[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
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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