[Federal Register Volume 87, Number 138 (Wednesday, July 20, 2022)]
[Notices]
[Pages 43343-43346]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-15445]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95280; File No. SR-Phlx-2022-29]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Phlx
Options 7, Section 4
July 14, 2022.
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 June 30, 2022, 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.
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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 Substance
of the Proposed Rule Change
The Exchange proposes to amend Phlx's Pricing Schedule at Options
7, Section 4, Multiply Listed Options Fees (Includes options overlying
equities, ETFs, ETNs and indexes which are Multiply Listed) (Excludes
SPY and broad-based index options symbols listed within Options 7,
Section 5.A).
While the changes proposed herein are effective upon filing, the
Exchange has designated that the amendments be operative on July 1,
2022.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/phlx/rules, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Phlx proposes to amend its Pricing Schedule at Options 7, Section
4, Multiply Listed Options Fees (Includes options overlying equities,
ETFs, ETNs and indexes which are Multiply Listed) (Excludes SPY and
broad-based index options symbols listed within Options 7, Section
5.A). Specifically, Phlx proposes to remove the rule text within note 1
of Options 7, Section 4 which provides a discount.
Today, Phlx assesses the following electronic Penny Symbol Options
Transaction Charges: $0.00 per contract to Customer; \3\ $0.48 per
contract \4\ to Professionals; \5\ $0.22 per contract to Lead Market
Makers \6\ and Maker Makers; \7\ $0.48 per contract \8\ for Broker-
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Dealers; \9\ and $0.48 per contract \10\ for Firms.\11\ Today, Phlx
assesses the following electronic non-Penny Symbol Options Transaction
Charges: $0.00 per contract to Customer; $0.75 per contract \12\ to
Professionals; $0.25 per contract \13\ to Lead Market Makers and Maker
Makers; $0.75 per contract \14\ for Broker-Dealers; and $0.75 per
contract \15\ for Firms.
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\3\ The term ``Customer'' applies to any transaction that is
identified by a member or member organization for clearing in the
Customer range at The Options Clearing Corporation (``OCC'') which
is not for the account of a broker or dealer or for the account of a
``Professional'' (as that term is defined in Options 1, Section
1(b)(45)). See Options 7, Section 1(c).
\4\ Electronic Complex Orders will be assessed $0.40 per
contract. See note 2 within Options 7, Section 4 of the Pricing
Schedule.
\5\ The term ``Professional'' applies to transactions for the
accounts of Professionals, as defined in Options 1, Section 1(b)(45)
means any person or entity that (i) is not a broker or dealer in
securities, and (ii) places more than 390 orders in listed options
per day on average during a calendar month for its own beneficial
account(s). See Options 7, Section 1(c).
\6\ The term ``Lead Market Maker'' applies to transactions for
the account of a Lead Market Maker (as defined in Options 2, Section
12(a)). A Lead Market Maker is an Exchange member who is registered
as an options Lead Market Maker pursuant to Options 2, Section
12(a). An options Lead Market Maker includes a Remote Lead Market
Maker which is defined as an options Lead Market Maker in one or
more classes that does not have a physical presence on an Exchange
floor and is approved by the Exchange pursuant to Options 2, Section
11. See Options 7, Section 1(c). The term ``Floor Lead Market
Maker'' is a member who is registered as an options Lead Market
Maker pursuant to Options 2, Section 12(a) and has a physical
presence on the Exchange's trading floor. See Options 8, Section
2(a)(3).
\7\ The term ``Market Maker'' is defined in Options 1, Section
1(b)(28) as a member of the Exchange who is registered as an options
Market Maker pursuant to Options 2, Section 12(a). A Market Maker
includes SQTs and RSQTs as well as Floor Market Makers. See Options
7, Section 1(c). The term ``Floor Market Maker'' is a Market Maker
who is neither an SQT or an RSQT. A Floor Market Maker may provide a
quote in open outcry. See Options 8, Section 2(a)(4).
\8\ Electronic Complex Orders will be assessed $0.40 per
contract. See note 2 within Options 7, Section 4 of the Pricing
Schedule.
\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. See Options 7, Section 1(c).
\10\ Electronic Complex Orders will be assessed $0.40 per
contract. See note 2 within Options 7, Section 4 of the Pricing
Schedule.
\11\ The term ``Firm'' applies to any transaction that is
identified by a member or member organization for clearing in the
Firm range at The Options Clearing Corporation. See Options 7,
Section 1(c).
\12\ Any member or member organization under Common Ownership
with another member or member organization or an Appointed OFP of an
Affiliated Entity that qualifies for Customer Rebate Tiers 4 or 5 in
Options 7, Section 2 of the Pricing Schedule will be assessed $0.65
per contract. See note 3 within Options 7, Section 4 of the Pricing
Schedule.
\13\ Any member or member organization under Common Ownership
with another member or member organization or an Appointed MM of an
Affiliate Entity that qualifies for Customer Rebate Tiers 4 or 5 in
Options 7, Section 2 of the Pricing Schedule will be assessed $0.23
per contract. See note 4 within Options 7, Section 4 of the Pricing
Schedule.
\14\ Any member or member organization under Common Ownership
with another member or member organization or an Appointed OFP of an
Affiliated Entity that qualifies for Customer Rebate Tiers 4 or 5 in
Options 7, Section 2 of the Pricing Schedule will be assessed $0.65
per contract. See note 3 within Options 7, Section 4 of the Pricing
Schedule.
\15\ Any member or member organization under Common Ownership
with another member or member organization or an Appointed OFP of an
Affiliated Entity that qualifies for Customer Rebate Tiers 4 or 5 in
Options 7, Section 2 of the Pricing Schedule will be assessed $0.65
per contract. See note 3 within Options 7, Section 4 of the Pricing
Schedule.
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Today, Phlx assesses an electronic Firm Penny and non-Penny Options
Transactions Charges of $0.45 per contract for simple orders in symbols
AAPL, BAC, EEM, FB, FXI, IWM, QQQ, TWTR, VXX and XLF. Phlx proposes to
remove the $0.45 per contract Options Transaction Charge for simple
orders applicable to AAPL, BAC, EEM, FB, FXI, IWM, QQQ, TWTR, VXX and
XLF and reserve note 1 of Options 7, Section 4 of the Pricing Schedule.
The Exchange notes that the symbols listed within note 1 of Options 7,
Section 4 of the Pricing Schedule are all Penny Symbols and would,
therefore, with this proposal be assessed an Options Transaction Charge
of $0.48 per contract for simple orders in symbols AAPL, BAC, EEM, FB,
FXI, IWM, QQQ, TWTR, VXX and XLF.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\16\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\17\ 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.
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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(4) and (5).
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The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \18\
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\18\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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Likewise, in NetCoalition v. Securities and Exchange Commission
\19\ (``NetCoalition'') the D.C. Circuit upheld the Commission's use of
a market-based approach in evaluating the fairness of market data fees
against a challenge claiming that Congress mandated a cost-based
approach.\20\ As the court emphasized, the Commission ``intended in
Regulation NMS that `market forces, rather than regulatory
requirements' play a role in determining the market data . . . to be
made available to investors and at what cost.'' \21\
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\19\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\20\ See NetCoalition, at 534-535.
\21\ Id. at 537.
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Further, ``[n]o one disputes that competition for order flow is
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market
system, buyers and sellers of securities, and the broker-dealers that
act as their order-routing agents, have a wide range of choices of
where to route orders for execution'; [and] `no exchange can afford to
take its market share percentages for granted' because `no exchange
possesses a monopoly, regulatory or otherwise, in the execution of
order flow from broker dealers' . . . .'' \22\ Although the court and
the SEC were discussing the cash equities markets, the Exchange
believes that these views apply with equal force to the options
markets.
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\22\ Id. at 539 (quoting Securities Exchange Act Release No.
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008)
(SR-NYSEArca-2006-21)).
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The Exchange believes that it is reasonable to eliminate the
electronic Firm Penny and non-Penny Options Transactions Charges of
$0.45 per contract for simple orders in symbols AAPL, BAC, EEM, FB,
FXI, IWM, QQQ, TWTR, VXX and XLF. By eliminating note 1 within Options
7, Section 4 of the Pricing Schedule, the Exchange would assess a Firm
Options Transaction Charge of $0.48 per contract in simple orders for
all Penny Symbols, which includes symbols AAPL, BAC, EEM, FB, FXI, IWM,
QQQ, TWTR, VXX and XLF. Since the aforementioned symbols are all Penny
Symbols, eliminating note 1 within Options 7, Section 4 would not cause
any Firm to be assessed the electronic non-Penny Options Transaction
Charge of $0.75 per contract for simple orders in symbols AAPL, BAC,
EEM, FB, FXI, IWM, QQQ, TWTR, VXX and XLF. While the Exchange is
removing this discount for these symbols, the Exchange believes that
its Options Transaction Charges remain competitive.
The Exchange believes that it is equitable and not unfairly
discriminatory to eliminate the electronic Firm Penny and non-Penny
Options Transactions Charges of $0.45 per contract for simple orders in
symbols AAPL, BAC, EEM, FB, FXI, IWM, QQQ, TWTR, VXX and XLF and,
instead, assess these symbols an electronic Firm Options Transaction
Charge of $0.48 per contract for simple orders similar to other Penny
Symbols. Customers would continue to pay no electronic Penny Symbol
Options Transaction Charge. Customer liquidity benefits all market
participants by providing more trading opportunities which attracts
market makers. An increase in the activity of these market participants
(particularly in response to pricing) in turn facilitates tighter
spreads which may cause an additional corresponding increase in order
flow from other market participants. Lead Market Makers and Market
Makers would continue to pay a $0.22 per contract electronic Penny
Symbol Options Transaction Charge, which is lower than the $0.48 per
contract electronic Penny Symbol Options Transaction Charge paid by
Professionals, Broker-Dealers and Firms. Lead Market Makers and Market
Makers add value through continuous quoting and are subject to
additional
[[Page 43345]]
requirements and obligations unlike other market participants.\23\
Incentivizing Lead Market Makers Market Makers to provide greater
liquidity benefits all market participants through the quality of order
interaction. The Exchange believes that it is equitable and not
unfairly discriminatory to assess AAPL, BAC, EEM, FB, FXI, IWM, QQQ,
TWTR, VXX and XLF an electronic Firm Penny Options Transactions Charge
of $0.48 per contract in simple orders similar to all other Penny
Symbols. With this proposal, the electronic Firm, Professional and
Broker-Dealer Options Transaction Charge for simple orders would be the
same for all Penny Symbols.
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\23\ See Phlx Options 2, Section 5.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
Inter-Market Competition
The proposal does not impose an undue burden on inter-market
competition. The Exchange believes its proposal remains competitive
with other options markets and will offer market participants with
another choice of where to transact options. The Exchange notes that it
operates in a highly competitive market in which market participants
can readily favor competing venues if they deem fee levels at a
particular venue to be excessive, or rebate opportunities available at
other venues to be more favorable. In such an environment, the Exchange
must continually adjust its fees to remain competitive with other
exchanges. Because competitors are free to modify their own fees in
response, and because market participants may readily adjust their
order routing practices, the Exchange believes that the degree to which
fee changes in this market may impose any burden on competition is
extremely limited.
Intra-Market Competition
The proposed amendment does not impose an undue burden on intra-
market competition. The Exchange believes that eliminating the
electronic Firm Penny and non-Penny Options Transactions Charges of
$0.45 per contract for simple orders in symbols AAPL, BAC, EEM, FB,
FXI, IWM, QQQ, TWTR, VXX and XLF and, instead, assessing these symbols
an electronic Firm Options Transaction Charge of $0.48 per contract for
simple orders, similar to other Penny Symbols, does not create an undue
burden on competition. Customers would continue to pay no electronic
Penny Symbol Options Transaction Charge. Customer liquidity benefits
all market participants by providing more trading opportunities which
attracts market makers. An increase in the activity of these market
participants (particularly in response to pricing) in turn facilitates
tighter spreads which may cause an additional corresponding increase in
order flow from other market participants. Lead Market Makers and
Market Makers would continue to pay a $0.22 per contract electronic
Penny Symbol Options Transaction Charge, which is lower than the $0.48
per contract electronic Penny Symbol Options Transaction Charge paid by
Professionals, Broker-Dealers and Firms. Lead Market Makers and Market
Makers add value through continuous quoting and are subject to
additional requirements and obligations unlike other market
participants.\24\ Incentivizing Lead Market Makers Market Makers to
provide greater liquidity benefits all market participants through the
quality of order interaction. Assessing AAPL, BAC, EEM, FB, FXI, IWM,
QQQ, TWTR, VXX and XLF an electronic Firm Penny Options Transactions
Charge of $0.48 per contract in simple orders, similar to all other
Penny Symbols, does not impose an undue burden on competition. With
this proposal, the electronic Firm, Professional and Broker-Dealer
Options Transaction Charge for simple orders would be the same for all
Penny Symbols.
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\24\ See Phlx Options 2, Section 5.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\25\
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\25\ 15 U.S.C. 78s(b)(3)(A)(ii).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-Phlx-2022-29 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-2022-29. 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-2022-29 and
should be submitted on or before August 10, 2022.
[[Page 43346]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-15445 Filed 7-19-22; 8:45 am]
BILLING CODE 8011-01-P