[Federal Register Volume 80, Number 104 (Monday, June 1, 2015)]
[Notices]
[Pages 31087-31090]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-13072]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75041; File No. SR-Phlx-2015-45]


Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
the Exchange's Pricing Schedule Under Section VIII With Respect to 
Execution and Routing of Orders in Securities Priced at $1 or More Per 
Share

May 26, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on May 18, 2015, NASDAQ OMX 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's Pricing Schedule 
under Section VIII, entitled ``NASDAQ OMX PSX FEES,'' with respect to 
execution and routing of orders in securities priced at $1 or more per 
share.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqomxphlx.cchwallstreet.com/, 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
    The purpose of the proposed rule change is to amend certain charges 
and fees for order execution and routing applicable to the use of the 
order execution and routing services of the NASDAQ OMX PSX System 
(``PSX'') by member organizations for all securities traded at $1 or 
more per share.
    Specifically, the charge to a member organization that executes in 
PSX will increase to $0.0029 per share executed regardless of where the 
shares are listed. This means an increase from: (i) $0.0026 to $0.0029 
per share executed for shares executed in The NASDAQ Stock Market LLC 
(``Nasdaq'')-listed securities; (ii) $0.0025 to $0.0029 per share 
executed for shares executed in New York Stock Exchange (``NYSE'')-
listed securities; and (iii) $0.0026 to $0.0029 per share executed for 
shares in securities listed on exchanges other than Nasdaq or NYSE. The 
Exchange believes that these increases enable it to balance the need to 
fund credits and operational costs.
    The Exchange will also increase certain credits to member 
organizations that provide liquidity through PSX. Specifically, the 
credit to a member organization that executes in PSX for a displayed 
quote/order will increase from $0.0025 to $0.0028 per share executed 
for quotes/orders entered by a member organization that provides and 
accesses 0.35% or more of Consolidated Volume during the month--
previously this rate required adding 0.12% of Consolidated Volume. The 
term ``accesses'' is another way of saying taking liquidity. This 
change also eliminates the requirements that (i) the quote/order is 
entered through a PSX Market Participant ID (``MPID'') through which 
the member organization displays, on average over the course of the 
month, 100 shares or more at the national best bid and/or national best 
offer at least 25% of the time during regular market hours in the 
security that is the subject of the quote/order, or (ii) the member 
organization displays, on average over the course of the month, 100 
shares or more at the national best bid and/or national best offer at 
least 25% of the time during regular market hours in 500 or more 
securities. The Exchange believes that eliminating these requirements 
will encourage firms to participate in PSX by allowing their 
participation in the market to define the credit rate they receive.
    The Exchange will also increase the credit to a member organization 
that

[[Page 31088]]

executes in PSX for a displayed quote/order from $0.0024 to $0.0027 per 
share executed for quotes/orders entered by a member organization that 
provides and accesses 0.25% or more of Consolidated Volume during the 
month--previously this rate required adding 0.04% of Consolidated 
Volume.
    The Exchange will similarly increase the credit to a member 
organization that executes in PSX for a displayed quote/order from 
$0.0021 to $0.0025 per share executed for quotes/orders entered by a 
member organization that provides and accesses 0.05% or more of 
Consolidated Volume during the month--previously this required that the 
member organization provide an average daily volume of 100,000 or more.
    The Exchange is also adding a new tier for displayed quotes/orders 
of $0.0023 per share executed for quotes/orders entered by a member 
organization that provides and accesses daily volume of 100,000 or more 
shares during the month.
    The Exchange will also increase the credit to a member organization 
that executes in PSX for all other displayed quotes/orders from $0.0015 
to $0.0020 per share executed.
    The Exchange is also adding another new tier for displayed quotes/
orders with an order size of 2,000 or more shares that will receive a 
$0.0001 credit in addition to the credits discussed above. Orders 
modified by the PSX participant entering the order or by the PSX System 
processes so that after such modification the unexecuted order size is 
below 2,000 shares will no longer qualify as an order of 2,000 or more 
shares.
    The Exchange is also adding a new credit tier for non-displayed 
orders of a $0.0015 per share executed credit for orders with midpoint 
pegging that provide liquidity entered by a member organization that 
provides 1,000,000 shares or more average daily volume of non-displayed 
liquidity during the month.
    Finally, the Exchange is clarifying that the credit tier for non-
displayed orders of $0.0010 per share executed will continue to apply 
to all other orders with midpoint pegging that provide liquidity.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\3\ in general, and with 
Section 6(b)(4) and 6(b)(5) of the Act,\4\ 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 or system which the Exchange operates or controls, and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \3\ 15 U.S.C. 78f.
    \4\ 15 U.S.C. 78f(b)(4) and (5).
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    The proposed increases to the credits and charges in the fee 
schedule under the Exchange's Pricing Schedule under Section VIII are 
reflective of the Exchange's ongoing efforts to use pricing incentive 
programs to attract order flow to the Exchange and improve market 
quality. The goal of these pricing incentives is to provide meaningful 
incentives for members to increase their participation on the Exchange.
    First, the Exchange is proposing modest increases to the charges 
that a member organization entering an order that executes in PSX from: 
(i) $0.0026 to $0.0029 per share executed for shares executed in 
Nasdaq-listed securities; (ii) $0.0025 to $0.0029 per share executed 
for shares executed in NYSE-listed securities; and (iii) $0.0026 to 
$0.0029 per share executed for shares in securities listed on exchanges 
other than Nasdaq or NYSE. The Exchange believes that these modest 
increases are reasonable because they reflect the Exchange's need to 
adjust its credits and fees in response to the costs and benefits 
provided by the Exchange. Additionally, these modest increases are 
reasonable because the Exchange is able to balance the need to fund 
credits and operational costs.
    The Exchange also believes that the proposed changes are consistent 
with an equitable allocation of fees and are not unfairly 
discriminatory because they apply to all member organizations that 
enter orders that execute in PSX and affects all members equally in the 
same way.
    Next, the Exchange proposes to increase the credit to a member 
organization that executes in PSX for a displayed quote/order from 
$0.0025 to $0.0028 per share executed for quotes/orders entered by a 
member organization that provides and accesses 0.35% or more of 
Consolidated Volume during the month (previously this rate required 
adding 0.12% of Consolidated Volume) and eliminate the requirements 
that (i) the quote/order is entered through a PSX MPID through which 
the member organization displays, on average over the course of the 
month, 100 shares or more at the national best bid and/or national best 
offer at least 25% of the time during regular market hours in the 
security that is the subject of the quote/order, or (ii) the member 
organization displays, on average over the course of the month, 100 
shares or more at the national best bid and/or national best offer at 
least 25% of the time during regular market hours in 500 or more 
securities. The Exchange believes these changes are reasonable because 
increasing the credit and replacing the qualifying requirements with a 
single increased ``provides and accesses Consolidated Volume'' 
requirement provides member organizations with a simpler, less 
confusing process for determining eligibility for the credit. 
Additionally, the Exchange believes increasing this pricing incentive 
will provide meaningful incentives for members to increase their 
participation on the Exchange. The Exchange believes including 
``accesses'' as part of the criteria will increase the quality of the 
market by allowing firms to decide how to participate most meaningfully 
on PSX. The requirement to provide and access 0.35% is reasonable 
because by achieving this activity level firms will be improving the 
market quality on PSX and thus receive a correspondingly higher credit 
than those firms that do not participate as actively on PSX. The 
Exchange also believes that the proposed rule change is consistent with 
an equitable allocation of fees and is not unfairly discriminatory 
because it affects all members equally and in the same way.
    The Exchange also proposes to increase the credit to a member 
organization that executes in PSX for a displayed quote/order from 
$0.0024 to $0.0027 per share executed for quotes/orders entered by a 
member organization that provides and accesses 0.25% or more of 
Consolidated Volume during the month--previously this rate required 
adding 0.04% of Consolidated Volume. The Exchange believes the proposed 
change is reasonable because increasing this pricing incentive will 
provide meaningful incentives for members to increase their 
participation on the Exchange. The Exchange believes including 
``accesses'' as part of the criteria will increase the quality of the 
market by allowing firms to decide how to participate most meaningfully 
on PSX. The requirement to provide and access 0.25% is reasonable 
because by achieving this activity level firms will be improving the 
market quality on PSX and thus receive a correspondingly higher credit 
than those firms that do not participate as actively on PSX. The 
Exchange also believes that the proposed rule change is consistent with 
an equitable allocation of fees and is not unfairly discriminatory 
because it affects all members equally and in the same way.

[[Page 31089]]

    Additionally, the Exchange proposes to increase the credit to a 
member organization that executes in PSX for a displayed quote/order 
from $0.0021 to $0.0025 per share executed for quotes/orders entered by 
a member organization that provides and accesses 0.05% or more of 
Consolidated Volume during the month--previously this required that the 
member organization provide an average daily volume of 100,000 or more. 
The Exchange believes the proposed rule change is reasonable because 
increasing this pricing incentive will provide meaningful incentives 
for members to increase their participation on the Exchange. The 
Exchange believes including ``accesses'' as part of the criteria will 
increase the quality of the market by allowing firms to decide how to 
participate most meaningfully on PSX. The requirement to provide and 
access 0.05% is reasonable because by achieving this activity level 
firms will be improving the market quality on PSX and thus receive a 
correspondingly higher credit than those firms that do not participate 
as actively on PSX. The Exchange also believes that the proposed rule 
change is consistent with an equitable allocation of fees and is not 
unfairly discriminatory because it affects all members equally and in 
the same way.
    The Exchange also proposes to add a new tier for displayed quotes/
orders. The new credit tier is $0.0023 per share executed for quotes/
orders entered by a member organization that provides and accesses 
daily volume of 100,000 or more shares during the month. The Exchange 
believes the proposed rule change is reasonable because this new credit 
tier will provide an additional meaningful incentive for members to 
increase their participation on the Exchange. The Exchange also 
believes that the proposed rule change is consistent with an equitable 
allocation of fees and is not unfairly discriminatory because it 
affects all members equally and in the same way.
    The Exchange believes that the proposed rule change to increase the 
credit to a member organization that executes in PSX for all other 
displayed quotes/orders from $0.0015 to $0.0020 per share executed is 
reasonable because increasing this pricing incentive will provide a 
meaningful incentive for members to increase their participation on the 
Exchange. The Exchange also believes that the proposed rule change is 
consistent with an equitable allocation of fees and is not unfairly 
discriminatory because it affects all members equally and in the same 
way.
    The Exchange proposes to add another new tier for displayed quotes/
orders size of 2,000 or more shares that will receive a $0.0001 credit 
in addition to the credits discussed above. Orders modified by the PSX 
participant entering the order or by the PSX System processes so that 
after such modification the unexecuted order size is below 2,000 shares 
will no longer qualify as an order of 2,000 or more shares. The 
Exchange believes the proposed rule change is reasonable because this 
new credit tier will provide an additional meaningful incentive for 
members to increase their participation on the Exchange. The Exchange 
also believes that the proposed rule change is consistent with an 
equitable allocation of fees and is not unfairly discriminatory because 
it affects all members equally and in the same way by allowing members 
to receive an additional $0.0001 credit per share executed in addition 
to the credits previously discussed by using relatively large orders of 
2,000 or more shares.
    The Exchange believes that the proposed rule change to add a new 
credit tier for non-displayed orders of $0.0015 per share executed for 
orders with midpoint pegging that provide liquidity entered by a member 
organization that provides 1,000,000 shares or more average daily 
volume of non-displayed liquidity during the month change is reasonable 
because this new credit tier will provide an additional meaningful 
incentive for members to increase their participation on the Exchange. 
The Exchange also believes that the proposed rule change is consistent 
with an equitable allocation of fees and is not unfairly discriminatory 
because the new credit tier is uniformly available to all members and 
affects all members equally and in the same way.
    The Exchange also believes that the proposed rule change clarify 
that the credit tier for non-displayed orders of $0.0010 per share 
executed will continue to apply to all other orders with midpoint 
pegging that provide liquidity is reasonable because it clarifies the 
treatment of all other orders with midpoint pegging that provide 
liquidity with the addition of the new credit tier discussed in the 
paragraph immediately above. The Exchange also believes that the 
proposed rule change is consistent with an equitable allocation of fees 
and is not unfairly discriminatory because it affects all members 
equally and in the same way.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended.\5\ 
Phlx notes that it operates in a highly competitive market in which 
market participants can readily favor dozens of different competing 
exchanges and alternative trading systems if they deem charges at a 
particular venue to be excessive, or credit opportunities available at 
other venues to be more favorable. In such an environment, the Exchange 
must continually adjust its charges and credits to remain competitive 
with other exchanges. Because competitors are free to modify their own 
charges and credits in response, and because market participants may 
readily adjust their order routing practices, the Exchange believes 
that the degree to which changes to charges and credits in this market 
may impose any burden on competition is extremely limited.
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    \5\ 15 U.S.C. 78f(b)(8).
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    In this instance, the changes to charges and credits do not impose 
a burden on competition because the Exchange membership is optional and 
is the subject of competition from other exchanges. The increased 
credits and charges are reflective of the intent to increase the order 
flow on the Exchange. For these reasons, the Exchange does not believe 
that any of the proposed changes will impair the ability of members or 
competing order execution venues to maintain their competitive standing 
in the financial markets. Moreover, because there are numerous 
competitive alternatives to the use of the Exchange, it is likely that 
the Exchange will lose market share as a result of the changes if they 
are unattractive to market participants.
    Accordingly, Phlx does not believe that the proposed rule changes 
will impair the ability of members or competing order execution venues 
to maintain their competitive standing in the financial markets.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section

[[Page 31090]]

19(b)(3)(A)(ii) of the Act.\6\ 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 necessary or appropriate in the public interest, for the 
protection of investors, or 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.
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    \6\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-Phlx-2015-45 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2015-45. 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 Web site (http://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 Web site 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 such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-Phlx-2015-45, and should be 
submitted on or before June 22, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-13072 Filed 5-29-15; 8:45 am]
 BILLING CODE 8011-01-P