Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing of Proposed Rule Change To Amend the Exchange's Fees for Top of PHLX Options (TOPO), PHLX Orders, and TOPO Plus Orders, 99925-99930 [2024-29040]
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Federal Register / Vol. 89, No. 238 / Wednesday, December 11, 2024 / Notices
All submissions should refer to file
number SR–Phlx–2024–65. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. 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–2024–65, and
should be submitted on or before
December 31, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–29035 Filed 12–10–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
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[Release No. 34–101822; File No. SR–Phlx–
2024–67]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing of
Proposed Rule Change To Amend the
Exchange’s Fees for Top of PHLX
Options (TOPO), PHLX Orders, and
TOPO Plus Orders
December 5, 2024.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
12 17
CFR 200.30–3(a)(12), (59).
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(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
27, 2024, Nasdaq PHLX LLC (‘‘Phlx’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Exchange’s proprietary data fees for Top
of PHLX Options (‘‘TOPO’’), PHLX
Orders, and TOPO Plus Orders at
Options 7, Section 10, as described
further below.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/phlx/rules, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
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 See Options 3, Section 23(a)(1) (‘‘Top of PHLX
Options (‘TOPO’) is a direct data feed product that
includes the Exchange’s best bid and offer price,
with aggregate size, based on displayable order and
quoting interest on Phlx and last sale information
for trades executed on Phlx. The data contained in
the TOPO data feed is identical to the data
simultaneously sent to the processor for the OPRA
and subscribers of the data feed. The data provided
for each options series includes the symbols (series
and underlying security), put or call indicator,
expiration date, the strike price of the series, and
whether the option series is available for trading on
Phlx and identifies if the series is available for
closing transactions only.’’).
4 See Options 3, Section 23(a)(1) (‘‘PHLX Orders
is a real-time full Limit Order book data feed that
provides pricing information for orders on the
PHLX Order book for displayed order types as well
as market participant capacity. PHLX Orders is
currently provided as part of the TOPO Plus Orders
data product. PHLX Orders provides real-time
information to enable users to keep track of the
single and complex order book(s). The data
provided for each options series includes the
symbols (series and underlying security), put or call
2 17
PO 00000
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99925
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend the Exchange’s
proprietary data fees for Top of PHLX
Options (‘‘TOPO’’),3 PHLX Orders,4 and
TOPO Plus Orders at Options 7, Section
10.5
Top of PHLX Options (‘‘TOPO’’)
TOPO is a direct data feed that
provides subscribers with PHLX Best
Bid and Offer (‘‘BBO’’) 6 and last sale
information.7 The data distributed on
TOPO is identical to the data
simultaneously sent to the Options Price
Reporting Authority (‘‘OPRA’’).8 The
TOPO feed also provides administrative
information to facilitate trading on the
Exchange such as, for example, the list
of symbols trading on a particular day.9
TOPO reduces the transmission and
processing latencies for top of book
information relative to the OPRA feed
by avoiding the latencies generated by
the latter in consolidating data.
indicator, expiration date, the strike price of the
series, leg information on complex strategies and
whether the option series is available for trading on
Phlx and identifies if the series is available for
closing transactions only. The feed also provides
auction and exposure notifications and order
imbalances on opening/reopening (size of matched
contracts and size of the imbalance)’’).
5 The proposed changes were initially filed on
November 16, 2023, as SR–Phlx–2023–51. On
December 5, 2023, SR–Phlx–2023–51 was
withdrawn and replaced with SR–Phlx–2023–57.
On January 29, 2024, SR–Phlx–2023–57 was
withdrawn and replaced with SR–Phlx 2024–03. On
March 20, 2024, SR–Phlx–2024–03 was withdrawn
and replaced with SR–Phlx–2024–15. On May 16,
2024, the Commission instituted proceedings to
determine whether to approve or disapprove the
proposed rule change. See Securities Exchange Act
Release No. 100160 (May 16, 2024), 89 FR 45036
(May 22, 2024). On November 19, 2024, SR–Phlx–
2024–15 was withdrawn and replaced with SR–
Phlx–2024–60. On November 27, 2024, SR–Phlx–
2024–60 was withdrawn and replaced with the
instant filing.
6 The Best Bid and Offer includes aggregate size
information based on displayable order and quoting
interest on the Exchange.
7 See PHLX, ‘‘Top of Phlx Options,’’ available at
https://www.nasdaqtrader.com/Micro.aspx?id=
TOPO#:∼:text=Top%20of%20PHLX%20Options
%20(TOPO,in%20the%20consolidated%20market
%20feed.
8 See Options 3 (Options Trading Rules), Section
23(a)(1) (Data Feeds and Trade Information) (‘‘The
data contained in the TOPO data feed is identical
to the data simultaneously sent to the processor for
the OPRA and subscribers of the data feed.’’).
9 See, e.g., Nasdaq, ‘‘Top of Phlx Options Interface
Specifications, Version 3.4’’ Section 4.3 available at
https://www.nasdaqtrader.com/content/
technicalsupport/specifications/dataproducts/
topofphlx.pdf (describing the start of day options
directory message, which lists all symbols eligible
for the auction process).
E:\FR\FM\11DEN1.SGM
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99926
Federal Register / Vol. 89, No. 238 / Wednesday, December 11, 2024 / Notices
Monthly fees for TOPO are currently
$2,000 for Internal Distributors,10
$2,500 for External Distributors,11 $1 for
a Non-Professional Subscriber,12 and
$40 for a Professional Subscriber.13
None of these fees have changed for
over a decade, since January 2013.14
PHLX Orders
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PHLX Orders is a real-time order book
feed with pricing information for
displayed orders on the PHLX order
book.15 The data provided for each
options series includes the symbols
(series and underlying security), a put or
call indicator, expiration date, and the
strike price of the series. It also provides
the real-time status of simple and
complex orders 16 on the order book,
including new orders and changes to
orders resting on the PHLX book for all
PHLX-listed options.17 The PHLX
Orders feed includes data on the
opening imbalance, Price Improvement
10 See Options 7, Section 10 (Proprietary Data
Feed Fees) (Top of PHLX Options) (‘‘A ‘distributor’
of Nasdaq PHLX data is any entity that receives a
feed or data file . . . directly from Nasdaq PHLX
or indirectly through another entity and then
distributes it either internally (within that entity) or
externally (outside that entity). All distributors
execute a Nasdaq PHLX distributor agreement.’’).
11 See id.
12 See id. (‘‘A Non-Professional Subscriber is a
natural person who is neither: (i) registered or
qualified in any capacity with the Commission, the
Commodities Futures Trading Commission, any
state securities agency, any securities exchange or
association, or any commodities or futures contract
market or association; (ii) engaged as an ‘investment
adviser’ as that term is defined in Section 201(11)
of the Investment Advisors Act of 1940 (whether or
not registered or qualified under that Act); nor (iii)
employed by a bank or other organization exempt
from registration under federal or state securities
laws to perform functions that would require
registration or qualification if such functions were
performed for an organization not so exempt. A
Non-Professional Subscriber may only use the data
provided for personal purposes and not for any
commercial purpose.’’).
13 See id. (‘‘A Professional Subscriber is any
Subscriber that is not a Non-Professional
Subscriber. If the Nasdaq Subscriber agreement is
signed in the name of a business or commercial
entity, such entity would be considered a
Professional Subscriber.’’).
14 See Securities Exchange Act Release No. 68576
(January 3, 2013), 78 FR 1886 (January 9, 2013) (SR–
Phlx–2012–145).
15 See Options 3 (Options Trading Rules), Section
23(a)(2) (Data Feeds and Trade Information).
16 See Options 3 (Options Trading Rules), Section
23(a)(2) (Data Feeds and Trade Information);
Section 14(a)(i) (‘‘Complex Order. For purposes of
the electronic trading of Complex Orders, a
Complex Order is an order involving the
simultaneous purchase and/or sale of two or more
different options series in the same underlying
security, priced as a net debit or credit based on the
relative prices of the individual components, for the
same account, for the purpose of executing a
particular investment strategy.’’).
17 See Nasdaq, ‘‘PHLX Orders,’’ available at
https://www.nasdaqtrader.com/
Micro.aspx?id=PHLXOrders.
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XL (PIXL),18 and Complex Order Live
Auction (COLA).19 A notification
message is sent for symbols entering an
auction.20 PHLX Orders also furnishes
an historical record of all simple and
complex order message data from the
PHLX Orders data feed. PHLX Orders
information is not sent to OPRA.21
PHLX Orders is an alternative to
PHLX Depth of Market. It is an
optimized technical channel designed to
lower technology costs, reduce
processing time, and facilitate the
ingestion of data while still providing
customers insight beyond the top of
book by viewing active buy and sell
orders. PHLX Orders excludes
quotations by market makers and other
authorized entities that is included in
PHLX Depth of Market.22
What is the utility of an orders-only
data feed? It provides customers with
the opportunity to reduce bandwidth
(and therefore data processing costs) by
several orders of magnitude relative to
the full depth of book feed, while
retaining a view of market participant
orders (setting aside symbols where
participants have not placed orders).
The December 2023 bandwidth report
shows that the PHLX Depth of Market
feed transmitted a maximum of 14.3
billion messages per day during the
month of December,23 while the PHLX
18 See Options 3 (Options Trading Rules), Section
23(a)(2); Section 13 (Price Improvement XL) (‘‘A
member may electronically submit for execution an
order it represents as agent on behalf of a Public
Customer, broker-dealer, or any other entity (‘PIXL
Order’) against principal interest or against any
other order (except as provided in sub-paragraph
(a)(6) below) it represents as agent (an ‘Initiating
Order’) provided it submits the PIXL Order for
electronic execution into the PIXL Auction
(‘Auction’) pursuant to this Rule.’’).
19 See Options 3, Section 14(e) (describing the
process for the Complex Order Live Auction
(‘‘COLA’’)).
20 Nasdaq, ‘‘PHLX Orders Interface
Specification,’’ (Version 1.92) available at https://
www.nasdaqtrader.com/content/technicalsupport/
specifications/dataproducts/topoplusorders.pdf
(describing auction notification message).
21 See Limited Liability Company Agreement of
Options Price Reporting Authority, LLC Article V,
Section 5.2(c)(i) (January 1, 2010), available at
https://assets.website-files.com/
5ba40927ac854d8c97bc92d7/5d0bd57d87
d3ccca102102d7_OPRA%20Plan%20with%20
Updated%20Exhibit%20A%20-%2006-19-2019.pdf
(describing last sale and best bid and offer
information disseminated by OPRA).
22 See Options 3 (Options Trading Rules), Section
23(a)(3) (Data Feeds and Trade Information) (‘‘PHLX
Depth of Market is a data product that provides: (i)
order and quotation information for individual
quotes and orders on the order book . . .’’)
(emphasis added); Section 4(b) (Entry and display
of Quotes) (identifying the market participants
authorized to submit quotes to the Exchange).
23 See Nasdaq, ‘‘December 2023 Bandwidth
Report,’’ available at https://view.officeapps.live.
com/op/view.aspx?src=https%3A%2F%2
Fwww.nasdaqtrader.com%2Fcontent%2
Ftechnicalsupport%2Fspecifications%2
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Orders feed transmitted a maximum of
53.6 million messages over the same
period (41.5 million messages for simple
orders, and 12.1 million messages for
complex orders). The Exchange’s full
depth of book feed requires the
customer to process over 200 times
more messages than the orders feed over
the course of a day; replacing a depth
of book feed with an orders feed allows
a customer to reduce the maximum
number of daily messages it receives by
99.6%.
To cite another example, the
1millisecond bandwidth peak for PHLX
Depth of Market was 13.96 million
messages; the comparable number of
messages for orders was 1.45 million
(891 thousand for simple and 561
thousand for complex orders). Replacing
depth of book with orders can therefore
reduce the number of messages
processed at peak at the 1 millisecond
bandwidth by nearly 90%.
Approximately 56% of customers
who take any data feed at all from the
PHLX exchange take an orders feed
(either Orders only or TOPO Plus
Orders) without depth of book. Another
38% of customers take both orders and
depth feeds. The remaining 6% take
either top of book or depth of book
alone.
What type of customer takes an orders
feed in lieu of depth? In general, firms
that only need information on actively
trading options do so. There are a great
number of use cases that fit this broad
description, but, for purposes of
illustration, the Exchange is aware of at
least two such types of customers.
The first is the market participant that
does not engage in order routing. These
are broker dealers that use third parties
to route orders, either because the
originating broker-dealer is not a
member of the exchange or to save costs.
Without the need for additional
information to inform routing decisions,
such customers often focus on active
trading alone, and therefore purchase
the orders feed.
A second category of customers are
those that use options data to analyze
trends in other markets. One example of
this type of customer is the equity trader
that analyzes equity-based options
orders to gauge market sentiment in the
underlying equity. For such customers,
there is relatively little utility in the full
depth feed.
Fdataproducts%2Fbandwidthreport.xls&wdOrigin
=BROWSELINK.
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Federal Register / Vol. 89, No. 238 / Wednesday, December 11, 2024 / Notices
As noted above, there are some
customers that purchase both orders and
depth. Vendors are one example of this
type of customer. They purchase market
data solely for resale, not for trading on
behalf of themselves or others. Another
example is the firm that uses orders for
analysis and depth for order routing. As
noted above, the orders feed can be
useful for assessing sentiment in equity
markets, while depth is often used in
order routing decisions. Firms that
engage in both functions can lower
overall processing requirements by
using orders for analytics and depth for
routing.
Customers can obtain all of the data
contained in PHLX Orders from PHLX
Depth of Market feed and may purchase
the latter if they do not realize the cost
savings offered by PHLX Orders.
PHLX Orders is a derivative product
designed as a lower-cost alternative to a
depth of book feed. It is not a
complement to any other product
offered by the Exchange or any of its
competitors. Customers are free to
purchase PHLX Orders or not, and can
reject the feed for any reason, including
the fee charged.
Current monthly fees for PHLX Orders
are $3,000 for Internal Distributors,
$3,500 for External Distributors, $1 for
a Non-Professional Subscriber, and $40
for a Professional Subscriber. None of
these fees have changes for over a
decade, since January 2013.24
TOPO Plus Orders
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TOPO Plus is a direct market data
product that offers subscribers both
TOPO and PHLX Orders for a
consolidated fee that is less than the
combined fee of the two products.25
Monthly fees for TOPO Plus Orders
are currently $4,500 for Internal
Distributors, $5,000 for External
Distributors, $1 for a Non-Professional
Subscriber, and $40 for a Professional
Subscriber.
Internal Distributor fees for TOPO
Plus Orders were modified in January
2018, over five years ago,26 but the other
TOPO Plus Orders fees have not
changed since January 2013.27
24 See Securities Exchange Act Release No. 68576
(January 3, 2013), 78 FR 1886 (January 9, 2013) (SR–
Phlx–2012–145).
25 See PHLX, TOPO Plus PHLX Orders, available
at https://www.nasdaqtrader.com/
Micro.aspx?id=TOPOPlusOrders.
26 See Securities Exchange Act Release No. 82495
(January 12, 2018), 83 FR 2839 (January 19, 2018)
(SR–Phlx–2018–08).
27 See Securities Exchange Act Release No. 68576
(January 3, 2013), 78 FR 1886 (January 9, 2013) (SR–
Phlx–2012–145).
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Usage of TOPO, PHLX Orders, and
TOPO Plus Orders
Different types of market participants
purchase TOPO, PHLX Orders and
TOPO Plus Orders, including market
makers, vendors, banks, proprietary
traders, agency brokers (brokers that
route trades on behalf of other market
participants), hedge funds, index
providers and other firms.
In characterizing market participants,
we must be clear that firms use data
feeds for multiple tasks. A market
maker, for example, may use market
data for order routing, or for risk
analysis used in quoting in their
assigned option series. Banks may use
market data for prime brokerage
services, proprietary trading, or risk
management. Market data vendors do
not directly use the data at all, but
rather disseminate data to market
participants that use the data for a
multiplicity of purposes. Other firms
purchase options data to assess the
value of equity securities.28
Characterizing firms based on what
we understand to be their primary
market activity, and understanding that
firms play multiple roles, we estimate
that approximately half of the customers
that take top of book data in any form,
in combination with other products or
alone, are market makers, and the
remaining half are market data vendors,
banks, proprietary traders, agency
brokers, hedge funds, index providers,
and others. Roughly the same
distribution applies to customers that
purchase PHLX Orders, whether alone
or in combination with other products.
Although the distributions are roughly
similar, different customers are
purchasing different products in
different combinations.
As explained above, firms generally
purchase PHLX Orders rather than
depth of book data to lower technology
costs and reduce processing time, while
still providing customers insight into
open executable orders that could
impact the BBO.
A more specific explanation of how
TOPO, PHLX Orders and TOPO Plus
Orders is used will vary based on use
case, with many firms employing
multiple use cases. Market makers,
banks, hedge funds, and proprietary
traders often use top of book and orders
feeds for trading, order routing and
analysis. Banks may use market data for
prime brokerage services, proprietary
28 We do not include ‘‘High Frequency Trading
Firm’’ as a distinct category because many market
participants may engage in low latency trading
strategies to some degree, but the Exchange does not
have sufficient information to be able to
characterize any particular firm as a high frequency
trader.
PO 00000
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99927
trading, or risk management. The clients
of market data vendors will utilize the
data for many different purposes. We do
not have sufficient visibility into our
customers’ businesses and proprietary
processes to be able to determine
precise data usage by customer category.
Proposed Changes
For TOPO, the Exchange proposes to
increase the monthly charge for Internal
Distributors from $2,000 to $2,500, and
the monthly charge for External
Distributors from $2,500 to $3,000. No
changes are proposed for NonProfessional and Professional Subscriber
fees.
For PHLX Orders, the Exchange
proposes to increase the monthly charge
for Internal Distributors from $3,000 to
$3,500, and the monthly charge for
External Distributors from $3,500 to
$4,000. No changes are proposed for
Non-Professional and Professional
Subscriber fees.
For TOPO Plus Orders, the Exchange
proposes to increase the monthly charge
for Internal Distributors from $4,500 to
$5,500, and the monthly charge for
External Distributors from $5,000 to
$6,000. No changes are proposed for
Non-Professional and Professional
Subscriber fees.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,29 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,30 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 proposal provides for the
equitable allocation of reasonable dues,
fees and other charges because the
proposed fees are comparable to, and in
some cases less than, those of similarly
situated exchanges.
The proposal is not designed to
permit unfair discrimination between
customers, issuers, brokers, or dealers
because: (i) it is not unfair
discrimination to charge external
distributors more for the product
because external distributors receive
additional value not available to
internal distributors by disseminating
information externally and typically
charging for the service; and (ii) the
market data feeds subject to the
proposed fee will be available to
29 15
30 15
E:\FR\FM\11DEN1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
11DEN1
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TABLE 1
Internal distribution
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Figure 1
Exchange, Inc. (‘‘Cboe’’) (for external
distribution), as summarized in Table 1:
External distribution
$3,000.
$6,000
($3,000 for simple orders; $3,000 for complex orders).
$3,500.
($1,750 for simple orders; $1,750 for complex orders).
$8,000.
($5,000 for simple orders; $3,000 for complex orders).
Monthly fees (top of book)
Securities Exchange, LLC (‘‘MIAX’’),
MIAX Emerald (for both internal and
external distribution) and Cboe
Market
share
%
9.1
5.7
3.6
Fmt 4703
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E:\FR\FM\11DEN1.SGM
11DEN1
32 See MIAX Options Exchange Fee Schedule
(October 1, 2024), available at https://
www.miaxglobal.com/sites/default/files/fee_
schedule-files/MIAX_Options_Fee_Schedule_
10012024.pdf.
proposed fee of $2,500 for internal
distribution is much less than the
$4,000 charged by MIAX for less
information.
For external distribution, MIAX
charges $3,000 for Top of Market feed,
and another $3,000 for its complex top
$2,500 ...................................................................
$4,000 ...................................................................
($2,000 for simple orders; $2,000 for complex orders).
$2,500 ...................................................................
($1,250 for simple orders; $1,250 for complex orders).
N/A ........................................................................
(fee is part of a package of multiple products) .....
MIAX charges different fees for
internal distribution of its simple and
complex top of book feeds: $2,000 for its
Top of Market feed, and another $2,000
for its complex Top of Market feed, for
a total of $4,000.32 PHLX TOPO
includes both simple and complex
orders in a single feed, and therefore the
17.9
traded in 2024 through October 28,
2024, as set forth in the following
graph: 31
Federal Register / Vol. 89, No. 238 / Wednesday, December 11, 2024 / Notices
ARCA
99928
:r
Equitable Allocation of Reasonable
Dues, Fees and Other Charges
The Exchange assesses the market
share for each of the eighteen options
markets utilizing total options contracts
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ports. Total contracts include both multi-list
options and proprietary options products.
Proprietary options products are products with
intellectual property rights that are not multi-listed.
BX does not list proprietary products.
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customers on a non-discriminatory
basis.
The proposed fees for Top of PHLX
Options are comparable to those
charged by Miami International
Exchange
PHLX ......................................................................
MIAX ......................................................................
MIAX Emerald ........................................................
Cboe ......................................................................
A more detailed discussion of the
comparison follows.
Jkt 265001
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MIAX
MIAX, with a market share of
approximately 5.7%, provides less
information in its top of book feeds than
PHLX, yet charges more for those feeds
than the PHLX proposal.
18:17 Dec 10, 2024
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31 Market share is the percentage of volume on a
particular exchange relative to the total volume
across all exchanges, and indicates the amount of
order flow directed to that exchange. High levels of
market share enhance the value of trading and
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Federal Register / Vol. 89, No. 238 / Wednesday, December 11, 2024 / Notices
of market feed,33 for a total of $6,000.
The proposed fees of $3,000 for the
PHLX TOPO feed, which includes both
simple and complex orders, is far less
than the fees charged by MIAX for less
information.
MIAX Emerald
The same analysis applies to MIAX
Emerald, with a market share of 3.6%.
Similar to MIAX, MIAX Emerald
charges different fees for simple and
complex top of book feeds: $1,250 for
internal distribution of its Top of Market
feed, and another $1,250 for internal
distribution of its Complex Top of
Market feed, for a total of $2,500.34 This
is the same amount proposed for TOPO
internal distribution, for less
information.
MIAX Emerald charges $1,750 for
external distribution of its Top of
Market feed, and another $1,750 for
external distribution of its complex Top
of Market feed, for a total of $3,500.35
MIAX Emerald therefore charges more
than PHLX’s proposed monthly charges
of $3,000 for external distribution of
TOPO, notwithstanding the fact that
MIAX Emerald provides less market
information.
This supports the proposition that the
proposed PHLX fees are comparable to
those of other exchanges and therefore
reasonable.
Cboe
Cboe has an approximately 17.9%
market share, nearly twice the PHLX
market share of 9.1%.36
99929
The Cboe fee for external distribution
of the top of book feed is $5,000 per
month.37 If a customer also wants
Cboe’s Complex Order Book (‘‘COB’’),
the customer would pay an additional
$3,000.38 These fees are comparable to
the proposed PHLX fee of $3,000 per
month for external distribution of a
combined simple and complex orders
feed because the higher fee for Cboe
reflects the higher market share of the
Cboe exchange.
PHLX Orders
The proposed fees for PHLX Orders
are comparable to the fees charged by
MIAX, MIAX Emerald, and Nasdaq ISE,
LLC (‘‘ISE’’), an affiliate of PHLX, as set
forth in Table 2 below.
TABLE 2
Market
share
%
Exchange
PHLX ..........................................................
MIAX ...........................................................
MIAX Emerald ............................................
ISE ..............................................................
9.1
5.7
3.6
6.2
MIAX
MIAX has a market share of
approximately 5.7%, somewhat more
than half of PHLX’s market share of
9.1%.
MIAX charges $3,000 for internal
distribution of its orders feed.39 PHLX,
with a market share over 50 percent
more than MIAX, proposes to charge
$3,500 for the same service. The PHLX
fee is only about 17% more than the
MIAX fee.
MIAX charges $3,500 for external
distribution of its orders feed.40 PHLX,
with a market share over 50 percent
more than MIAX, proposes to charge
$4,000 for the same service. The PHLX
fee is only about 14% more than the
MIAX fee.
MIAX Emerald
MIAX Emerald also has a market
share of 3.6%, less than half of PHLX’s
market share of 9.1%.
33 See
id.
MIAX Emerald Options Schedule
(December 8, 2022), available at https://
www.miaxglobal.com/sites/default/files/fee_
schedule-files/MIAX_Emerald_Fee_Schedule_
12082022c.pdf.
35 See id.
36 See Nasdaq, Options Market Statistics (Last
updated November 3, 2023), available at https://
www.nasdaqtrader.com/
Trader.aspx?id=OptionsVolumeSummary.
37 See id.
lotter on DSK11XQN23PROD with NOTICES1
34 See
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18:17 Dec 10, 2024
Jkt 265001
Monthly fees (orders)
Internal distribution
External distribution
$3,500 ........................................................
3,000 ..........................................................
3,000 ..........................................................
3,000 ..........................................................
$4,000.
$3,500.
$3,500.
$3,000 per month plus $20 per month per
controlled device.
Like MIAX, MIAX Emerald charges
$3,000 for internal distribution of its
orders feed.41 PHLX, with a market
share over twice that of MIAX Emerald,
proposes to charge $3,500 for the same
service. The PHLX fee is only about
17% more than the MIAX fee.
MIAX Emerald also charges $3,500 for
external distribution of its orders feed.42
PHLX, with a market share over twice
that of MIAX Emerald, proposes to
charge $4,000 for the same service. The
PHLX fee is only about 14% more than
the MIAX Emerald fee.
and the ISE feed does not include
information on complex orders.
For external distribution, ISE charges
$3000 per month, plus an additional
$20 per month for each controlled
device, up to a maximum fee of $5,000
per month.44 This is comparable to the
proposed PHLX fee of $4,000 (the ISE
fee may be above or below the PHLX
fee, depending on the number of
controlled devices) and the proposed fee
is reasonable given PHLX’s larger
market share.
ISE
TOPO Plus Orders
ISE has a market share of
approximately 6.2%, below PHLX’s
market share of 9.1%.
ISE charges $3,000 for internal
distribution of its Order Feed.43 This is
comparable to the proposed PHLX
Orders feed for internal distribution of
$3,500 because PHLX has a larger share
The separate fees for TOPO and PHLX
Orders are each reasonable because, as
shown above, they are comparable to
other SRO fees. The TOPO Plus Orders
product offers a discount for the
purchase of these two separate feeds
together. A discount from fees that have
already been shown to be reasonable is
38 As explained in note 32, Cboe waives its
Complex Order Book feed for internal distribution
of top of book and depth, but not for external
distribution of top of book.
39 See MIAX Options Exchange Fee Schedule
(October 1, 2024), available at https://
www.miaxglobal.com/sites/default/files/fee_
schedule-files/MIAX_Options_Fee_Schedule_
10012024.pdf.
40 See id.
41 See MIAX Emerald Options Schedule
(December 8, 2022), available at https://
www.miaxglobal.com/sites/default/files/fee_
schedule-files/MIAX_Emerald_Fee_Schedule_
12082022c.pdf.
42 See id.
43 See Nasdaq ISE, LLC Rules, Options 7, Section
10(G) (Nasdaq ISE Order Feed). The ISE Order feed
differs from the PHLX Orders feed in that it
provides information only on simple orders,
whereas the PHLX Orders feed provides
information on both simple and complex orders.
44 See id.
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99930
Federal Register / Vol. 89, No. 238 / Wednesday, December 11, 2024 / Notices
reasonable and consistent with the
Exchange Act.
In summary, (i) the proposed fees for
Top of PHLX Options are comparable to
those of MIAX, MIAX Emerald and
Cboe; (ii) the proposed fees for PHLX
Orders are comparable to those of
MIAX, MIAX Emerald, and ISE; and (iii)
the proposed PHLX TOPO Plus Orders
fees offer a discount from the amount
the customer would pay for TOPO and
Orders separately, and, because these
separate fees are comparable to those
charged by other exchanges, the
proposed discount for TOPO Plus
Orders is reasonable.
No Unfair Discrimination Between
Customers, Issuers, Brokers, or Dealers
The proposal is not designed to
permit unfair discrimination between
customers, issuers, brokers, or dealers
because: (i) external distributors receive
additional value not available to
internal distributors; and (ii) these
market data feeds will be available on a
non-discriminatory basis.
External Distributors receive
additional value not available to
Internal Distributors by disseminating
information externally and typically
charging for the service. This additional
value supports higher fees for external
distribution for TOPO, PHLX Orders,
and TOPO Plus Orders. Higher fees for
external distribution of data are
common throughout the industry, and
nearly universal among exchanges. The
difference in value between internal and
external distribution is also reflected in
the current fee schedule, which has
previously been shown to be consistent
with the Exchange Act.
The three market data feeds at issue
here—TOPO, PHLX Orders, and TOPO
Plus Orders—are used by a variety of
market participants for a variety of
purposes. Users include regulators,
market makers, competing exchanges,
media, retail, academics, portfolio
managers. Market data feeds will be
available to members of all of these
groups on a non-discriminatory basis.
lotter on DSK11XQN23PROD with NOTICES1
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
Nothing in the Proposal burdens
inter-market competition (the
competition among self-regulatory
organizations) because approval of the
Proposal does not impose any burden
on the ability of other options exchanges
to compete. PHLX fees are comparable
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18:17 Dec 10, 2024
Jkt 265001
to, and in some cases less than, those of
other exchanges, as discussed above.
Nothing in the Proposal burdens
intra-market competition (the
competition among consumers of
exchange data) because PHLX market
data is available to any customer under
the same fee schedule as any other
customer, and any market participant
that wishes to purchase PHLX market
data can do so on a non-discriminatory
basis.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the Exchange consents,
the Commission shall: (a) by order
approve or disapprove such proposed
rule change, or (b) institute proceedings
to determine whether the proposed rule
change should be disapproved.
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–2024–67 and should be
submitted on or before December 31,
2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.45
Sherry R. Haywood,
Assistant Secretary.
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:
[FR Doc. 2024–29040 Filed 12–10–24; 8:45 am]
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–2024–67 on the subject line.
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Its
Fee Schedule Regarding Dedicated
Cores
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–2024–67. 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
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 November
26, 2024, Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) filed with the
Securities and Exchange Commission
(‘‘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
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BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101825; File No. SR–
CboeBZX–2024–122]
December 5, 2024
45 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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]]>Agencies
[Federal Register Volume 89, Number 238 (Wednesday, December 11, 2024)]
[Notices]
[Pages 99925-99930]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-29040]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101822; File No. SR-Phlx-2024-67]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
of Proposed Rule Change To Amend the Exchange's Fees for Top of PHLX
Options (TOPO), PHLX Orders, and TOPO Plus Orders
December 5, 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 November 27, 2024, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III, below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Exchange's proprietary data fees
for Top of PHLX Options (``TOPO''), PHLX Orders, and TOPO Plus Orders
at Options 7, Section 10, as described further below.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/phlx/rules, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these 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.
---------------------------------------------------------------------------
\3\ See Options 3, Section 23(a)(1) (``Top of PHLX Options
(`TOPO') is a direct data feed product that includes the Exchange's
best bid and offer price, with aggregate size, based on displayable
order and quoting interest on Phlx and last sale information for
trades executed on Phlx. The data contained in the TOPO data feed is
identical to the data simultaneously sent to the processor for the
OPRA and subscribers of the data feed. The data provided for each
options series includes the symbols (series and underlying
security), put or call indicator, expiration date, the strike price
of the series, and whether the option series is available for
trading on Phlx and identifies if the series is available for
closing transactions only.'').
\4\ See Options 3, Section 23(a)(1) (``PHLX Orders is a real-
time full Limit Order book data feed that provides pricing
information for orders on the PHLX Order book for displayed order
types as well as market participant capacity. PHLX Orders is
currently provided as part of the TOPO Plus Orders data product.
PHLX Orders provides real-time information to enable users to keep
track of the single and complex order book(s). The data provided for
each options series includes the symbols (series and underlying
security), put or call indicator, expiration date, the strike price
of the series, leg information on complex strategies and whether the
option series is available for trading on Phlx and identifies if the
series is available for closing transactions only. The feed also
provides auction and exposure notifications and order imbalances on
opening/reopening (size of matched contracts and size of the
imbalance)'').
\5\ The proposed changes were initially filed on November 16,
2023, as SR-Phlx-2023-51. On December 5, 2023, SR-Phlx-2023-51 was
withdrawn and replaced with SR-Phlx-2023-57. On January 29, 2024,
SR-Phlx-2023-57 was withdrawn and replaced with SR-Phlx 2024-03. On
March 20, 2024, SR-Phlx-2024-03 was withdrawn and replaced with SR-
Phlx-2024-15. On May 16, 2024, the Commission instituted proceedings
to determine whether to approve or disapprove the proposed rule
change. See Securities Exchange Act Release No. 100160 (May 16,
2024), 89 FR 45036 (May 22, 2024). On November 19, 2024, SR-Phlx-
2024-15 was withdrawn and replaced with SR-Phlx-2024-60. On November
27, 2024, SR-Phlx-2024-60 was withdrawn and replaced with the
instant filing.
---------------------------------------------------------------------------
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the Exchange's
proprietary data fees for Top of PHLX Options (``TOPO''),\3\ PHLX
Orders,\4\ and TOPO Plus Orders at Options 7, Section 10.\5\
Top of PHLX Options (``TOPO'')
TOPO is a direct data feed that provides subscribers with PHLX Best
Bid and Offer (``BBO'') \6\ and last sale information.\7\ The data
distributed on TOPO is identical to the data simultaneously sent to the
Options Price Reporting Authority (``OPRA'').\8\ The TOPO feed also
provides administrative information to facilitate trading on the
Exchange such as, for example, the list of symbols trading on a
particular day.\9\ TOPO reduces the transmission and processing
latencies for top of book information relative to the OPRA feed by
avoiding the latencies generated by the latter in consolidating data.
---------------------------------------------------------------------------
\6\ The Best Bid and Offer includes aggregate size information
based on displayable order and quoting interest on the Exchange.
\7\ See PHLX, ``Top of Phlx Options,'' available at https://
www.nasdaqtrader.com/
Micro.aspx?id=TOPO#:~:text=Top%20of%20PHLX%20Options%20(TOPO,in%20the
%20consolidated%20market%20feed.
\8\ See Options 3 (Options Trading Rules), Section 23(a)(1)
(Data Feeds and Trade Information) (``The data contained in the TOPO
data feed is identical to the data simultaneously sent to the
processor for the OPRA and subscribers of the data feed.'').
\9\ See, e.g., Nasdaq, ``Top of Phlx Options Interface
Specifications, Version 3.4'' Section 4.3 available at https://www.nasdaqtrader.com/content/technicalsupport/specifications/dataproducts/topofphlx.pdf (describing the start of day options
directory message, which lists all symbols eligible for the auction
process).
---------------------------------------------------------------------------
[[Page 99926]]
Monthly fees for TOPO are currently $2,000 for Internal
Distributors,\10\ $2,500 for External Distributors,\11\ $1 for a Non-
Professional Subscriber,\12\ and $40 for a Professional Subscriber.\13\
None of these fees have changed for over a decade, since January
2013.\14\
---------------------------------------------------------------------------
\10\ See Options 7, Section 10 (Proprietary Data Feed Fees) (Top
of PHLX Options) (``A `distributor' of Nasdaq PHLX data is any
entity that receives a feed or data file . . . directly from Nasdaq
PHLX or indirectly through another entity and then distributes it
either internally (within that entity) or externally (outside that
entity). All distributors execute a Nasdaq PHLX distributor
agreement.'').
\11\ See id.
\12\ See id. (``A Non-Professional Subscriber is a natural
person who is neither: (i) registered or qualified in any capacity
with the Commission, the Commodities Futures Trading Commission, any
state securities agency, any securities exchange or association, or
any commodities or futures contract market or association; (ii)
engaged as an `investment adviser' as that term is defined in
Section 201(11) of the Investment Advisors Act of 1940 (whether or
not registered or qualified under that Act); nor (iii) employed by a
bank or other organization exempt from registration under federal or
state securities laws to perform functions that would require
registration or qualification if such functions were performed for
an organization not so exempt. A Non-Professional Subscriber may
only use the data provided for personal purposes and not for any
commercial purpose.'').
\13\ See id. (``A Professional Subscriber is any Subscriber that
is not a Non-Professional Subscriber. If the Nasdaq Subscriber
agreement is signed in the name of a business or commercial entity,
such entity would be considered a Professional Subscriber.'').
\14\ See Securities Exchange Act Release No. 68576 (January 3,
2013), 78 FR 1886 (January 9, 2013) (SR-Phlx-2012-145).
---------------------------------------------------------------------------
PHLX Orders
PHLX Orders is a real-time order book feed with pricing information
for displayed orders on the PHLX order book.\15\ The data provided for
each options series includes the symbols (series and underlying
security), a put or call indicator, expiration date, and the strike
price of the series. It also provides the real-time status of simple
and complex orders \16\ on the order book, including new orders and
changes to orders resting on the PHLX book for all PHLX-listed
options.\17\ The PHLX Orders feed includes data on the opening
imbalance, Price Improvement XL (PIXL),\18\ and Complex Order Live
Auction (COLA).\19\ A notification message is sent for symbols entering
an auction.\20\ PHLX Orders also furnishes an historical record of all
simple and complex order message data from the PHLX Orders data feed.
PHLX Orders information is not sent to OPRA.\21\
---------------------------------------------------------------------------
\15\ See Options 3 (Options Trading Rules), Section 23(a)(2)
(Data Feeds and Trade Information).
\16\ See Options 3 (Options Trading Rules), Section 23(a)(2)
(Data Feeds and Trade Information); Section 14(a)(i) (``Complex
Order. For purposes of the electronic trading of Complex Orders, a
Complex Order is an order involving the simultaneous purchase and/or
sale of two or more different options series in the same underlying
security, priced as a net debit or credit based on the relative
prices of the individual components, for the same account, for the
purpose of executing a particular investment strategy.'').
\17\ See Nasdaq, ``PHLX Orders,'' available at https://www.nasdaqtrader.com/Micro.aspx?id=PHLXOrders.
\18\ See Options 3 (Options Trading Rules), Section 23(a)(2);
Section 13 (Price Improvement XL) (``A member may electronically
submit for execution an order it represents as agent on behalf of a
Public Customer, broker-dealer, or any other entity (`PIXL Order')
against principal interest or against any other order (except as
provided in sub-paragraph (a)(6) below) it represents as agent (an
`Initiating Order') provided it submits the PIXL Order for
electronic execution into the PIXL Auction (`Auction') pursuant to
this Rule.'').
\19\ See Options 3, Section 14(e) (describing the process for
the Complex Order Live Auction (``COLA'')).
\20\ Nasdaq, ``PHLX Orders Interface Specification,'' (Version
1.92) available at https://www.nasdaqtrader.com/content/technicalsupport/specifications/dataproducts/topoplusorders.pdf
(describing auction notification message).
\21\ See Limited Liability Company Agreement of Options Price
Reporting Authority, LLC Article V, Section 5.2(c)(i) (January 1,
2010), available at https://assets.website-files.com/5ba40927ac854d8c97bc92d7/5d0bd57d87d3ccca102102d7_OPRA%20Plan%20with%20Updated%20Exhibit%20A%20-%2006-19-2019.pdf (describing last sale and best bid and offer
information disseminated by OPRA).
---------------------------------------------------------------------------
PHLX Orders is an alternative to PHLX Depth of Market. It is an
optimized technical channel designed to lower technology costs, reduce
processing time, and facilitate the ingestion of data while still
providing customers insight beyond the top of book by viewing active
buy and sell orders. PHLX Orders excludes quotations by market makers
and other authorized entities that is included in PHLX Depth of
Market.\22\
---------------------------------------------------------------------------
\22\ See Options 3 (Options Trading Rules), Section 23(a)(3)
(Data Feeds and Trade Information) (``PHLX Depth of Market is a data
product that provides: (i) order and quotation information for
individual quotes and orders on the order book . . .'') (emphasis
added); Section 4(b) (Entry and display of Quotes) (identifying the
market participants authorized to submit quotes to the Exchange).
---------------------------------------------------------------------------
What is the utility of an orders-only data feed? It provides
customers with the opportunity to reduce bandwidth (and therefore data
processing costs) by several orders of magnitude relative to the full
depth of book feed, while retaining a view of market participant orders
(setting aside symbols where participants have not placed orders).
The December 2023 bandwidth report shows that the PHLX Depth of
Market feed transmitted a maximum of 14.3 billion messages per day
during the month of December,\23\ while the PHLX Orders feed
transmitted a maximum of 53.6 million messages over the same period
(41.5 million messages for simple orders, and 12.1 million messages for
complex orders). The Exchange's full depth of book feed requires the
customer to process over 200 times more messages than the orders feed
over the course of a day; replacing a depth of book feed with an orders
feed allows a customer to reduce the maximum number of daily messages
it receives by 99.6%.
---------------------------------------------------------------------------
\23\ See Nasdaq, ``December 2023 Bandwidth Report,'' available
at https://view.officeapps.live.com/op/view.aspx?src=https%3A%2F%2Fwww.nasdaqtrader.com%2Fcontent%2Ftechnicalsupport%2Fspecifications%2Fdataproducts%2Fbandwidthreport.xls&wdOrigin=BROWSELINK.
---------------------------------------------------------------------------
To cite another example, the 1millisecond bandwidth peak for PHLX
Depth of Market was 13.96 million messages; the comparable number of
messages for orders was 1.45 million (891 thousand for simple and 561
thousand for complex orders). Replacing depth of book with orders can
therefore reduce the number of messages processed at peak at the 1
millisecond bandwidth by nearly 90%.
Approximately 56% of customers who take any data feed at all from
the PHLX exchange take an orders feed (either Orders only or TOPO Plus
Orders) without depth of book. Another 38% of customers take both
orders and depth feeds. The remaining 6% take either top of book or
depth of book alone.
What type of customer takes an orders feed in lieu of depth? In
general, firms that only need information on actively trading options
do so. There are a great number of use cases that fit this broad
description, but, for purposes of illustration, the Exchange is aware
of at least two such types of customers.
The first is the market participant that does not engage in order
routing. These are broker dealers that use third parties to route
orders, either because the originating broker-dealer is not a member of
the exchange or to save costs. Without the need for additional
information to inform routing decisions, such customers often focus on
active trading alone, and therefore purchase the orders feed.
A second category of customers are those that use options data to
analyze trends in other markets. One example of this type of customer
is the equity trader that analyzes equity-based options orders to gauge
market sentiment in the underlying equity. For such customers, there is
relatively little utility in the full depth feed.
[[Page 99927]]
As noted above, there are some customers that purchase both orders
and depth. Vendors are one example of this type of customer. They
purchase market data solely for resale, not for trading on behalf of
themselves or others. Another example is the firm that uses orders for
analysis and depth for order routing. As noted above, the orders feed
can be useful for assessing sentiment in equity markets, while depth is
often used in order routing decisions. Firms that engage in both
functions can lower overall processing requirements by using orders for
analytics and depth for routing.
Customers can obtain all of the data contained in PHLX Orders from
PHLX Depth of Market feed and may purchase the latter if they do not
realize the cost savings offered by PHLX Orders.
PHLX Orders is a derivative product designed as a lower-cost
alternative to a depth of book feed. It is not a complement to any
other product offered by the Exchange or any of its competitors.
Customers are free to purchase PHLX Orders or not, and can reject the
feed for any reason, including the fee charged.
Current monthly fees for PHLX Orders are $3,000 for Internal
Distributors, $3,500 for External Distributors, $1 for a Non-
Professional Subscriber, and $40 for a Professional Subscriber. None of
these fees have changes for over a decade, since January 2013.\24\
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\24\ See Securities Exchange Act Release No. 68576 (January 3,
2013), 78 FR 1886 (January 9, 2013) (SR-Phlx-2012-145).
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TOPO Plus Orders
TOPO Plus is a direct market data product that offers subscribers
both TOPO and PHLX Orders for a consolidated fee that is less than the
combined fee of the two products.\25\
---------------------------------------------------------------------------
\25\ See PHLX, TOPO Plus PHLX Orders, available at https://www.nasdaqtrader.com/Micro.aspx?id=TOPOPlusOrders.
---------------------------------------------------------------------------
Monthly fees for TOPO Plus Orders are currently $4,500 for Internal
Distributors, $5,000 for External Distributors, $1 for a Non-
Professional Subscriber, and $40 for a Professional Subscriber.
Internal Distributor fees for TOPO Plus Orders were modified in
January 2018, over five years ago,\26\ but the other TOPO Plus Orders
fees have not changed since January 2013.\27\
---------------------------------------------------------------------------
\26\ See Securities Exchange Act Release No. 82495 (January 12,
2018), 83 FR 2839 (January 19, 2018) (SR-Phlx-2018-08).
\27\ See Securities Exchange Act Release No. 68576 (January 3,
2013), 78 FR 1886 (January 9, 2013) (SR-Phlx-2012-145).
---------------------------------------------------------------------------
Usage of TOPO, PHLX Orders, and TOPO Plus Orders
Different types of market participants purchase TOPO, PHLX Orders
and TOPO Plus Orders, including market makers, vendors, banks,
proprietary traders, agency brokers (brokers that route trades on
behalf of other market participants), hedge funds, index providers and
other firms.
In characterizing market participants, we must be clear that firms
use data feeds for multiple tasks. A market maker, for example, may use
market data for order routing, or for risk analysis used in quoting in
their assigned option series. Banks may use market data for prime
brokerage services, proprietary trading, or risk management. Market
data vendors do not directly use the data at all, but rather
disseminate data to market participants that use the data for a
multiplicity of purposes. Other firms purchase options data to assess
the value of equity securities.\28\
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\28\ We do not include ``High Frequency Trading Firm'' as a
distinct category because many market participants may engage in low
latency trading strategies to some degree, but the Exchange does not
have sufficient information to be able to characterize any
particular firm as a high frequency trader.
---------------------------------------------------------------------------
Characterizing firms based on what we understand to be their
primary market activity, and understanding that firms play multiple
roles, we estimate that approximately half of the customers that take
top of book data in any form, in combination with other products or
alone, are market makers, and the remaining half are market data
vendors, banks, proprietary traders, agency brokers, hedge funds, index
providers, and others. Roughly the same distribution applies to
customers that purchase PHLX Orders, whether alone or in combination
with other products. Although the distributions are roughly similar,
different customers are purchasing different products in different
combinations.
As explained above, firms generally purchase PHLX Orders rather
than depth of book data to lower technology costs and reduce processing
time, while still providing customers insight into open executable
orders that could impact the BBO.
A more specific explanation of how TOPO, PHLX Orders and TOPO Plus
Orders is used will vary based on use case, with many firms employing
multiple use cases. Market makers, banks, hedge funds, and proprietary
traders often use top of book and orders feeds for trading, order
routing and analysis. Banks may use market data for prime brokerage
services, proprietary trading, or risk management. The clients of
market data vendors will utilize the data for many different purposes.
We do not have sufficient visibility into our customers' businesses and
proprietary processes to be able to determine precise data usage by
customer category.
Proposed Changes
For TOPO, the Exchange proposes to increase the monthly charge for
Internal Distributors from $2,000 to $2,500, and the monthly charge for
External Distributors from $2,500 to $3,000. No changes are proposed
for Non-Professional and Professional Subscriber fees.
For PHLX Orders, the Exchange proposes to increase the monthly
charge for Internal Distributors from $3,000 to $3,500, and the monthly
charge for External Distributors from $3,500 to $4,000. No changes are
proposed for Non-Professional and Professional Subscriber fees.
For TOPO Plus Orders, the Exchange proposes to increase the monthly
charge for Internal Distributors from $4,500 to $5,500, and the monthly
charge for External Distributors from $5,000 to $6,000. No changes are
proposed for Non-Professional and Professional Subscriber fees.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\29\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\30\ 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.
---------------------------------------------------------------------------
\29\ 15 U.S.C. 78f(b).
\30\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The proposal provides for the equitable allocation of reasonable
dues, fees and other charges because the proposed fees are comparable
to, and in some cases less than, those of similarly situated exchanges.
The proposal is not designed to permit unfair discrimination
between customers, issuers, brokers, or dealers because: (i) it is not
unfair discrimination to charge external distributors more for the
product because external distributors receive additional value not
available to internal distributors by disseminating information
externally and typically charging for the service; and (ii) the market
data feeds subject to the proposed fee will be available to
[[Page 99928]]
customers on a non-discriminatory basis.
Equitable Allocation of Reasonable Dues, Fees and Other Charges
The Exchange assesses the market share for each of the eighteen
options markets utilizing total options contracts traded in 2024
through October 28, 2024, as set forth in the following graph: \31\
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\31\ Market share is the percentage of volume on a particular
exchange relative to the total volume across all exchanges, and
indicates the amount of order flow directed to that exchange. High
levels of market share enhance the value of trading and ports. Total
contracts include both multi-list options and proprietary options
products. Proprietary options products are products with
intellectual property rights that are not multi-listed. BX does not
list proprietary products.
---------------------------------------------------------------------------
Figure 1
[GRAPHIC] [TIFF OMITTED] TN11DE24.030
The proposed fees for Top of PHLX Options are comparable to those
charged by Miami International Securities Exchange, LLC (``MIAX''),
MIAX Emerald (for both internal and external distribution) and Cboe
Exchange, Inc. (``Cboe'') (for external distribution), as summarized in
Table 1:
Table 1
----------------------------------------------------------------------------------------------------------------
Monthly fees (top of book)
Exchange Market -----------------------------------------------------------
share % Internal distribution External distribution
----------------------------------------------------------------------------------------------------------------
PHLX..................................... 9.1 $2,500...................... $3,000.
MIAX..................................... 5.7 $4,000...................... $6,000
($2,000 for simple orders; ($3,000 for simple orders;
$2,000 for complex orders). $3,000 for complex orders).
MIAX Emerald............................. 3.6 $2,500...................... $3,500.
($1,250 for simple orders; ($1,750 for simple orders;
$1,250 for complex orders). $1,750 for complex orders).
Cboe..................................... 17.9 N/A......................... $8,000.
(fee is part of a package of ($5,000 for simple orders;
multiple products). $3,000 for complex orders).
----------------------------------------------------------------------------------------------------------------
A more detailed discussion of the comparison follows.
MIAX
MIAX, with a market share of approximately 5.7%, provides less
information in its top of book feeds than PHLX, yet charges more for
those feeds than the PHLX proposal.
MIAX charges different fees for internal distribution of its simple
and complex top of book feeds: $2,000 for its Top of Market feed, and
another $2,000 for its complex Top of Market feed, for a total of
$4,000.\32\ PHLX TOPO includes both simple and complex orders in a
single feed, and therefore the proposed fee of $2,500 for internal
distribution is much less than the $4,000 charged by MIAX for less
information.
---------------------------------------------------------------------------
\32\ See MIAX Options Exchange Fee Schedule (October 1, 2024),
available at https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Options_Fee_Schedule_10012024.pdf.
---------------------------------------------------------------------------
For external distribution, MIAX charges $3,000 for Top of Market
feed, and another $3,000 for its complex top
[[Page 99929]]
of market feed,\33\ for a total of $6,000. The proposed fees of $3,000
for the PHLX TOPO feed, which includes both simple and complex orders,
is far less than the fees charged by MIAX for less information.
---------------------------------------------------------------------------
\33\ See id.
---------------------------------------------------------------------------
MIAX Emerald
The same analysis applies to MIAX Emerald, with a market share of
3.6%. Similar to MIAX, MIAX Emerald charges different fees for simple
and complex top of book feeds: $1,250 for internal distribution of its
Top of Market feed, and another $1,250 for internal distribution of its
Complex Top of Market feed, for a total of $2,500.\34\ This is the same
amount proposed for TOPO internal distribution, for less information.
---------------------------------------------------------------------------
\34\ See MIAX Emerald Options Schedule (December 8, 2022),
available at https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Emerald_Fee_Schedule_12082022c.pdf.
---------------------------------------------------------------------------
MIAX Emerald charges $1,750 for external distribution of its Top of
Market feed, and another $1,750 for external distribution of its
complex Top of Market feed, for a total of $3,500.\35\ MIAX Emerald
therefore charges more than PHLX's proposed monthly charges of $3,000
for external distribution of TOPO, notwithstanding the fact that MIAX
Emerald provides less market information.
---------------------------------------------------------------------------
\35\ See id.
---------------------------------------------------------------------------
This supports the proposition that the proposed PHLX fees are
comparable to those of other exchanges and therefore reasonable.
Cboe
Cboe has an approximately 17.9% market share, nearly twice the PHLX
market share of 9.1%.\36\
---------------------------------------------------------------------------
\36\ See Nasdaq, Options Market Statistics (Last updated
November 3, 2023), available at https://www.nasdaqtrader.com/Trader.aspx?id=OptionsVolumeSummary.
---------------------------------------------------------------------------
The Cboe fee for external distribution of the top of book feed is
$5,000 per month.\37\ If a customer also wants Cboe's Complex Order
Book (``COB''), the customer would pay an additional $3,000.\38\ These
fees are comparable to the proposed PHLX fee of $3,000 per month for
external distribution of a combined simple and complex orders feed
because the higher fee for Cboe reflects the higher market share of the
Cboe exchange.
---------------------------------------------------------------------------
\37\ See id.
\38\ As explained in note 32, Cboe waives its Complex Order Book
feed for internal distribution of top of book and depth, but not for
external distribution of top of book.
---------------------------------------------------------------------------
PHLX Orders
The proposed fees for PHLX Orders are comparable to the fees
charged by MIAX, MIAX Emerald, and Nasdaq ISE, LLC (``ISE''), an
affiliate of PHLX, as set forth in Table 2 below.
Table 2
----------------------------------------------------------------------------------------------------------------
Monthly fees (orders)
Exchange Market -----------------------------------------------------------
share % Internal distribution External distribution
----------------------------------------------------------------------------------------------------------------
PHLX..................................... 9.1 $3,500...................... $4,000.
MIAX..................................... 5.7 3,000....................... $3,500.
MIAX Emerald............................. 3.6 3,000....................... $3,500.
ISE...................................... 6.2 3,000....................... $3,000 per month plus $20
per month per controlled
device.
----------------------------------------------------------------------------------------------------------------
MIAX
MIAX has a market share of approximately 5.7%, somewhat more than
half of PHLX's market share of 9.1%.
MIAX charges $3,000 for internal distribution of its orders
feed.\39\ PHLX, with a market share over 50 percent more than MIAX,
proposes to charge $3,500 for the same service. The PHLX fee is only
about 17% more than the MIAX fee.
---------------------------------------------------------------------------
\39\ See MIAX Options Exchange Fee Schedule (October 1, 2024),
available at https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Options_Fee_Schedule_10012024.pdf.
---------------------------------------------------------------------------
MIAX charges $3,500 for external distribution of its orders
feed.\40\ PHLX, with a market share over 50 percent more than MIAX,
proposes to charge $4,000 for the same service. The PHLX fee is only
about 14% more than the MIAX fee.
---------------------------------------------------------------------------
\40\ See id.
---------------------------------------------------------------------------
MIAX Emerald
MIAX Emerald also has a market share of 3.6%, less than half of
PHLX's market share of 9.1%.
Like MIAX, MIAX Emerald charges $3,000 for internal distribution of
its orders feed.\41\ PHLX, with a market share over twice that of MIAX
Emerald, proposes to charge $3,500 for the same service. The PHLX fee
is only about 17% more than the MIAX fee.
---------------------------------------------------------------------------
\41\ See MIAX Emerald Options Schedule (December 8, 2022),
available at https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Emerald_Fee_Schedule_12082022c.pdf.
---------------------------------------------------------------------------
MIAX Emerald also charges $3,500 for external distribution of its
orders feed.\42\ PHLX, with a market share over twice that of MIAX
Emerald, proposes to charge $4,000 for the same service. The PHLX fee
is only about 14% more than the MIAX Emerald fee.
---------------------------------------------------------------------------
\42\ See id.
---------------------------------------------------------------------------
ISE
ISE has a market share of approximately 6.2%, below PHLX's market
share of 9.1%.
ISE charges $3,000 for internal distribution of its Order Feed.\43\
This is comparable to the proposed PHLX Orders feed for internal
distribution of $3,500 because PHLX has a larger share and the ISE feed
does not include information on complex orders.
---------------------------------------------------------------------------
\43\ See Nasdaq ISE, LLC Rules, Options 7, Section 10(G) (Nasdaq
ISE Order Feed). The ISE Order feed differs from the PHLX Orders
feed in that it provides information only on simple orders, whereas
the PHLX Orders feed provides information on both simple and complex
orders.
---------------------------------------------------------------------------
For external distribution, ISE charges $3000 per month, plus an
additional $20 per month for each controlled device, up to a maximum
fee of $5,000 per month.\44\ This is comparable to the proposed PHLX
fee of $4,000 (the ISE fee may be above or below the PHLX fee,
depending on the number of controlled devices) and the proposed fee is
reasonable given PHLX's larger market share.
---------------------------------------------------------------------------
\44\ See id.
---------------------------------------------------------------------------
TOPO Plus Orders
The separate fees for TOPO and PHLX Orders are each reasonable
because, as shown above, they are comparable to other SRO fees. The
TOPO Plus Orders product offers a discount for the purchase of these
two separate feeds together. A discount from fees that have already
been shown to be reasonable is
[[Page 99930]]
reasonable and consistent with the Exchange Act.
In summary, (i) the proposed fees for Top of PHLX Options are
comparable to those of MIAX, MIAX Emerald and Cboe; (ii) the proposed
fees for PHLX Orders are comparable to those of MIAX, MIAX Emerald, and
ISE; and (iii) the proposed PHLX TOPO Plus Orders fees offer a discount
from the amount the customer would pay for TOPO and Orders separately,
and, because these separate fees are comparable to those charged by
other exchanges, the proposed discount for TOPO Plus Orders is
reasonable.
No Unfair Discrimination Between Customers, Issuers, Brokers, or
Dealers
The proposal is not designed to permit unfair discrimination
between customers, issuers, brokers, or dealers because: (i) external
distributors receive additional value not available to internal
distributors; and (ii) these market data feeds will be available on a
non-discriminatory basis.
External Distributors receive additional value not available to
Internal Distributors by disseminating information externally and
typically charging for the service. This additional value supports
higher fees for external distribution for TOPO, PHLX Orders, and TOPO
Plus Orders. Higher fees for external distribution of data are common
throughout the industry, and nearly universal among exchanges. The
difference in value between internal and external distribution is also
reflected in the current fee schedule, which has previously been shown
to be consistent with the Exchange Act.
The three market data feeds at issue here--TOPO, PHLX Orders, and
TOPO Plus Orders--are used by a variety of market participants for a
variety of purposes. Users include regulators, market makers, competing
exchanges, media, retail, academics, portfolio managers. Market data
feeds will be available to members of all of these groups on a non-
discriminatory basis.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
Nothing in the Proposal burdens inter-market competition (the
competition among self-regulatory organizations) because approval of
the Proposal does not impose any burden on the ability of other options
exchanges to compete. PHLX fees are comparable to, and in some cases
less than, those of other exchanges, as discussed above.
Nothing in the Proposal burdens intra-market competition (the
competition among consumers of exchange data) because PHLX market data
is available to any customer under the same fee schedule as any other
customer, and any market participant that wishes to purchase PHLX
market data can do so on a non-discriminatory basis.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission shall: (a) by order approve
or disapprove such proposed rule change, or (b) institute proceedings
to determine whether the proposed rule change should be 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-2024-67 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-2024-67. 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-2024-67 and should be
submitted on or before December 31, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\45\
---------------------------------------------------------------------------
\45\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-29040 Filed 12-10-24; 8:45 am]
BILLING CODE 8011-01-P
