose an undue burden on
competition. Today, Customers are not
assessed an Options Transaction Charge
in Multiply Listed Penny or Non-Penny
Symbols because Customer order flow is
unique. Customer liquidity benefits all
market participants by providing more
trading opportunities, which attracts
Lead Marker Makers and Market
Makers. An increase in the activity of
Federal Reserve System as further discussed at
Options 6D, Section 1. See Options 7, Section 1(c).
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18:08 Mar 22, 2024
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these market participants in turn
facilitates tighter spreads, which may
cause an additional corresponding
increase in order flow from other market
participants. The Exchange believes that
lowering the Professional Floor Options
Transaction Charges is similarly
beneficial as the lower fees may cause
market participants to select Phlx’s
Trading Floor as a venue to send
Professional order flow, which benefits
all market participants by attracting
valuable liquidity to the market and
thereby enhancing the trading quality
and efficiency for all market
participants. Today, Lead Market
Makers and Market Makers are assessed
the highest Penny and Non-Penny Floor
Options Transaction Charges. Customers
are not assessed a Penny or Non-Penny
Options Transaction Charge. With this
proposal, Professionals would continue
to be assessed a lower Floor Options
Transaction Charges in Multiply Listed
Penny and Non-Penny Symbols as
compared to Lead Market Makers and
Market Makers. Lead Market Makers
and Market Makers have a time and
place advantage on the Trading Floor
with respect to orders, unlike other
market participants. A Professional,
Broker-Dealer or a Firm would
necessarily require a Floor Broker to
represent their trading interest on the
Trading Floor as compared to a Lead
Market Maker or Market Maker that
could directly transact such orders on
the Trading Floor. Further, the
Exchange believes that to attract orders
from Professionals, Broker-Dealers, or
Firms, via a Floor Broker, the rates must
be competitive with rates at other
trading floors. With respect to Firms, the
Exchange notes that Firms are subject to
a Monthly Firm Fee Cap. Firm Floor
Option Transaction Charges along with
Qualified Contingent Cross Transaction
Fees, in the aggregate, for one billing
month may not exceed the Monthly
Firm Fee Cap per member organization
when such members are trading in their
own proprietary account.38 Finally,
with respect to Broker-Dealers, today
the Exchange waives the Floor Options
Transaction Charge for Broker-Dealers
executing facilitation orders pursuant to
Options 8, Section 30 when such
members would otherwise incur this
charge for trading in their own
proprietary account contra to a
Customer (‘‘BD-Customer Facilitation’’),
if the member’s BD-Customer
Facilitation average daily volume
(including both FLEX and non-FLEX
transactions) exceeds 10,000 contracts
per day in a given month.39 The
38 See
39 See
PO 00000
Options 7, Section 4.
Options 7, Section 4.
Frm 00115
Fmt 4703
Sfmt 4703
20743
Exchange notes that both Firms and
Broker-Dealers have the ability to
reduce their Options Transaction
Charges as compared to Professionals.
Further, the Exchange believes it does
not impose an undue burden on
competition to assess Professionals no
Floor Options Transaction Charge the
same as a Customer and more favorable
than Firms, and Broker-Dealers, Lead
Market Makers, and Market Makers. The
potential increased volume would
create better trading opportunities that
benefit all market participants.
Specifically, greater volume and
liquidity from increased order flow
could create more trading opportunities
and tighter spreads. Assessing lower
Floor Options Transaction Charges for
Professional Customers compared to
Lead Market Makers, Market Makers,
Firms, and Broker-Dealers is not novel
as BOX currently assesses lower fees for
Professional Customers as compared to
Broker Dealers and Market Makers.40
Monthly Firm Fee Cap
The Exchange’s proposal to increase
the Monthly Firm Fee Cap from a cap
of $200,000 to a monthly cap of
$250,000 does not impose an undue
burden on competition because other
market participants benefit from an
opportunity to pay reduced fees on Phlx
as do Firms. Today, Customers are not
assessed an Options Transaction Charge
in Multiply Listed Penny or Non-Penny
Symbols.41 Customer liquidity benefits
all market participants by providing
more trading opportunities. An increase
in the activity of these market
participants in turn facilitates tighter
spreads, which may cause an additional
corresponding increase in order flow
from other market participants. Today,
Lead Market Makers and Market Makers
are subject to a Monthly Market Maker
Cap.42 With respect to Broker-Dealers,
40 See
supra 25 above.
Options 7, Section 4.
42 See Options 7, Section 4. Lead Market Makers
and Market Makers are subject to a ‘‘Monthly
Market Maker Cap’’ of $500,000 for: (i) electronic
Option Transaction Charges, excluding surcharges
and excluding options overlying broad-based index
options symbols listed within Options 7, Section
5.A; and (ii) QCC Transaction Fees (as defined in
Exchange Options 3, Section 12 and Floor QCC
Orders, as defined in Options 8, Section 30(e)). The
trading activity of separate Lead Market Maker and
Market Maker member organizations is aggregated
in calculating the Monthly Market Maker Cap if
there is Common Ownership between the member
organizations. All dividend, merger, short stock
interest, reversal and conversion, jelly roll and box
spread strategy executions (as defined in this
Options 7, Section 4) is excluded from the Monthly
Market Maker Cap. Lead Market Makers or Market
Makers that (i) are on the contra-side of an
electronically-delivered and executed Customer
order, excluding responses to a PIXL auction; and
41 See
Continued
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Federal Register / Vol. 89, No. 58 / Monday, March 25, 2024 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES
today, the Exchange waives the Floor
Options Transaction Charge for BrokerDealers executing facilitation orders
pursuant to Options 8, Section 30 when
such members would otherwise incur
this charge for trading in their own
proprietary account contra to a
Customer (‘‘BD-Customer Facilitation’’),
if the member’s BD-Customer
Facilitation average daily volume
(including both FLEX and non-FLEX
transactions) exceeds 10,000 contracts
per day in a given month.43 Finally,
today, Professional Floor Options
Transaction Charges are proposed to be
$0.00 per contract, similar to Customers
and more favorable than Firms.44
Additionally, the Exchange believes that
the proposal does not impose an undue
burden on competition because
members and member organizations that
are JBOs 45 could be subject to the
Monthly Firm Fee Cap, as are other
members, as long as the JBO trades for
their own proprietary account.
Additionally, the proposed change
would encourage JBOs that are not
members or member organizations to
seek to become members or member
organizations to further reduce their
transaction fees. Finally, other market
participants may interact with the order
flow submitted by Firms to Phlx to
reach the Monthly Firm Fee Cap.
(ii) have reached the Monthly Market Maker Cap
will be assessed fees as follows: $0.05 per contract
Fee for Adding Liquidity in Penny Symbols; $0.18
per contract Fee for Removing Liquidity in Penny
Symbols; $0.18 per contract in Non-Penny Symbols;
and $0.18 per contract in a non-Complex electronic
auction, including the Quote Exhaust auction and,
for purposes of this fee, the opening process. A
Complex electronic auction includes, but is not
limited to, the Complex Order Live Auction
(‘‘COLA’’). Transactions which execute against an
order for which the Exchange broadcast an order
exposure alert in an electronic auction will be
subject to this fee.
43 See Options 7, Section 4.
44 See Options 7, Section 4. Professional Floor
Options Transaction Charges for Penny and NonPenny Symbols are $0.05 per contract whereas Firm
Floor Options Transaction Charges for Penny and
Non-Penny Symbols are $0.25 per contract. The
Exchange is proposing to reduce the Floor Options
Transaction Charges to $0.00 per contract.
45 The term ‘‘Joint Back Office’’ or ‘‘JBO’’ applies
to any transaction that is identified by a member or
member organization for clearing in the Firm range
at OCC and is identified with an origin code as a
JBO. A JBO is priced the same as a Broker-Dealer.
A JBO participant is a member, member
organization or non-member organization that
maintains a JBO arrangement with a clearing
broker-dealer (‘‘JBO Broker’’) subject to the
requirements of Regulation T Section 220.7 of the
Federal Reserve System as further discussed at
Options 6D, Section 1. See Options 7, Section 1(c).
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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.46
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–2024–14 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–2024–14. 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–2024–14 and should be
submitted on or before April 15, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.47
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–06175 Filed 3–22–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99773; File No. SR–
NYSENAT–2024–10]
Self-Regulatory Organizations; NYSE
National, Inc.; Notice of Filing of
Proposed Change To Amend Its
Schedule of Fees and Rebates
March 19, 2024.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 14,
2024, NYSE National, Inc. (‘‘NYSE
National’’ or the ‘‘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 its
Schedule of Fees and Rebates (‘‘Fee
Schedule’’) to (1) include a rebate for
non-tiered orders removing liquidity in
47 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
46 15
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
Frm 00116
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E:\FR\FM\25MRN1.SGM
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]]>Agencies
[Federal Register Volume 89, Number 58 (Monday, March 25, 2024)]
[Notices]
[Pages 20739-20744]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-06175]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99770; File No. SR-PHLX-2024-14]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Options 7,
Section 4
March 19, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on March 15, 2024, 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.\3\
---------------------------------------------------------------------------
\3\ The Exchange initially filed the proposed pricing change on
February 29, 2024 to be operative on March 1, 2024 (SR-Phlx-2024-
07). On March 12, 2024, the Exchange withdrew SR-Phlx-2024-07 and
submitted SR-Phlx-2024-11. On March 15, 2024, the Exchange withdrew
SR-Phlx-2024-11 and submitted this filing.
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/phlx/rules, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Phlx proposes to amend its Pricing Schedule within Options 7,
Section 4, ``Multiply Listed Options Fees (Includes options overlying
equities, ETFs, ETNs and indexes which are Multiply Listed) (Excludes
SPY and broad-based index options symbols listed within Options 7,
Section 5.A).'' Specifically, Phlx proposes to: (1) lower the
Professional \4\ Floor \5\ Options Transaction Charges \6\ in Multiply
Listed Penny and Non-Penny Symbols; \7\ (2) increase the Lead Market
Maker \8\ and Market Maker \9\ Floor Options Transaction Charges in
Multiply Listed Penny and Non-Penny Symbols; and (3) increase the
Monthly Firm Fee Cap. Each change will be described below.
---------------------------------------------------------------------------
\4\ The term ``Professional'' applies to transactions for the
accounts of Professionals, as defined in Options 1, Section 1(b)(45)
means any person or entity that (i) is not a broker or dealer in
securities, and (ii) places more than 390 orders in listed options
per day on average during a calendar month for its own beneficial
account(s). See Phlx's Pricing Schedule at Options 7, Section 1(c).
\5\ The term ``floor transaction'' is a transaction that is
effected in open outcry on the Exchange's Trading Floor. See Phlx's
Pricing Schedule at Options 7, Section 1(c).
\6\ Options Transaction Charges are per contract. Floor
transaction fees apply to any ``as of'' or ``reversal'' adjustments
for manually processed trades originally submitted electronically or
through FBMS. See Phlx's Pricing Schedule at Options 7, Section 4,
footnote 8.
\7\ For consistency, the Exchange proposes to capitalize the
term ``non-Penny'' in the table in Options 7, Section 4 of the
Pricing Schedule.
\8\ The term ``Floor Lead Market Maker'' is a member who is
registered as an options Lead Market Maker pursuant to Options 2,
Section 12(a) and has a physical presence on the Exchange's Trading
Floor. See Phlx's Pricing Schedule at Options 7, Section 1(c).
\9\ The term ``Floor Market Maker'' is a Market Maker who is
neither an SQT or an RSQT. A Floor Market Maker may provide a quote
in open outcry. See Phlx's Pricing Schedule at Options 7, Section
1(c).
---------------------------------------------------------------------------
Floor Options Transaction Charges
Today, the Exchange assesses Options Transaction Charges in
Multiply Listed options, including options overlying equities, ETFs,
ETNs and indexes and excluding options in SPY \10\ and broad-
[[Page 20740]]
based index options symbols listed within Options 7, Section 5.A. The
Exchange currently assesses the following Floor Options Transaction
Charges in Multiply Listed Penny and Non-Penny Symbols: $0.05 per
contract for a Professional, $0.35 per contract for a Lead Market Maker
and Market Maker, and $0.25 per contract for a Broker-Dealer \11\ and
Firm.\12\ Customers \13\ are not assessed an Options Transaction Charge
in Multiply Listed Penny or Non-Penny Symbols.
---------------------------------------------------------------------------
\10\ Transactions in SPY originating on the Exchange floor are
subject to the Multiply Listed Options Fees (see Multiply Listed
Options Fees in Options 7, Section 4). However, if one side of the
transaction originates on the Exchange floor and any other side of
the trade was the result of an electronically submitted order or a
quote, then these fees will apply to the transactions which
originated on the Exchange floor and contracts that are executed
electronically on all sides of the transaction. The one side of the
transaction which originates on the Exchange floor will count toward
the volume which qualifies a participant for the Simple Order Rebate
for Adding Liquidity for Lead Market Makers and Market Makers in
SPY. See Options 7, Section 3, Part C.
\11\ The term ``Broker-Dealer'' applies to any transaction which
is not subject to any of the other transaction fees applicable
within a particular category. See Phlx's Pricing Schedule at Options
7, Section 1(c).
\12\ The term ``Firm'' applies to any transaction that is
identified by a member or member organization for clearing in the
Firm range at The Options Clearing Corporation (``OCC''). See Phlx's
Pricing Schedule at Options 7, Section 1(c).
\13\ The term ``Customer'' applies to any transaction that is
identified by a member or member organization for clearing in the
Customer range at OCC which is not for the account of a broker or
dealer or for the account of a ``Professional'' (as that term is
defined in Options 1, Section 1(b)(45)). See Phlx's Pricing Schedule
at Options 7, Section 1(c).
---------------------------------------------------------------------------
At this time, the Exchange proposes to decrease the Professional
Floor Options Transaction Charges in Penny and Non-Penny Symbols from
$0.05 to $0.00 per contract. The Exchange believes the decreased
Professional Options Transaction Charges will attract a greater amount
of Professional orders to Phlx's Trading Floor. The Exchange notes that
NYSE Arca, Inc. (``NYSE Arca'') also assesses no Professional Customer
fee for manual executions.\14\
---------------------------------------------------------------------------
\14\ NYSE Arca modified its fees for Professional Customer
manual executions from a $0.25 per contract fee for such executions,
which fee had been waived for the period August 1, 2022 to December
31, 2022, to $0.00 per contract. NYSE Arca stated that the proposed
change was intended to continue to attract manually executed
Professional Customer orders to the Exchange, and the Exchange
believed that all market participants stood to benefit from an
increase in such volume, which would promote market depth,
facilitate tighter spreads and enhance price discovery, and may lead
to a corresponding increase in order flow from other market
participants as well. See Securities Exchange Act Release No. 96763
(January 27, 2023), 88 FR 7119 (February 2, 2023) (S (SR-NYSEARCA-
2023-09).
---------------------------------------------------------------------------
At this time, the Exchange proposes to increase the Lead Market
Maker and Market Maker Floor Options Transaction Charges in Penny and
Non-Penny Symbols from $0.35 to $0.50 per contract. While the Exchange
is increasing the Lead Market Maker and Market Maker Floor Options
Transaction Charge by $0.15 per contract (increase from $0.35 to $0.50
per contract), the Exchange believes that its pricing will continue to
attract order flow to the Exchange. Today, Lead Market Makers and
Market Makers are subject to a ``Monthly Market Maker Cap'' of $500,000
for: (i) electronic Option Transaction Charges, excluding surcharges
and excluding options overlying broad-based index options symbols
listed within Options 7, Section 5.A; and (ii) Qualified Contingent
Cross or ``QCC'' Transaction Fees (as defined in Exchange Options 3,
Section 12 and Floor QCC Orders, as defined in Options 8, Section
30(e)).\15\ The Exchange proposes this increased fee for business
reasons and to encourage competition on its trading floor. The Exchange
believes Lead Market Makers and Market Makers will continue to quote
aggressively, adding liquidity to the trading floor, so that they may
participate in transactions as they do today. Lead Market Makers and
Market Makers have a time and place advantage in the trading crowd
which the Exchange believes increases competition on its trading floor
to the benefit of other floor participants.
---------------------------------------------------------------------------
\15\ The trading activity of separate Lead Market Maker and
Market Maker member organizations are aggregated in calculating the
Monthly Market Maker Cap if there is Common Ownership between the
member organizations. All dividend, merger, short stock interest,
reversal and conversion, jelly roll and box spread strategy
executions (as defined in this Options 7, Section 4) are excluded
from the Monthly Market Maker Cap. Floor Lead Market Makers or Floor
Market Makers that (i) are on the contra-side of an electronically-
delivered and executed Customer order, excluding responses to a PIXL
auction; and (ii) have reached the Monthly Market Maker Cap are
assessed: $0.05 per contract Fee for Adding Liquidity in Penny
Symbols; $0.18 per contract Fee for Removing Liquidity in Penny
Symbols; $0.18 per contract in Non-Penny Symbols; and $0.18 per
contract in a non-Complex electronic auction, including the Quote
Exhaust auction and, for purposes of this fee, the opening process.
A Complex electronic auction includes, but is not limited to, the
Complex Order Live Auction (``COLA''). Transactions which execute
against an order for which the Exchange broadcast an order exposure
alert in an electronic auction will be assessed $0.18 per contract.
---------------------------------------------------------------------------
Monthly Firm Fee Cap
Today, Firms are subject to a $200,000 ``Monthly Firm Fee Cap.''
Today, Firm Floor Option Transaction Charges and QCC Transaction Fees,
in the aggregate, for one billing month that exceed the Monthly Firm
Fee Cap per member or member organization, when such members or member
organizations are trading in their own proprietary account, are subject
to a reduced transaction fee of $0.02 per capped contract unless there
is no fee or the fee is waived. Today, all dividend, merger, short
stock interest, reversal and conversion, jelly roll, and box spread
strategy executions (as defined in this Options 7, Section 4) are
excluded from the Monthly Firm Fee Cap. Transactions in broad-based
index options symbols listed within Options 7, Section 5.A. are
excluded from the Monthly Firm Fee Cap and QCC Transaction Fees are
included in the calculation of the Monthly Firm Fee Cap.\16\
---------------------------------------------------------------------------
\16\ For purposes of the Monthly Firm Fee Cap, members and
member organizations must notify the Exchange in writing of all
accounts in which the member or member organization is not trading
in its own proprietary account. The Exchange will not make
adjustments to billing invoices where transactions are commingled in
accounts which are not subject to the Monthly Firm Fee Cap. See
Options 7, Section 4.
---------------------------------------------------------------------------
At this time, the Exchange proposes to increase the Monthly Firm
Fee Cap from a cap of $200,000 to a monthly cap of $250,000 as a
competitive response to a similar change on NYSE Arca.\17\ The Exchange
believes that aligning its firm cap with NYSE Arca's firm cap will
allow it to compete for transactions on its trading floor. The Exchange
believes that increasing the Monthly Firm Fee Cap will continue to
lower fees for Firms that transact certain qualifying volume on Phlx,
thus enabling these Firms the ability to lower costs while continuing
to incentivize Firms to transact volume on the Exchange.
---------------------------------------------------------------------------
\17\ NYSE Arca modified its Monthly Fee Cap in November 2023 by
raising the cap from $200,000 to $250,000. See Securities Exchange
Act Release No. 99021 (December 1, 2023), 88 FR 84030 (November 27,
2023 (SR-NYSEArca-2023-80).
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\18\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\19\ 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.
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78f(b).
\19\ 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
[[Page 20741]]
broader forms that are most important to investors and listed
companies.'' \20\
---------------------------------------------------------------------------
\20\ 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
\21\ (``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.\22\ 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.'' \23\
---------------------------------------------------------------------------
\21\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\22\ See NetCoalition, at 534--535.
\23\ 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'. . . .'' \24\ 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.
---------------------------------------------------------------------------
\24\ 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)).
---------------------------------------------------------------------------
Options Transaction Charges
The Exchange's proposal to decrease the Professional Floor Options
Transaction Charges in Multiply Listed Penny and Non-Penny Symbols in
Penny and Non-Penny Symbols from $0.05 to $0.00 per contract is
reasonable because the decreased fee should attract a greater amount of
Professional orders to Phlx's Trading Floor. Today, Phlx assesses
Professionals a lower Floor Options Transaction Charge as compared to
Lead Market Makers, Broker-Dealers and Firms with respect to Floor
Options Transaction Charges. Similarly, today, BOX Exchange LLC
(``BOX'') assesses Professionals lower manual transaction fees as
compared to Broker Dealers and Market Makers.\25\ By decreasing its
Professional Floor Options Transaction Charge, the Exchange believes it
will be able to compete more effectively for options order flow because
of the lower Professional fee. Also, the Exchange believes the
decreased Professional Options Transaction Charges will attract a
greater number of Professional orders to Phlx's Trading Floor. The
Exchange notes that NYSE Arca, Inc. (``NYSE Arca'') also assesses no
Professional Customer fee for manual executions.\26\
---------------------------------------------------------------------------
\25\ BOX assesses Professional Customers a $0.10 per contract
manual transaction fee in Penny and Non-Penny Symbols. A Broker
Dealer is assessed a $0.025 per contract manual transaction fee in
Penny and Non-Penny Symbols and a Market Maker is assessed a $0.35
per contract manual transaction fee in Penny and Non-Penny Symbols.
BOX does not assess Public Customers or Broker Dealers facilitating
a Public Customer a Penny and Non-Penny Interval Classes manual
transactions fee. See BOX's Fee Schedule at Section V.
\26\ NYSE Arca modified its fees for Professional Customer
manual executions from a $0.25 per contract fee for such executions,
which fee had been waived for the period August 1, 2022 to December
31, 2022, to $0.00 per contract. NYSE Arca stated that the proposed
change is intended to continue to attract manually executed
Professional Customer orders to the Exchange, and the Exchange
believes that all market participants stand to benefit from an
increase in such volume, which would promote market depth,
facilitate tighter spreads and enhance price discovery, and may lead
to a corresponding increase in order flow from other market
participants as well. See Securities Exchange Act Release No. 96763
(January 27, 2023), 88 FR 7119 (February 2, 2023) (S (SR-NYSEARCA-
2023-09).
---------------------------------------------------------------------------
The Exchange's proposal to decrease the Professional Floor Options
Transaction Charges in Multiply Listed Penny and Non-Penny Symbols in
Penny and Non-Penny Symbols from $0.05 to $0.00 per contract is
equitable and not unfairly discriminatory. Today, Customers are not
assessed an Options Transaction Charge in Multiply Listed Penny or Non-
Penny Symbols because Customer order flow is unique. Customer liquidity
benefits all market participants by providing more trading
opportunities, which attracts Lead Marker Makers and 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.
The Exchange believes that lowering the Professional Floor Options
Transaction Charges is similarly beneficial as the lower fees may cause
market participants to select Phlx's Trading Floor as a venue to send
Professional order flow, which benefits all market participants by
attracting valuable liquidity to the market and thereby enhancing the
trading quality and efficiency for all market participants. Today, Lead
Market Makers and Market Makers are assessed the highest Penny and Non-
Penny Floor Options Transaction Charges. Customers are not assessed a
Penny or Non-Penny Options Transaction Charge. With this proposal,
Professionals would continue to be assessed a lower Floor Options
Transaction Charges in Multiply Listed Penny and Non-Penny Symbols as
compared to Lead Market Makers and Market Makers. Lead Market Makers
and Market Makers have a time and place advantage on the Trading Floor
with respect to orders, unlike other market participants. A
Professional, Broker-Dealer or a Firm would necessarily require a Floor
Broker to represent their trading interest on the Trading Floor as
compared to a Lead Market Maker or Market Maker that could directly
transact such orders on the Trading Floor. Further, the Exchange
believes that to attract orders from Professionals, Broker-Dealers, or
Firms, via a Floor Broker, the rates must be competitive with rates at
other trading floors. With respect to Firms, the Exchange notes that
Firms are subject to a Monthly Firm Fee Cap. Firm Floor Option
Transaction Charges along with Qualified Contingent Cross Transaction
Fees, in the aggregate, for one billing month may not exceed the
Monthly Firm Fee Cap per member organization when such members are
trading in their own proprietary account.\27\ Finally, with respect to
Broker-Dealers, today the Exchange waives the Floor Options Transaction
Charge for Broker-Dealers executing facilitation orders pursuant to
Options 8, Section 30 when such members would otherwise incur this
charge for trading in their own proprietary account contra to a
Customer (``BD-Customer Facilitation''), if the member's BD-Customer
Facilitation average daily volume (including both FLEX and non-FLEX
transactions) exceeds 10,000 contracts per day in a given month.\28\
The Exchange notes that both Firms and Broker-Dealers have the ability
to reduce their Options Transaction Charges as compared to
Professionals.
---------------------------------------------------------------------------
\27\ See Options 7, Section 4.
\28\ See Options 7, Section 4.
---------------------------------------------------------------------------
The Exchange believes it is equitable and not unfairly
discriminatory to assess Professionals no Floor Options Transaction
Charge the same as a Customer and more favorable than Firms, and
Broker-Dealers, Lead Market Makers, and Market Makers. The potential
increased volume would create better trading opportunities that benefit
all market participants. Specifically, greater volume and liquidity
from increased order flow could create more trading opportunities and
tighter spreads. Assessing lower Floor Options Transaction Charges for
Professional Customers compared to
[[Page 20742]]
Lead Market Makers, Market Makers, Firms, and Broker-Dealers is not
novel as BOX currently assesses lower fees for Professional Customers
as compared to Broker Dealers and Market Makers.\29\
---------------------------------------------------------------------------
\29\ See supra 25 above.
---------------------------------------------------------------------------
The Exchange's proposal to increase the Lead Market Maker and the
Market Maker Floor Options Transaction Charges in Multiply Listed Penny
and Non-Penny Symbols from $0.35 to $0.50 per contract is reasonable,
equitable and not unfairly discriminatory because Lead Market Makers
and Market Makers benefit from having access to interact with orders
that are made available in open outcry on the Trading Floor. Lead
Market Makers and Market Makers have a time and place advantage on the
Trading Floor with respect to orders, unlike other market participants.
Further, Lead Market Makers and Market Makers have the benefit of
trading on any Trading Floor or in any electronic venue if they so
choose. The Exchange believes that it has set its Floor Options
Transaction Charges for Lead Market Makers and Market Makers in such a
way as to balance the need to attract additional orders to the trading
floor while continuing to attract Lead Market Makers and Market Makers
to its Trading Floor. The Exchange proposes this increased fee for
business reasons and to encourage competition on its trading floor. The
Exchange believes Lead Market Makers and Market Makers will continue to
quote aggressively, adding liquidity to the trading floor, so that they
may participate in transactions as they do today. Today, Lead Market
Makers and Market Makers are subject to a ``Monthly Market Maker Cap''
of $500,000 for: (i) electronic Option Transaction Charges, excluding
surcharges and excluding options overlying broad-based index options
symbols listed within Options 7, Section 5.A; and (ii) QCC Transaction
Fees (as defined in Exchange Options 3, Section 12 and Floor QCC
Orders, as defined in Options 8, Section 30(e)).\30\ The Exchange is
not proposing to amend the Monthly Market Maker Cap, which affords Lead
Market Makers and Market Makers the ability to pay lower Floor Options
Transaction Charges as compared to Non-Customers \31\ once they have
capped for the month. To the extent that Phlx's increased fee for Lead
Market Makers and Maker Makers was priced too high, the Exchange would
lose liquidity providers on its Trading Floor. Competitive forces would
serve to constrain the Exchange's ability to overprice certain services
on its market.
---------------------------------------------------------------------------
\30\ The trading activity of separate Lead Market Maker and
Market Maker member organizations are aggregated in calculating the
Monthly Market Maker Cap if there is Common Ownership between the
member organizations. All dividend, merger, short stock interest,
reversal and conversion, jelly roll and box spread strategy
executions (as defined in this Options 7, Section 4) are excluded
from the Monthly Market Maker Cap. Floor Lead Market Makers or Floor
Market Makers that (i) are on the contra-side of an electronically-
delivered and executed Customer order, excluding responses to a PIXL
auction; and (ii) have reached the Monthly Market Maker Cap are
assessed: $0.05 per contract Fee for Adding Liquidity in Penny
Symbols; $0.18 per contract Fee for Removing Liquidity in Penny
Symbols; $0.18 per contract in Non-Penny Symbols; and $0.18 per
contract in a non-Complex electronic auction, including the Quote
Exhaust auction and, for purposes of this fee, the opening process.
A Complex electronic auction includes, but is not limited to, the
Complex Order Live Auction (``COLA''). Transactions which execute
against an order for which the Exchange broadcast an order exposure
alert in an electronic auction will be assessed $0.18 per contract.
\31\ The term ``Non-Customer'' applies to transactions for the
accounts of Lead Market Makers, Market Makers, Firms, Professionals,
Broker-Dealers and JBOs. See Options 7, Section 1(c).
---------------------------------------------------------------------------
Monthly Firm Fee Cap
The Exchange's proposal to increase the Monthly Firm Fee Cap from a
cap of $200,000 to a monthly cap of $250,000 is reasonable because,
despite the increase, the Monthly Firm Fee Cap will continue to lower
fees for Firms that transact certain qualifying volume on Phlx, thus
enabling these Firms the ability to lower costs while continuing to
incentivize Firms to direct order flow to the Exchange to achieve the
benefits of reducing their fees. Further, increasing the monthly firm
cap to $250,000 is a competitive response to a similar change on NYSE
Arca.\32\ The Exchange believes that aligning its firm cap with NYSE
Arca's firm cap will allow it to compete for transactions on its
trading floor.
---------------------------------------------------------------------------
\32\ NYSE Arca modified its Monthly Fee Cap in November 2023 by
raising the cap from $200,000 to $250,000. See Securities Exchange
Act Release No. 99021 (December 1, 2023), 88 FR 84030 (November 27,
2023 (SR-NYSEArca-2023-80).
---------------------------------------------------------------------------
The Exchange's proposal to increase the Monthly Firm Fee Cap from a
cap of $200,000 to a monthly cap of $250,000 is equitable and not
unfairly discriminatory as other market participants benefit from an
opportunity to pay reduced fees on Phlx as do Firms. Today, Customers
are not assessed an Options Transaction Charge in Multiply Listed Penny
or Non-Penny Symbols.\33\ Customer liquidity benefits all market
participants by providing more trading opportunities. An increase in
the activity of these market participants in turn facilitates tighter
spreads, which may cause an additional corresponding increase in order
flow from other market participants. Today, Lead Market Makers and
Market Makers are subject to a Monthly Market Maker Cap.\34\ With
respect to Broker-Dealers, today, the Exchange waives the Floor Options
Transaction Charge for Broker-Dealers executing facilitation orders
pursuant to Options 8, Section 30 when such members would otherwise
incur this charge for trading in their own proprietary account contra
to a Customer (``BD-Customer Facilitation''), if the member's BD-
Customer Facilitation average daily volume (including both FLEX and
non-FLEX transactions) exceeds 10,000 contracts per day in a given
month.\35\ Finally, today, Professional Floor Options Transaction
Charges are proposed to be $0.00 per contract, similar to Customers and
more favorable than Firms.\36\ Additionally, the Exchange believes that
the proposal is equitable and not unfairly discriminatory because
members and member organizations that are JBOs \37\ could be subject to
the
[[Page 20743]]
Monthly Firm Fee Cap, as are other members, as long as the JBO trades
for their own proprietary account. Additionally, the proposed change
would encourage JBOs that are not members or member organizations to
seek to become members or member organizations to further reduce their
transaction fees. Finally, other market participants may interact with
the order flow submitted by Firms to Phlx to reach the Monthly Firm Fee
Cap.
---------------------------------------------------------------------------
\33\ See Options 7, Section 4.
\34\ See Options 7, Section 4. Lead Market Makers and Market
Makers are subject to a ``Monthly Market Maker Cap'' of $500,000
for: (i) electronic Option Transaction Charges, excluding surcharges
and excluding options overlying broad-based index options symbols
listed within Options 7, Section 5.A; and (ii) QCC Transaction Fees
(as defined in Exchange Options 3, Section 12 and Floor QCC Orders,
as defined in Options 8, Section 30(e)). The trading activity of
separate Lead Market Maker and Market Maker member organizations is
aggregated in calculating the Monthly Market Maker Cap if there is
Common Ownership between the member organizations. All dividend,
merger, short stock interest, reversal and conversion, jelly roll
and box spread strategy executions (as defined in this Options 7,
Section 4) is excluded from the Monthly Market Maker Cap. Lead
Market Makers or Market Makers that (i) are on the contra-side of an
electronically-delivered and executed Customer order, excluding
responses to a PIXL auction; and (ii) have reached the Monthly
Market Maker Cap will be assessed fees as follows: $0.05 per
contract Fee for Adding Liquidity in Penny Symbols; $0.18 per
contract Fee for Removing Liquidity in Penny Symbols; $0.18 per
contract in Non-Penny Symbols; and $0.18 per contract in a non-
Complex electronic auction, including the Quote Exhaust auction and,
for purposes of this fee, the opening process. A Complex electronic
auction includes, but is not limited to, the Complex Order Live
Auction (``COLA''). Transactions which execute against an order for
which the Exchange broadcast an order exposure alert in an
electronic auction will be subject to this fee.
\35\ See Options 7, Section 4.
\36\ See Options 7, Section 4. Professional Floor Options
Transaction Charges for Penny and Non-Penny Symbols are $0.05 per
contract whereas Firm Floor Options Transaction Charges for Penny
and Non-Penny Symbols are $0.25 per contract. The Exchange is
proposing to reduce the Floor Options Transaction Charges to $0.00
per contract.
\37\ The term ``Joint Back Office'' or ``JBO'' applies to any
transaction that is identified by a member or member organization
for clearing in the Firm range at OCC and is identified with an
origin code as a JBO. A JBO is priced the same as a Broker-Dealer. A
JBO participant is a member, member organization or non-member
organization that maintains a JBO arrangement with a clearing
broker-dealer (``JBO Broker'') subject to the requirements of
Regulation T Section 220.7 of the Federal Reserve System as further
discussed at Options 6D, Section 1. See Options 7, Section 1(c).
---------------------------------------------------------------------------
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 venue in which to submit orders. 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
Floor Options Transaction Charges
The Exchange's proposal to decrease the Professional Floor Options
Transaction Charges in Multiply Listed Penny and Non-Penny Symbols in
Penny and Non-Penny Symbols from $0.05 to $0.00 per contract does not
impose an undue burden on competition. Today, Customers are not
assessed an Options Transaction Charge in Multiply Listed Penny or Non-
Penny Symbols because Customer order flow is unique. Customer liquidity
benefits all market participants by providing more trading
opportunities, which attracts Lead Marker Makers and 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.
The Exchange believes that lowering the Professional Floor Options
Transaction Charges is similarly beneficial as the lower fees may cause
market participants to select Phlx's Trading Floor as a venue to send
Professional order flow, which benefits all market participants by
attracting valuable liquidity to the market and thereby enhancing the
trading quality and efficiency for all market participants. Today, Lead
Market Makers and Market Makers are assessed the highest Penny and Non-
Penny Floor Options Transaction Charges. Customers are not assessed a
Penny or Non-Penny Options Transaction Charge. With this proposal,
Professionals would continue to be assessed a lower Floor Options
Transaction Charges in Multiply Listed Penny and Non-Penny Symbols as
compared to Lead Market Makers and Market Makers. Lead Market Makers
and Market Makers have a time and place advantage on the Trading Floor
with respect to orders, unlike other market participants. A
Professional, Broker-Dealer or a Firm would necessarily require a Floor
Broker to represent their trading interest on the Trading Floor as
compared to a Lead Market Maker or Market Maker that could directly
transact such orders on the Trading Floor. Further, the Exchange
believes that to attract orders from Professionals, Broker-Dealers, or
Firms, via a Floor Broker, the rates must be competitive with rates at
other trading floors. With respect to Firms, the Exchange notes that
Firms are subject to a Monthly Firm Fee Cap. Firm Floor Option
Transaction Charges along with Qualified Contingent Cross Transaction
Fees, in the aggregate, for one billing month may not exceed the
Monthly Firm Fee Cap per member organization when such members are
trading in their own proprietary account.\38\ Finally, with respect to
Broker-Dealers, today the Exchange waives the Floor Options Transaction
Charge for Broker-Dealers executing facilitation orders pursuant to
Options 8, Section 30 when such members would otherwise incur this
charge for trading in their own proprietary account contra to a
Customer (``BD-Customer Facilitation''), if the member's BD-Customer
Facilitation average daily volume (including both FLEX and non-FLEX
transactions) exceeds 10,000 contracts per day in a given month.\39\
The Exchange notes that both Firms and Broker-Dealers have the ability
to reduce their Options Transaction Charges as compared to
Professionals. Further, the Exchange believes it does not impose an
undue burden on competition to assess Professionals no Floor Options
Transaction Charge the same as a Customer and more favorable than
Firms, and Broker-Dealers, Lead Market Makers, and Market Makers. The
potential increased volume would create better trading opportunities
that benefit all market participants. Specifically, greater volume and
liquidity from increased order flow could create more trading
opportunities and tighter spreads. Assessing lower Floor Options
Transaction Charges for Professional Customers compared to Lead Market
Makers, Market Makers, Firms, and Broker-Dealers is not novel as BOX
currently assesses lower fees for Professional Customers as compared to
Broker Dealers and Market Makers.\40\
---------------------------------------------------------------------------
\38\ See Options 7, Section 4.
\39\ See Options 7, Section 4.
\40\ See supra 25 above.
---------------------------------------------------------------------------
Monthly Firm Fee Cap
The Exchange's proposal to increase the Monthly Firm Fee Cap from a
cap of $200,000 to a monthly cap of $250,000 does not impose an undue
burden on competition because other market participants benefit from an
opportunity to pay reduced fees on Phlx as do Firms. Today, Customers
are not assessed an Options Transaction Charge in Multiply Listed Penny
or Non-Penny Symbols.\41\ Customer liquidity benefits all market
participants by providing more trading opportunities. An increase in
the activity of these market participants in turn facilitates tighter
spreads, which may cause an additional corresponding increase in order
flow from other market participants. Today, Lead Market Makers and
Market Makers are subject to a Monthly Market Maker Cap.\42\ With
respect to Broker-Dealers,
[[Page 20744]]
today, the Exchange waives the Floor Options Transaction Charge for
Broker-Dealers executing facilitation orders pursuant to Options 8,
Section 30 when such members would otherwise incur this charge for
trading in their own proprietary account contra to a Customer (``BD-
Customer Facilitation''), if the member's BD-Customer Facilitation
average daily volume (including both FLEX and non-FLEX transactions)
exceeds 10,000 contracts per day in a given month.\43\ Finally, today,
Professional Floor Options Transaction Charges are proposed to be $0.00
per contract, similar to Customers and more favorable than Firms.\44\
Additionally, the Exchange believes that the proposal does not impose
an undue burden on competition because members and member organizations
that are JBOs \45\ could be subject to the Monthly Firm Fee Cap, as are
other members, as long as the JBO trades for their own proprietary
account. Additionally, the proposed change would encourage JBOs that
are not members or member organizations to seek to become members or
member organizations to further reduce their transaction fees. Finally,
other market participants may interact with the order flow submitted by
Firms to Phlx to reach the Monthly Firm Fee Cap.
---------------------------------------------------------------------------
\41\ See Options 7, Section 4.
\42\ See Options 7, Section 4. Lead Market Makers and Market
Makers are subject to a ``Monthly Market Maker Cap'' of $500,000
for: (i) electronic Option Transaction Charges, excluding surcharges
and excluding options overlying broad-based index options symbols
listed within Options 7, Section 5.A; and (ii) QCC Transaction Fees
(as defined in Exchange Options 3, Section 12 and Floor QCC Orders,
as defined in Options 8, Section 30(e)). The trading activity of
separate Lead Market Maker and Market Maker member organizations is
aggregated in calculating the Monthly Market Maker Cap if there is
Common Ownership between the member organizations. All dividend,
merger, short stock interest, reversal and conversion, jelly roll
and box spread strategy executions (as defined in this Options 7,
Section 4) is excluded from the Monthly Market Maker Cap. Lead
Market Makers or Market Makers that (i) are on the contra-side of an
electronically-delivered and executed Customer order, excluding
responses to a PIXL auction; and (ii) have reached the Monthly
Market Maker Cap will be assessed fees as follows: $0.05 per
contract Fee for Adding Liquidity in Penny Symbols; $0.18 per
contract Fee for Removing Liquidity in Penny Symbols; $0.18 per
contract in Non-Penny Symbols; and $0.18 per contract in a non-
Complex electronic auction, including the Quote Exhaust auction and,
for purposes of this fee, the opening process. A Complex electronic
auction includes, but is not limited to, the Complex Order Live
Auction (``COLA''). Transactions which execute against an order for
which the Exchange broadcast an order exposure alert in an
electronic auction will be subject to this fee.
\43\ See Options 7, Section 4.
\44\ See Options 7, Section 4. Professional Floor Options
Transaction Charges for Penny and Non-Penny Symbols are $0.05 per
contract whereas Firm Floor Options Transaction Charges for Penny
and Non-Penny Symbols are $0.25 per contract. The Exchange is
proposing to reduce the Floor Options Transaction Charges to $0.00
per contract.
\45\ The term ``Joint Back Office'' or ``JBO'' applies to any
transaction that is identified by a member or member organization
for clearing in the Firm range at OCC and is identified with an
origin code as a JBO. A JBO is priced the same as a Broker-Dealer. A
JBO participant is a member, member organization or non-member
organization that maintains a JBO arrangement with a clearing
broker-dealer (``JBO Broker'') subject to the requirements of
Regulation T Section 220.7 of the Federal Reserve System as further
discussed at Options 6D, Section 1. See Options 7, Section 1(c).
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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.\46\
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\46\ 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-2024-14 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-2024-14. 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-2024-14 and should be
submitted on or before April 15, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\47\
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\47\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-06175 Filed 3-22-24; 8:45 am]
BILLING CODE 8011-01-P
