[Federal Register Volume 87, Number 196 (Wednesday, October 12, 2022)]
[Notices]
[Pages 61640-61642]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-22081]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95985; File No. SR-Phlx-2022-37]


Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Temporarily 
Waive Certain Port-Related Fees at Equity 7, Section 3

October 5, 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 September 22, 2022, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule change as described in Items I and II, 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 temporarily waive certain port-related 
fees at Equity 7, Section 3, 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.

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 Equity 7, 
Section 3 to provide a temporary fee waiver for newly added OUCH order 
entry ports (production and Testing Facility environments) with the 
updated version of the OUCH Order entry protocol,\3\ referred to as 
``OUCH 5.0.'' The Exchange has proposed \4\ to introduce this new 
upgraded version of the OUCH Order entry protocol that will enable the 
Exchange to make functional enhancements and improvements to specific 
Order Types \5\ and Order Attributes.\6\
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    \3\ The OUCH Order entry protocol is a proprietary protocol that 
allows subscribers to quickly enter orders into the System and 
receive executions. OUCH accepts limit Orders from members, and if 
there are matching Orders, they will execute. Non-matching Orders 
are added to the Limit Order Book, a database of available limit 
Orders, where they are matched in price-time priority. OUCH only 
provides a method for members to send Orders and receive status 
updates on those Orders. See https://www.nasdaqtrader.com/Trader.aspx?id=OUCH.
    \4\ See Securities Exchange Act Release No. 95769 (September 14, 
2022), 87 FR 57527 (September 20, 2022).
    \5\ An ``Order Type'' is a standardized set of instructions 
associated with an Order that define how it will behave with respect 
to pricing, execution, and/or posting to the Exchange Book when 
submitted to the Exchange. See Equity 1, Section 1(e).
    \6\ An ``Order Attribute'' is a further set of variable 
instructions that may be associated with an Order to further define 
how it will behave with respect to pricing, execution, and/or 
posting to the Exchange Book when submitted to the Exchange. See id.
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    First, the Exchange proposes to amend Equity 7, Section 3 to 
provide a 30-day waiver of the OUCH production port fee for up to five 
\7\ newly added OUCH ports with the updated version of the OUCH Order 
entry protocol, OUCH 5.0. The fee waiver would be offered for a three-
month period, beginning on October 10, 2022. At the end of the three-
month period, users would no longer be eligible for the waiver. A user 
may only receive the 30-day waiver once per port (up to a maximum of 
five ports) within the three-month window. The Exchange proposes to 
offer this temporary waiver to encourage new, prospective customers to 
adopt and returning customers to migrate to the updated version of the 
OUCH Order entry protocol.
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    \7\ The fee waiver is limited to a maximum of five OUCH 
production ports per Web Central Registration Depository (``CRD'') 
membership.
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    Second, the Exchange proposes to amend Equity 7, Section 3 to 
provide a 30-day waiver of the $300 Testing Facility fee for up to five 
\8\ newly added OUCH Testing Facility ports with the updated version of 
the OUCH Order entry protocol, OUCH 5.0. This fee waiver would be 
offered for a three-month period, beginning on September 22, 2022. At 
the end of the three-month period, users would no longer be

[[Page 61641]]

eligible for the waiver. A user may only receive the 30-day waiver once 
per port (up to a maximum of five ports) within the three-month window. 
The Testing Facility provides subscribers with a virtual System test 
environment that closely approximates the production environment on 
which they may test their automated systems that integrate with the 
Exchange. For example, the Testing Facility provides subscribers a 
virtual System environment for testing upcoming releases and product 
enhancements, as well as testing firm software prior to implementation. 
The Exchange proposes to offer this temporary waiver to encourage 
customers to test the updated version of the OUCH Order entry protocol 
free of charge.
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    \8\ The fee waiver is limited to a maximum of five OUCH Testing 
Facility ports per CRD membership.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\9\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\10\ 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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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange's proposed changes to its fee schedule are reasonable 
in several respects. As a threshold matter, the Exchange is subject to 
significant competitive forces in the market for equity securities 
transaction services that constrain its pricing determinations in that 
market. 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.'' \11\
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    \11\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    The Exchange believes that it is reasonable to provide temporary 
fee waivers for up to five newly added OUCH order entry ports 
(production and Testing Facility environments) with the updated version 
of the OUCH Order entry protocol, OUCH 5.0. The Exchange believes it is 
important to provide users an opportunity to test OUCH 5.0 free of 
charge. The temporary fee waivers would encourage users to test and 
adopt the enhanced OUCH Order entry protocol.
    The Exchange believes that the proposed temporary fee waivers are 
an equitable allocation of reasonable dues, fees and other charges and 
not unfairly discriminatory because the Exchange will apply the same 
temporary fee waivers to all similarly situated members. The waivers 
will reduce fees for and benefit all users that add OUCH 5.0 order 
entry ports (production and Testing Facility environments) within the 
three-month window.

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.
Intramarket Competition
    The Exchange does not believe that its proposal will place any 
category of Exchange participants at a competitive disadvantage. The 
proposed change to temporarily waive fees for newly added OUCH 5.0 
order entry ports (production and Testing Facility environments) will 
apply uniformly to all similarly situated participants. The temporary 
fee waivers are available to all users and would enable users to test 
the OUCH enhancements at no cost.
Intermarket Competition
    The Exchange believes that the proposed temporary fee waivers will 
not impose a burden on competition because the Exchange's execution 
services are completely voluntary and subject to extensive competition 
both from the other live exchanges and from off-exchange venues, which 
include alternative trading systems that trade national market system 
stock.
    The proposed fee waivers are reflective of this competition 
because, as a threshold issue, the Exchange is a relatively small 
market so its ability to burden intermarket competition is limited. In 
this regard, even the largest U.S. equities exchange by volume only has 
17-18% market share, which in most markets could hardly be categorized 
as having enough market power to burden competition. The proposed fee 
waivers would facilitate adoption of enhancements to the Exchange's 
System and Order entry protocols, which is pro-competitive because the 
enhancements bolster the efficiency, functionality, and overall 
attractiveness of the Exchange in an absolute sense and relative to its 
peers. Accordingly, the Exchange does not believe that the proposed 
change will impair the ability of members, participants, 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 
19(b)(3)(A)(ii) of the Act,\12\ and Rule 19b-4(f)(2) \13\ thereunder.
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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 17 CFR 240.19b-4(f)(2).
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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-2022-37 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-2022-37. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your

[[Page 61642]]

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-2022-37 and should be submitted on or before November 2, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-22081 Filed 10-11-22; 8:45 am]
BILLING CODE 8011-01-P