[Federal Register Volume 84, Number 77 (Monday, April 22, 2019)]
[Notices]
[Pages 16725-16730]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07980]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85654; File No. SR-PHLX-2019-15]


Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Pricing Schedule

April 16, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

[[Page 16726]]

(``Act''), \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on April 10, 2019, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I, II, 
and III, below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Pricing Schedule at Section 1, 
B, ``Customer Rebate Program,'' Section 3, ``Rebates and Fees for 
Adding and Removing Liquidity in SPY'' and Section 6, E, ``Market 
Access and Routing Subsidy (``MARS'').'' \3\
---------------------------------------------------------------------------

    \3\ The Commission notes that the Exchange initially filed the 
proposed Pricing Schedule amendment on April 1, 2019 (SR-PHLX-2019-
10). On April 10, 2019, the Exchange withdrew that filing and 
submitted this filing.
---------------------------------------------------------------------------

    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaqphlx.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 Exchange proposes to amend the Pricing Schedule at (i) Section 
1, B, ``Customer Rebate Program,'' to decrease certain Customer 
Rebates; (ii) Section 3, ``Rebates and Fees for Adding and Removing 
Liquidity in SPY'' to decrease a Simple Order Customer Fee for Removing 
Liquidity and decrease all rebate tiers; an [sic] (iii) Section 6, E, 
``Market Access and Routing Subsidy (``MARS'')'' to add a new rebate 
tier. Each change will be described below in more detail.
Customer Rebate
    The Exchange proposes to amend the Pricing Schedule at Section 1, 
B, ``Customer Rebate Program'' to lower certain rebates. Today, the 
Exchange pays rebates to members who transacted a certain amount of 
Customer volume. Specifically, Phlx totals Customer volume in Multiply 
Listed Options (including SPY) that is electronically-delivered and 
executed, except volume associated with electronic QCC Orders, as 
defined in Exchange Rule 1080(o). Rebates are paid on Customer Rebate 
Tiers according to the below: \4\
---------------------------------------------------------------------------

    \4\ Members and member organizations under Common Ownership may 
aggregate their Customer volume for purposes of calculating the 
Customer Rebate Tiers and receiving rebates. Affiliated Entities may 
aggregate their Customer volume for purposes of calculating the 
Customer Rebate Tiers and receiving rebates.

----------------------------------------------------------------------------------------------------------------
                          Percentage thresholds
                           of national customer
                           volume in multiply-
 Customer rebate tiers    listed equity and ETF     Category A      Category B      Category C      Category D
                             options classes,
                          excluding SPY options
                                (monthly)
----------------------------------------------------------------------------------------------------------------
Tier 1.................  0.00%-0.60%............           $0.00           $0.00           $0.00           $0.00
Tier 2.................  Above 0.60%-1.10%......          * 0.10          * 0.10         *# 0.16         *# 0.21
Tier 3.................  Above 1.10%-1.60%......            0.15          * 0.12         *# 0.18         *# 0.22
Tier 4.................  Above 1.60%-2.50%......            0.20            0.16          # 0.22          # 0.26
Tier 5.................  Above 2.50%............            0.21            0.17          # 0.22          # 0.27
----------------------------------------------------------------------------------------------------------------

    The Exchange pays a Category A Rebate to members who execute 
electronically-delivered Customer Simple Orders in Penny Pilot Options 
and Customer Simple Orders in Non-Penny Pilot Options in Options 7, 
Section 4 symbols.\5\ The Exchange pays a Category B Rebate on Customer 
PIXL Orders in Options 7, Section 4 symbols that execute against non-
Initiating Order interest. In the instance where member organizations 
qualify for Tier 4 or higher in the Customer Rebate Program, Customer 
PIXL Orders that execute against a PIXL Initiating Order is paid a 
rebate of $0.14 per contract. Rebates on Customer PIXL Orders are 
capped at 4,000 contracts per order for Simple PIXL Orders. The 
Exchange pays a Category C Rebate to members who execute 
electronically-delivered Customer Complex Orders in Penny Pilot Options 
in Options 7, Section 4 symbols. Rebates are paid on Customer PIXL 
Complex Orders in Options 7, Section 4 symbols that execute against 
non-Initiating Order interest. Customer Complex PIXL Orders that 
execute against a Complex PIXL Initiating Order are not paid a rebate 
under any circumstance. The Category C Rebate is not paid when an 
electronically-delivered Customer Complex Order, including a Customer 
Complex PIXL Order, executes against another electronically-delivered 
Customer Complex Order. Finally, the Exchange pays a Category D Rebate 
to members who execute electronically-delivered Customer Complex Orders 
in Non-Penny Pilot Options in Options 7, Section 4 symbols. Rebates are 
paid on Customer PIXL Complex Orders in Options 7, Section 4 symbols 
that execute against non-Initiating Order interest. Customer Complex 
PIXL Orders that execute against a Complex PIXL Initiating Order are 
not paid a rebate under any circumstance. The Category D Rebate are not 
paid when an electronically-delivered Customer Complex Order, including 
a Customer Complex PIXL Order, executes against another electronically-
delivered Customer Complex Order. Rebates are not paid on NDX or NDXP 
contracts in any Category, however NDX and NDXP contracts will count 
toward the volume requirement to qualify for a Customer Rebate Tier.
---------------------------------------------------------------------------

    \5\ Options 7, Section 4 describes pricing for Multiply Listed 
Options Fees (Includes options overlying equities, ETFs, ETNs and 
indexes which are Multiply Listed).
---------------------------------------------------------------------------

    Today, the Exchange pays a $0.05 per contract Category C and D 
rebate in addition to the applicable Tier 2, 3, 4 and 5 rebates to 
members or member organizations or member or member organization 
affiliated under Common Ownership provided the member or member 
organization qualified for any MARS Payments in Options 7, Section

[[Page 16727]]

6, E. The Exchange proposes to decrease the Category C and D rebates 
applicable Tier 2, 3, 4 and 5 rebates to members or member 
organizations or member or member organization affiliated under Common 
Ownership provided the member or member organization qualified for any 
MARS Payments in Options 7, Section 6, E. The Exchange proposes to 
decrease the Category C Rebate from $0.05 to $0.04 per contract. The 
Exchange proposes to decrease the Category D Rebate from $0.05 to $0.02 
per contract. While these rebates are decreasing, the Exchange believes 
that the Customer Rebates will continue to incentivize member 
organizations to execute against Customer orders.
Rebates and Fees for SPY
    The Exchange proposes to amend the Pricing Schedule at Section 3, 
``Rebates and Fees for Adding and Removing Liquidity in SPY'' to 
decrease the Simple Order Customer Fee for Removing Liquidity and 
decrease all rebate tiers. Today, the Exchange assesses a Customer Fee 
for Removing Liquidity in SPY of $0.45 per contract. All other market 
participants, Specialists,\6\ Market Makers,\7\ Firms,\8\ Broker-
Dealers \9\ and Professionals,\10\ are assessed a Fee for Removing 
Liquidity in SPY of $0.48 per contract. The Exchange proposes to lower 
the Customer Fee for Removing Liquidity in SPY from $0.45 to $0.42 per 
contract. The Exchange's proposal to lower the Customer Fee for 
Removing Liquidity in SPY from $0.45 to $0.42 per contract will 
encourage a greater amount of Customer orders, even if submitted by 
other market participants, to remove volume from the Exchange.
---------------------------------------------------------------------------

    \6\ The term ``Specialist'' applies to transactions for the 
account of a Specialist (as defined in Exchange Rule 1020(a)). A 
Specialist is an Exchange member who is registered as an options 
specialist pursuant to Rule 1020(a). An options Specialist includes 
a Remote Specialist which is defined as an options specialist in one 
or more classes that does not have a physical presence on an 
Exchange floor and is approved by the Exchange pursuant to Rule 501.
    \7\ The term ``ROT, SQT and RSQT'' applies to transactions for 
the accounts of Registered Option Traders (``ROTs''), Streaming 
Quote Traders (``SQTs''), and Remote Streaming Quote Traders 
(``RSQTs''). For purposes of the Pricing Schedule, the term ``Market 
Maker'' will be utilized to describe fees and rebates applicable to 
ROTs, SQTs and RSQTs. RSQTs may also be referred to as Remote Market 
Markers (``RMMs''). The term ROT is defined in Exchange Rule 1014(b) 
as a regular member of the Exchange located on the trading floor who 
has received permission from the Exchange to trade in options for 
his own account. A ROT includes SQTs and RSQTs as well as on and 
off-floor ROTS. The term SQT is defined in Exchange Rule 
1014(b)(ii)(A) as an ROT who has received permission from the 
Exchange to generate and submit option quotations electronically in 
options to which such SQT is assigned. The term RSQT is defined in 
Exchange Rule in 1014(b)(ii)(B) as an ROT that is a member 
affiliated with an RSQTO with no physical trading floor presence who 
has received permission from the Exchange to generate and submit 
option quotations electronically in options to which such RSQT has 
been assigned. A Remote Streaming Quote Trader Organization or 
``RSQTO,'' which may also be referred to as a Remote Market Making 
Organization (``RMO''), is a member organization in good standing 
that satisfies the RSQTO readiness requirements in Rule 507(a).
    \8\ The term ``Firm'' applies to any transaction that is 
identified by a member or member organization for clearing in the 
Firm range at OCC.
    \9\ The term ``Broker-Dealer'' applies to any transaction which 
is not subject to any of the other transaction fees applicable 
within a particular category.
    \10\ The term ``Professional'' applies to transactions for the 
accounts of Professionals, as defined in Exchange Rule 1000(b)(14) 
means any person or entity that (i) is not a broker or dealer in 
securities, and (ii) places more than 390 orders in listed options 
per day on average during a calendar month for its own beneficial 
account(s).
---------------------------------------------------------------------------

    Today, a Simple Order Rebate for Adding Liquidity is paid to 
Specialists and Market Makers who add the requisite amount of 
electronically executed Specialist and Market Maker Simple Order 
contracts per day in a month in SPY.\11\ Today the Exchange pays the 
following rebates:
---------------------------------------------------------------------------

    \11\ The Exchange notes that the Customer Rebates offered in 
Section 1, B do not apply to electronic executions in SPY.

------------------------------------------------------------------------
                                                            Rebate for
           Tiers                 Average daily volume         adding
                                       ``ADV''               liquidity
------------------------------------------------------------------------
1..........................  1 to 2,499.................           $0.15
2..........................  2,500 to 4,999.............            0.18
3..........................  5,000 to 19,999............            0.21
4..........................  20,000 to 34,999...........            0.27
5..........................  35,000 to 49,999...........            0.30
6..........................  greater than 49,999........            0.35
------------------------------------------------------------------------

    The Exchange proposes to lower each rebate tier by $0.03 per 
contract so the proposed rebates would be:

------------------------------------------------------------------------
                                                            Rebate for
           Tiers                 Average daily volume         adding
                                       ``ADV''               liquidity
------------------------------------------------------------------------
1..........................  1 to 2,499.................           $0.12
2..........................  2,500 to 4,999.............            0.15
3..........................  5,000 to 19,999............            0.18
4..........................  20,000 to 34,999...........            0.24
5..........................  35,000 to 49,999...........            0.27
6..........................  greater than 49,999........            0.32
------------------------------------------------------------------------

    While the Exchange is lowering the amount of rebates \12\ it would 
pay to Specialists and Market Makers who add the requisite amount of 
electronically executed Specialist and Market Maker Simple Order 
contracts per day in a month in SPY, the Exchange believes the proposed 
rebates will continue to incentivize Market Makers to add liquidity on 
Phlx.
---------------------------------------------------------------------------

    \12\ The Exchange would lower Tier 1 (1 to 2,499) from $0.15 to 
$0.12 per contract; Tier 2 (2,500 to 4,999) would be lowered from 
$0.18 to $0.15 per contract; Tier 3 (5,000 to 19,999) would be 
lowered from $0.21 to $0.18 per contract; Tier 4 (20,000 to 34,999) 
would be lowered from $0.27 to $0.24 per contract; Tier 5 (35,000 to 
49,999) would be lowered from $0.30 to $0.27 per contract; and Tier 
6 (greater than 49,999) would be lowered from $0.35 to $0.32 per 
contract.
---------------------------------------------------------------------------

MARS
    Today, MARS, [sic] pays a subsidy to Phlx members that provide 
certain order routing functionalities to other Phlx members and/or use 
such

[[Page 16728]]

functionalities themselves. Generally, under MARS, Phlx pays 
participating Phlx members to subsidize their costs of providing 
routing services to route orders to Phlx. To qualify for MARS, a Phlx 
member's order routing functionality is required to meet certain 
criteria.\13\ Any Phlx member may apply for MARS, provided the 
requirements are met, including a robust and reliable System. The 
member is solely responsible for implementing and operating its System. 
The Exchange is not proposing to amend eligibility standards.
---------------------------------------------------------------------------

    \13\ Specifically, a Phlx member's routing system (``hereinafter 
System'') is required to: (1) Enable the electronic routing of 
orders to all of the U.S. options exchanges, including Phlx; (2) 
provide current consolidated market data from the U.S. options 
exchanges; and (3) be capable of interfacing with Phlx's API to 
access current Phlx match engine functionality. Further, the 
member's System needs to cause Phlx to be the one of the top five 
default destination exchanges for individually executed marketable 
orders if Phlx is at the national best bid or offer (``NBBO''), 
regardless of size or time, but allow any user to manually override 
Phlx as a default destination on an order-by-order basis. 
Notwithstanding the above, with respect to Complex Orders a Phlx 
member's routing system is not required to enable the electronic 
routing of orders to all of the U.S. options exchanges or provide 
current consolidated market data from the U.S. options exchanges. 
Any Phlx member is permitted to avail itself of this arrangement, 
provided that its order routing functionality incorporates the 
features described above and satisfies Phlx that it appears to be 
robust and reliable. The member remains solely responsible for 
implementing and operating its system. The Exchange does not require 
Complex Orders to enable the electronic routing of orders to all of 
the U.S. options exchanges or provide current consolidated market 
data from the U.S. options exchanges.
---------------------------------------------------------------------------

    Today, a MARS Payment would be made to Phlx members that have 
System Eligibility and have routed the requisite number of Eligible 
Contracts daily in a month, which were executed on Phlx. For the 
purpose of qualifying for the MARS Payment, Eligible Contracts include 
Firm, Broker-Dealer, Joint Back Office or ``JBO'' \14\ or Professional 
equity option orders that are electronically delivered and executed. 
Eligible Contracts do not include floor-based orders, qualified 
contingent cross or ``QCC'' orders,\15\ price improvement or ``PIXL'' 
orders,\16\ Mini-Option orders \17\ or Singly-Listed Options \18\ 
orders. The Eligible Contracts requirements are not being amended.
---------------------------------------------------------------------------

    \14\ The term ``Joint Back Office'' or ``JBO'' applies to any 
transaction that is identified by a member or member organization 
for clearing in the Firm range at OCC and is identified with an 
origin code as a JBO. A JBO will be priced the same as a Broker-
Dealer. A JBO participant is a member, member organization or non-
member organization that maintains a JBO arrangement with a clearing 
broker-dealer (``JBO Broker'') subject to the requirements of 
Regulation T Section 220.7 of the Federal Reserve System as further 
discussed at Exchange Rule 703.
    \15\ A QCC Order is comprised of an order to buy or sell at 
least 1000 contracts that is identified as being part of a qualified 
contingent trade, as that term is defined in Rule 1080(o)(3), 
coupled with a contra-side order to buy or sell an equal number of 
contracts. The QCC Order must be executed at a price at or between 
the NBBO and be rejected if a Customer order is resting on the 
Exchange book at the same price. A QCC Order shall only be submitted 
electronically from off the floor to the Exchange's match engine. 
See Rule 1080(o).
    \16\ PIXL is the Exchange's price improvement mechanism known as 
Price Improvement XL or (PIXL\SM\). See Rule 1087.
    \17\ Mini Options are further specified in Phlx Rule 1012, 
Commentary .13.
    \18\ Singly Listed Options are options overlying currencies, 
equities, ETFs, ETNs treasury securities and indexes not listed on 
another exchange.
---------------------------------------------------------------------------

    Today, Phlx members that have System Eligibility and have executed 
the requisite number of Eligible Contracts in a month are paid the 
following per contract rebates: \19\
---------------------------------------------------------------------------

    \19\ The specified MARS Payment are paid on all executed 
Eligible Contracts which are routed to Phlx through a participating 
Phlx member's System and meet the requisite Eligible Contracts ADV. 
No payment are [sic] made with respect to orders that are routed to 
Phlx, but not executed. A Phlx member is not entitled to receive any 
other revenue for the use of its System specifically with respect to 
orders routed to Phlx with the exception of the Marketing Fee.

------------------------------------------------------------------------
                                                   MARS payment
         Tiers            Average daily  -------------------------------
                        volume (``ADV'')      Non-SPY           SPY
------------------------------------------------------------------------
1.....................  1,000...........           $0.01           $0.01
2.....................  30,000..........            0.10            0.10
3.....................  40,000..........            0.12            0.12
4.....................  52,500..........            0.14            0.12
5.....................  65,000..........            0.18            0.12
6.....................  75,000..........            0.20            0.12
------------------------------------------------------------------------

    The Exchange proposes to adopt a new Tier 2 rebate for members that 
have System Eligibility and have executed the requisite number of 
Eligible Contracts in a month. The new Tier 2 rebate would require 
average daily volume (``ADV'') of 20,000 contracts and pay a Non-SPY 
and SPY MARS Payment of $0.05. The Exchange proposes to renumber each 
subsequent tier.\20\ The Exchange believes that with this proposal MARS 
will continue to attract higher volumes of electronic equity and ETF 
options volume to the Exchange from non-Phlx market participants as 
well as Phlx members with the proposed amendments.
---------------------------------------------------------------------------

    \20\ Current Tier 2 would be renumbered as Tier 3, current Tier 
3 would be renumbered as Tier 4, current Tier 4 would be renumbered 
as Tier 5, current Tier 5 would be renumbered as Tier 6, and current 
Tier 6 would be renumbered as Tier 7.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\21\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\22\ 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.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

Customer Rebate Program
    The Exchange's proposal to decrease the Category C Rebate from 
$0.05 to $0.04 and decrease the Category D Rebate from $0.05 to $0.02 
per contract is reasonable because the Exchange will continue to pay a 
rebate to incentivize members to execute Customer Complex Orders in 
Penny Pilot Options, as well as Customer Complex Orders in Non-Penny 
Pilot Options, despite the lower rebate.
    The Exchange's proposal to decrease the Category C Rebate from 
$0.05 to $0.04 and decrease the Category D Rebate from $0.05 to $0.02 
per contract is equitable and not unfairly discriminatory because the 
Exchange will uniformly pay Category C and D rebates to all qualifying 
market participants. Any market participant may qualify for a Customer 
Rebate.
Rebates and Fees for SPY
    The Exchange's proposal to lower the Customer Fee for Removing 
Liquidity in SPY from $0.45 to $0.42 per contract is

[[Page 16729]]

reasonable because it will encourage a greater amount of Customer 
orders, even if submitted by other market participants, to remove 
volume from the Exchange. Customer liquidity benefits all market 
participants by providing more trading opportunities, which attracts 
Specialists and Market Makers.
    The Exchange's proposal to lower the Customer Fee for Removing 
Liquidity in SPY from $0.45 to $0.42 per contract is equitable and not 
unfairly discriminatory because Customer orders will continue to be 
assessed the lowest Fees for Removing Liquidity in SPY Simple Orders. 
Customer liquidity benefits all market participants by providing more 
trading opportunities, which attracts Specialists and Market Makers. An 
increase in the activity of these market participants in turn 
facilitates tighter spreads, which may cause an additional 
corresponding increase in order flow from other market participants.
    The Exchange's proposal to lower the amount of rebates paid to 
Specialists and Market Makers who add the requisite amount of 
electronically executed Specialist and Market Maker Simple Order 
contracts per day in a month in SPY by $0.03 per contract for each tier 
\23\ is reasonable because although the Exchange is lowering the amount 
of rebates it would pay to Specialists and Market Makers who add the 
requisite amount of electronically executed Specialist and Market Maker 
Simple Order contracts per day in a month in SPY, the Exchange believes 
the proposed rebates will continue to incentivize Market Makers to add 
liquidity on Phlx.
---------------------------------------------------------------------------

    \23\ The Exchange would lower Tier 1 (1 to 2,499) from $0.15 to 
$0.12 per contract; Tier 2 (2,500 to 4,999) would be lowered from 
$0.18 to $0.15 per contract; Tier 3 (5,000 to 19,999) would be 
lowered from $0.21 to $0.18 per contract; Tier 4 (20,000 to 34,999) 
would be lowered from $0.27 to $0.24 per contract; Tier 5 (35,000 to 
49,999) would be lowered from $0.30 to $0.27 per contract; and Tier 
6 (greater than 49,999) would be lowered from $0.35 to $0.32 per 
contract.
---------------------------------------------------------------------------

    The Exchange's proposal to lower the amount of rebates paid to 
Specialists and Market Makers who add the requisite amount of 
electronically executed Specialist and Market Maker Simple Order 
contracts per day in a month in SPY by $0.03 per contract for each tier 
is equitable and not unfairly discriminatory because the Exchange is 
uniformly reducing each tier of the 6 tier rebate it pays to 
Specialists and Market Makers who add the requisite amount of 
electronically executed Specialist and Market Maker Simple Order 
contracts per day in a month in SPY. Every Specialist and Market Maker 
will be equally impacted. Also, the Exchange notes that every 
Specialist and Market Maker may earn a rebate on each contract as the 
tier schedule starts with 1 contract.
MARS
    The Exchange believes that adopting a new Tier 2 with an ADV of 
20,000 contracts which pays a MARS Payment of $0.05 for Non-Penny and 
Penny is reasonable because all Phlx members may qualify for another 
tier that allows contracts below 30,000 (Tier 2) but higher than 1,000 
contracts (Tier 1) and in return receive the higher rebate of $0.05 as 
compared to the $0.01 rebate for Tier 1. The proposed tier should 
attract higher volumes of electronic equity and ETF options volume to 
the Exchange, which will benefit all Phlx members by offering greater 
price discovery, increased transparency, and an increased opportunity 
to trade on the Exchange. The expanded MARS Payments should enhance the 
competitiveness of the Exchange, particularly with respect to those 
exchanges that offer their own front-end order entry system or one they 
subsidize in some manner. The adoption of a new Tier 2 will incentivize 
Phlx members to achieve an even higher rebate, provided the Phlx member 
is eligible for MARS. Further, the tier structure will allow Phlx 
members to price their services at a level that will enable them to 
attract order flow from market participants who would otherwise utilize 
an existing front-end order entry mechanism offered by the Exchange's 
competitors instead of incurring the cost in time and money to develop 
their own internal systems to be able to deliver orders directly to the 
Exchange's System.
    The Exchange believes that adopting a new Tier 2 with an ADV of 
20,000 contracts which pays a MARS Payment of $0.05 for Non-Penny and 
Penny is equitable and not unfairly discriminatory because the Exchange 
will uniformly pay all Phlx members the rebates specified in the 
proposed MARS Payment tiers provided the Phlx member has executed the 
requisite number of Eligible Contracts. Moreover, the Exchange believes 
that the proposed MARS Payments offered by the Exchange are equitable 
and not unfairly discriminatory because any qualifying Phlx member that 
offers market access and connectivity to the Exchange and/or utilize 
such functionality themselves may earn the MARS Payment for all 
Eligible Contracts.

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. In terms of inter-market 
competition, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem fee levels at a particular venue to be 
excessive, or rebate opportunities available at other venues to be more 
favorable. In such an environment, the Exchange must continually adjust 
its fees to remain competitive with other exchanges and with 
alternative trading systems that have been exempted from compliance 
with the statutory standards applicable to exchanges. Because 
competitors are free to modify their own fees in response, and because 
market participants may readily adjust their order routing practices, 
the Exchange believes that the degree to which fee changes in this 
market may impose any burden on competition is extremely limited.
Customer Rebate Program
    The Exchange's proposal to decrease the Category C Rebate from 
$0.05 to $0.04 and decrease the Category D Rebate from $0.05 to $0.02 
per contract does not impose an undue burden on competition because the 
Exchange will uniformly pay Category C and D rebates to all qualifying 
market participants. Any market participant may qualify for a Customer 
Rebate.
Rebates and Fees for SPY
    The Exchange's proposal to lower the Customer Fee for Removing 
Liquidity in SPY from $0.45 to $0.42 per contract does not create an 
undue burden on competition because Customers will continue to be 
assessed the lowest Fees for Removing Liquidity in SPY Simple Orders. 
Customer liquidity benefits all market participants by providing more 
trading opportunities, which attracts Specialists and Market Makers. An 
increase in the activity of these market participants in turn 
facilitates tighter spreads, which may cause an additional 
corresponding increase in order flow from other market participants.
    The Exchange's proposal to lower the amount of rebates paid to 
Specialists and Market Makers who add the requisite amount of 
electronically executed Specialist and Market Maker Simple Order 
contracts per day in a month in SPY by $0.03 per contract for each tier 
does not impose an undue burden on competition because the Exchange is 
uniformly reducing each tier of the 6 tier rebate it pays to 
Specialists and Market Makers who add the requisite amount of 
electronically

[[Page 16730]]

executed Specialist and Market Maker Simple Order contracts per day in 
a month in SPY. Every Specialist and Market Maker will be equally 
impacted. Also, the Exchange notes that every Specialist and Market 
Maker may earn a rebate on each contract as the tier schedule starts 
with 1 contract.
MARS
    The Exchange believes that adopting a new Tier 2 with an ADV of 
20,000 contracts which pays a MARS Payment of $0.05 for Non-Penny and 
Penny does not impose an undue burden on intra-market competition 
because the Exchange will uniformly pay all Phlx members the rebates 
specified in the proposed MARS Payment tiers provided the Phlx member 
has executed the requisite number of Eligible Contracts. Moreover, the 
Exchange believes that the proposed MARS Payments offered by the 
Exchange are equitable and not unfairly discriminatory because any 
qualifying Phlx member that offers market access and connectivity to 
the Exchange and/or utilizes such functionality themselves may earn the 
MARS Payment for all Eligible Contracts.

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

    No written comments were either solicited or received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\24\
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-PHLX-2019-15 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-PHLX-2019-15. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (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 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. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-PHLX-2019-15 and should be submitted on 
or before May 13, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
---------------------------------------------------------------------------

    \25\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-07980 Filed 4-19-19; 8:45 am]
 BILLING CODE 8011-01-P