[Federal Register Volume 89, Number 58 (Monday, March 25, 2024)]
[Notices]
[Pages 20739-20744]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-06175]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99770; File No. SR-PHLX-2024-14]


Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, 
Section 4

March 19, 2024.
    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 March 15, 2024, 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.\3\
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    \3\ The Exchange initially filed the proposed pricing change on 
February 29, 2024 to be operative on March 1, 2024 (SR-Phlx-2024-
07). On March 12, 2024, the Exchange withdrew SR-Phlx-2024-07 and 
submitted SR-Phlx-2024-11. On March 15, 2024, the Exchange withdrew 
SR-Phlx-2024-11 and submitted this filing.
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    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 within 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: (1) lower the 
Professional \4\ Floor \5\ Options Transaction Charges \6\ in Multiply 
Listed Penny and Non-Penny Symbols; \7\ (2) increase the Lead Market 
Maker \8\ and Market Maker \9\ Floor Options Transaction Charges in 
Multiply Listed Penny and Non-Penny Symbols; and (3) increase the 
Monthly Firm Fee Cap. Each change will be described below.
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    \4\ 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 Phlx's Pricing Schedule at Options 7, Section 1(c).
    \5\ The term ``floor transaction'' is a transaction that is 
effected in open outcry on the Exchange's Trading Floor. See Phlx's 
Pricing Schedule at Options 7, Section 1(c).
    \6\ Options Transaction Charges are per contract. Floor 
transaction fees apply to any ``as of'' or ``reversal'' adjustments 
for manually processed trades originally submitted electronically or 
through FBMS. See Phlx's Pricing Schedule at Options 7, Section 4, 
footnote 8.
    \7\ For consistency, the Exchange proposes to capitalize the 
term ``non-Penny'' in the table in Options 7, Section 4 of the 
Pricing Schedule.
    \8\ 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 Phlx's Pricing Schedule at Options 7, Section 1(c).
    \9\ 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 Phlx's Pricing Schedule at Options 7, Section 
1(c).
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Floor Options Transaction Charges
    Today, the Exchange assesses Options Transaction Charges in 
Multiply Listed options, including options overlying equities, ETFs, 
ETNs and indexes and excluding options in SPY \10\ and broad-

[[Page 20740]]

based index options symbols listed within Options 7, Section 5.A. The 
Exchange currently assesses the following Floor Options Transaction 
Charges in Multiply Listed Penny and Non-Penny Symbols: $0.05 per 
contract for a Professional, $0.35 per contract for a Lead Market Maker 
and Market Maker, and $0.25 per contract for a Broker-Dealer \11\ and 
Firm.\12\ Customers \13\ are not assessed an Options Transaction Charge 
in Multiply Listed Penny or Non-Penny Symbols.
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    \10\ Transactions in SPY originating on the Exchange floor are 
subject to the Multiply Listed Options Fees (see Multiply Listed 
Options Fees in Options 7, Section 4). However, if one side of the 
transaction originates on the Exchange floor and any other side of 
the trade was the result of an electronically submitted order or a 
quote, then these fees will apply to the transactions which 
originated on the Exchange floor and contracts that are executed 
electronically on all sides of the transaction. The one side of the 
transaction which originates on the Exchange floor will count toward 
the volume which qualifies a participant for the Simple Order Rebate 
for Adding Liquidity for Lead Market Makers and Market Makers in 
SPY. See Options 7, Section 3, Part C.
    \11\ 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 Phlx's Pricing Schedule at Options 
7, Section 1(c).
    \12\ 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 (``OCC''). See Phlx's 
Pricing Schedule at Options 7, Section 1(c).
    \13\ The term ``Customer'' applies to any transaction that is 
identified by a member or member organization for clearing in the 
Customer range at 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 Phlx's Pricing Schedule 
at Options 7, Section 1(c).
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    At this time, the Exchange proposes to decrease the Professional 
Floor Options Transaction Charges in Penny and Non-Penny Symbols from 
$0.05 to $0.00 per contract. The Exchange believes the decreased 
Professional Options Transaction Charges will attract a greater amount 
of Professional orders to Phlx's Trading Floor. The Exchange notes that 
NYSE Arca, Inc. (``NYSE Arca'') also assesses no Professional Customer 
fee for manual executions.\14\
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    \14\ NYSE Arca modified its fees for Professional Customer 
manual executions from a $0.25 per contract fee for such executions, 
which fee had been waived for the period August 1, 2022 to December 
31, 2022, to $0.00 per contract. NYSE Arca stated that the proposed 
change was intended to continue to attract manually executed 
Professional Customer orders to the Exchange, and the Exchange 
believed that all market participants stood to benefit from an 
increase in such volume, which would promote market depth, 
facilitate tighter spreads and enhance price discovery, and may lead 
to a corresponding increase in order flow from other market 
participants as well. See Securities Exchange Act Release No. 96763 
(January 27, 2023), 88 FR 7119 (February 2, 2023) (S (SR-NYSEARCA-
2023-09).
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    At this time, the Exchange proposes to increase the Lead Market 
Maker and Market Maker Floor Options Transaction Charges in Penny and 
Non-Penny Symbols from $0.35 to $0.50 per contract. While the Exchange 
is increasing the Lead Market Maker and Market Maker Floor Options 
Transaction Charge by $0.15 per contract (increase from $0.35 to $0.50 
per contract), the Exchange believes that its pricing will continue to 
attract order flow to the Exchange. Today, Lead Market Makers and 
Market Makers are subject to a ``Monthly Market Maker Cap'' of $500,000 
for: (i) electronic Option Transaction Charges, excluding surcharges 
and excluding options overlying broad-based index options symbols 
listed within Options 7, Section 5.A; and (ii) Qualified Contingent 
Cross or ``QCC'' Transaction Fees (as defined in Exchange Options 3, 
Section 12 and Floor QCC Orders, as defined in Options 8, Section 
30(e)).\15\ The Exchange proposes this increased fee for business 
reasons and to encourage competition on its trading floor. The Exchange 
believes Lead Market Makers and Market Makers will continue to quote 
aggressively, adding liquidity to the trading floor, so that they may 
participate in transactions as they do today. Lead Market Makers and 
Market Makers have a time and place advantage in the trading crowd 
which the Exchange believes increases competition on its trading floor 
to the benefit of other floor participants.
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    \15\ The trading activity of separate Lead Market Maker and 
Market Maker member organizations are aggregated in calculating the 
Monthly Market Maker Cap if there is Common Ownership between the 
member organizations. All dividend, merger, short stock interest, 
reversal and conversion, jelly roll and box spread strategy 
executions (as defined in this Options 7, Section 4) are excluded 
from the Monthly Market Maker Cap. Floor Lead Market Makers or Floor 
Market Makers that (i) are on the contra-side of an electronically-
delivered and executed Customer order, excluding responses to a PIXL 
auction; and (ii) have reached the Monthly Market Maker Cap are 
assessed: $0.05 per contract Fee for Adding Liquidity in Penny 
Symbols; $0.18 per contract Fee for Removing Liquidity in Penny 
Symbols; $0.18 per contract in Non-Penny Symbols; and $0.18 per 
contract in a non-Complex electronic auction, including the Quote 
Exhaust auction and, for purposes of this fee, the opening process. 
A Complex electronic auction includes, but is not limited to, the 
Complex Order Live Auction (``COLA''). Transactions which execute 
against an order for which the Exchange broadcast an order exposure 
alert in an electronic auction will be assessed $0.18 per contract.
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Monthly Firm Fee Cap
    Today, Firms are subject to a $200,000 ``Monthly Firm Fee Cap.'' 
Today, Firm Floor Option Transaction Charges and QCC Transaction Fees, 
in the aggregate, for one billing month that exceed the Monthly Firm 
Fee Cap per member or member organization, when such members or member 
organizations are trading in their own proprietary account, are subject 
to a reduced transaction fee of $0.02 per capped contract unless there 
is no fee or the fee is waived. Today, all dividend, merger, short 
stock interest, reversal and conversion, jelly roll, and box spread 
strategy executions (as defined in this Options 7, Section 4) are 
excluded from the Monthly Firm Fee Cap. Transactions in broad-based 
index options symbols listed within Options 7, Section 5.A. are 
excluded from the Monthly Firm Fee Cap and QCC Transaction Fees are 
included in the calculation of the Monthly Firm Fee Cap.\16\
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    \16\ For purposes of the Monthly Firm Fee Cap, members and 
member organizations must notify the Exchange in writing of all 
accounts in which the member or member organization is not trading 
in its own proprietary account. The Exchange will not make 
adjustments to billing invoices where transactions are commingled in 
accounts which are not subject to the Monthly Firm Fee Cap. See 
Options 7, Section 4.
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    At this time, the Exchange proposes to increase the Monthly Firm 
Fee Cap from a cap of $200,000 to a monthly cap of $250,000 as a 
competitive response to a similar change on NYSE Arca.\17\ The Exchange 
believes that aligning its firm cap with NYSE Arca's firm cap will 
allow it to compete for transactions on its trading floor. The Exchange 
believes that increasing the Monthly Firm Fee Cap will continue to 
lower fees for Firms that transact certain qualifying volume on Phlx, 
thus enabling these Firms the ability to lower costs while continuing 
to incentivize Firms to transact volume on the Exchange.
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    \17\ NYSE Arca modified its Monthly Fee Cap in November 2023 by 
raising the cap from $200,000 to $250,000. See Securities Exchange 
Act Release No. 99021 (December 1, 2023), 88 FR 84030 (November 27, 
2023 (SR-NYSEArca-2023-80).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\18\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\19\ 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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    \18\ 15 U.S.C. 78f(b).
    \19\ 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

[[Page 20741]]

broader forms that are most important to investors and listed 
companies.'' \20\
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    \20\ 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 
\21\ (``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.\22\ 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.'' \23\
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    \21\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \22\ See NetCoalition, at 534--535.
    \23\ 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'. . . .'' \24\ 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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    \24\ 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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Options Transaction Charges
    The Exchange's proposal to decrease the Professional Floor Options 
Transaction Charges in Multiply Listed Penny and Non-Penny Symbols in 
Penny and Non-Penny Symbols from $0.05 to $0.00 per contract is 
reasonable because the decreased fee should attract a greater amount of 
Professional orders to Phlx's Trading Floor. Today, Phlx assesses 
Professionals a lower Floor Options Transaction Charge as compared to 
Lead Market Makers, Broker-Dealers and Firms with respect to Floor 
Options Transaction Charges. Similarly, today, BOX Exchange LLC 
(``BOX'') assesses Professionals lower manual transaction fees as 
compared to Broker Dealers and Market Makers.\25\ By decreasing its 
Professional Floor Options Transaction Charge, the Exchange believes it 
will be able to compete more effectively for options order flow because 
of the lower Professional fee. Also, the Exchange believes the 
decreased Professional Options Transaction Charges will attract a 
greater number of Professional orders to Phlx's Trading Floor. The 
Exchange notes that NYSE Arca, Inc. (``NYSE Arca'') also assesses no 
Professional Customer fee for manual executions.\26\
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    \25\ BOX assesses Professional Customers a $0.10 per contract 
manual transaction fee in Penny and Non-Penny Symbols. A Broker 
Dealer is assessed a $0.025 per contract manual transaction fee in 
Penny and Non-Penny Symbols and a Market Maker is assessed a $0.35 
per contract manual transaction fee in Penny and Non-Penny Symbols. 
BOX does not assess Public Customers or Broker Dealers facilitating 
a Public Customer a Penny and Non-Penny Interval Classes manual 
transactions fee. See BOX's Fee Schedule at Section V.
    \26\ NYSE Arca modified its fees for Professional Customer 
manual executions from a $0.25 per contract fee for such executions, 
which fee had been waived for the period August 1, 2022 to December 
31, 2022, to $0.00 per contract. NYSE Arca stated that the proposed 
change is intended to continue to attract manually executed 
Professional Customer orders to the Exchange, and the Exchange 
believes that all market participants stand to benefit from an 
increase in such volume, which would promote market depth, 
facilitate tighter spreads and enhance price discovery, and may lead 
to a corresponding increase in order flow from other market 
participants as well. See Securities Exchange Act Release No. 96763 
(January 27, 2023), 88 FR 7119 (February 2, 2023) (S (SR-NYSEARCA-
2023-09).
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    The Exchange's proposal to decrease the Professional Floor Options 
Transaction Charges in Multiply Listed Penny and Non-Penny Symbols in 
Penny and Non-Penny Symbols from $0.05 to $0.00 per contract is 
equitable and not unfairly discriminatory. Today, Customers are not 
assessed an Options Transaction Charge in Multiply Listed Penny or Non-
Penny Symbols because Customer order flow is unique. Customer liquidity 
benefits all market participants by providing more trading 
opportunities, which attracts Lead Marker Makers 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 believes that lowering the Professional Floor Options 
Transaction Charges is similarly beneficial as the lower fees may cause 
market participants to select Phlx's Trading Floor as a venue to send 
Professional order flow, which benefits all market participants by 
attracting valuable liquidity to the market and thereby enhancing the 
trading quality and efficiency for all market participants. Today, Lead 
Market Makers and Market Makers are assessed the highest Penny and Non-
Penny Floor Options Transaction Charges. Customers are not assessed a 
Penny or Non-Penny Options Transaction Charge. With this proposal, 
Professionals would continue to be assessed a lower Floor Options 
Transaction Charges in Multiply Listed Penny and Non-Penny Symbols as 
compared to Lead Market Makers and Market Makers. Lead Market Makers 
and Market Makers have a time and place advantage on the Trading Floor 
with respect to orders, unlike other market participants. A 
Professional, Broker-Dealer or a Firm would necessarily require a Floor 
Broker to represent their trading interest on the Trading Floor as 
compared to a Lead Market Maker or Market Maker that could directly 
transact such orders on the Trading Floor. Further, the Exchange 
believes that to attract orders from Professionals, Broker-Dealers, or 
Firms, via a Floor Broker, the rates must be competitive with rates at 
other trading floors. With respect to Firms, the Exchange notes that 
Firms are subject to a Monthly Firm Fee Cap. Firm Floor Option 
Transaction Charges along with Qualified Contingent Cross Transaction 
Fees, in the aggregate, for one billing month may not exceed the 
Monthly Firm Fee Cap per member organization when such members are 
trading in their own proprietary account.\27\ Finally, with respect to 
Broker-Dealers, today the Exchange waives the Floor Options Transaction 
Charge for Broker-Dealers executing facilitation orders pursuant to 
Options 8, Section 30 when such members would otherwise incur this 
charge for trading in their own proprietary account contra to a 
Customer (``BD-Customer Facilitation''), if the member's BD-Customer 
Facilitation average daily volume (including both FLEX and non-FLEX 
transactions) exceeds 10,000 contracts per day in a given month.\28\ 
The Exchange notes that both Firms and Broker-Dealers have the ability 
to reduce their Options Transaction Charges as compared to 
Professionals.
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    \27\ See Options 7, Section 4.
    \28\ See Options 7, Section 4.
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    The Exchange believes it is equitable and not unfairly 
discriminatory to assess Professionals no Floor Options Transaction 
Charge the same as a Customer and more favorable than Firms, and 
Broker-Dealers, Lead Market Makers, and Market Makers. The potential 
increased volume would create better trading opportunities that benefit 
all market participants. Specifically, greater volume and liquidity 
from increased order flow could create more trading opportunities and 
tighter spreads. Assessing lower Floor Options Transaction Charges for 
Professional Customers compared to

[[Page 20742]]

Lead Market Makers, Market Makers, Firms, and Broker-Dealers is not 
novel as BOX currently assesses lower fees for Professional Customers 
as compared to Broker Dealers and Market Makers.\29\
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    \29\ See supra 25 above.
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    The Exchange's proposal to increase the Lead Market Maker and the 
Market Maker Floor Options Transaction Charges in Multiply Listed Penny 
and Non-Penny Symbols from $0.35 to $0.50 per contract is reasonable, 
equitable and not unfairly discriminatory because Lead Market Makers 
and Market Makers benefit from having access to interact with orders 
that are made available in open outcry on the Trading Floor. Lead 
Market Makers and Market Makers have a time and place advantage on the 
Trading Floor with respect to orders, unlike other market participants. 
Further, Lead Market Makers and Market Makers have the benefit of 
trading on any Trading Floor or in any electronic venue if they so 
choose. The Exchange believes that it has set its Floor Options 
Transaction Charges for Lead Market Makers and Market Makers in such a 
way as to balance the need to attract additional orders to the trading 
floor while continuing to attract Lead Market Makers and Market Makers 
to its Trading Floor. The Exchange proposes this increased fee for 
business reasons and to encourage competition on its trading floor. The 
Exchange believes Lead Market Makers and Market Makers will continue to 
quote aggressively, adding liquidity to the trading floor, so that they 
may participate in transactions as they do today. Today, Lead Market 
Makers and Market Makers are subject to a ``Monthly Market Maker Cap'' 
of $500,000 for: (i) electronic Option Transaction Charges, excluding 
surcharges and excluding options overlying broad-based index options 
symbols listed within Options 7, Section 5.A; and (ii) QCC Transaction 
Fees (as defined in Exchange Options 3, Section 12 and Floor QCC 
Orders, as defined in Options 8, Section 30(e)).\30\ The Exchange is 
not proposing to amend the Monthly Market Maker Cap, which affords Lead 
Market Makers and Market Makers the ability to pay lower Floor Options 
Transaction Charges as compared to Non-Customers \31\ once they have 
capped for the month. To the extent that Phlx's increased fee for Lead 
Market Makers and Maker Makers was priced too high, the Exchange would 
lose liquidity providers on its Trading Floor. Competitive forces would 
serve to constrain the Exchange's ability to overprice certain services 
on its market.
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    \30\ The trading activity of separate Lead Market Maker and 
Market Maker member organizations are aggregated in calculating the 
Monthly Market Maker Cap if there is Common Ownership between the 
member organizations. All dividend, merger, short stock interest, 
reversal and conversion, jelly roll and box spread strategy 
executions (as defined in this Options 7, Section 4) are excluded 
from the Monthly Market Maker Cap. Floor Lead Market Makers or Floor 
Market Makers that (i) are on the contra-side of an electronically-
delivered and executed Customer order, excluding responses to a PIXL 
auction; and (ii) have reached the Monthly Market Maker Cap are 
assessed: $0.05 per contract Fee for Adding Liquidity in Penny 
Symbols; $0.18 per contract Fee for Removing Liquidity in Penny 
Symbols; $0.18 per contract in Non-Penny Symbols; and $0.18 per 
contract in a non-Complex electronic auction, including the Quote 
Exhaust auction and, for purposes of this fee, the opening process. 
A Complex electronic auction includes, but is not limited to, the 
Complex Order Live Auction (``COLA''). Transactions which execute 
against an order for which the Exchange broadcast an order exposure 
alert in an electronic auction will be assessed $0.18 per contract.
    \31\ The term ``Non-Customer'' applies to transactions for the 
accounts of Lead Market Makers, Market Makers, Firms, Professionals, 
Broker-Dealers and JBOs. See Options 7, Section 1(c).
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Monthly Firm Fee Cap
    The Exchange's proposal to increase the Monthly Firm Fee Cap from a 
cap of $200,000 to a monthly cap of $250,000 is reasonable because, 
despite the increase, the Monthly Firm Fee Cap will continue to lower 
fees for Firms that transact certain qualifying volume on Phlx, thus 
enabling these Firms the ability to lower costs while continuing to 
incentivize Firms to direct order flow to the Exchange to achieve the 
benefits of reducing their fees. Further, increasing the monthly firm 
cap to $250,000 is a competitive response to a similar change on NYSE 
Arca.\32\ The Exchange believes that aligning its firm cap with NYSE 
Arca's firm cap will allow it to compete for transactions on its 
trading floor.
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    \32\ NYSE Arca modified its Monthly Fee Cap in November 2023 by 
raising the cap from $200,000 to $250,000. See Securities Exchange 
Act Release No. 99021 (December 1, 2023), 88 FR 84030 (November 27, 
2023 (SR-NYSEArca-2023-80).
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    The Exchange's proposal to increase the Monthly Firm Fee Cap from a 
cap of $200,000 to a monthly cap of $250,000 is equitable and not 
unfairly discriminatory as other market participants benefit from an 
opportunity to pay reduced fees on Phlx as do Firms. Today, Customers 
are not assessed an Options Transaction Charge in Multiply Listed Penny 
or Non-Penny Symbols.\33\ Customer liquidity benefits all market 
participants by providing more trading opportunities. 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. Today, Lead Market Makers and 
Market Makers are subject to a Monthly Market Maker Cap.\34\ With 
respect to Broker-Dealers, today, the Exchange waives the Floor Options 
Transaction Charge for Broker-Dealers executing facilitation orders 
pursuant to Options 8, Section 30 when such members would otherwise 
incur this charge for trading in their own proprietary account contra 
to a Customer (``BD-Customer Facilitation''), if the member's BD-
Customer Facilitation average daily volume (including both FLEX and 
non-FLEX transactions) exceeds 10,000 contracts per day in a given 
month.\35\ Finally, today, Professional Floor Options Transaction 
Charges are proposed to be $0.00 per contract, similar to Customers and 
more favorable than Firms.\36\ Additionally, the Exchange believes that 
the proposal is equitable and not unfairly discriminatory because 
members and member organizations that are JBOs \37\ could be subject to 
the

[[Page 20743]]

Monthly Firm Fee Cap, as are other members, as long as the JBO trades 
for their own proprietary account. Additionally, the proposed change 
would encourage JBOs that are not members or member organizations to 
seek to become members or member organizations to further reduce their 
transaction fees. Finally, other market participants may interact with 
the order flow submitted by Firms to Phlx to reach the Monthly Firm Fee 
Cap.
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    \33\ See Options 7, Section 4.
    \34\ See Options 7, Section 4. Lead Market Makers and Market 
Makers are subject to a ``Monthly Market Maker Cap'' of $500,000 
for: (i) electronic Option Transaction Charges, excluding surcharges 
and excluding options overlying broad-based index options symbols 
listed within Options 7, Section 5.A; and (ii) QCC Transaction Fees 
(as defined in Exchange Options 3, Section 12 and Floor QCC Orders, 
as defined in Options 8, Section 30(e)). The trading activity of 
separate Lead Market Maker and Market Maker member organizations is 
aggregated in calculating the Monthly Market Maker Cap if there is 
Common Ownership between the member organizations. All dividend, 
merger, short stock interest, reversal and conversion, jelly roll 
and box spread strategy executions (as defined in this Options 7, 
Section 4) is excluded from the Monthly Market Maker Cap. Lead 
Market Makers or Market Makers that (i) are on the contra-side of an 
electronically-delivered and executed Customer order, excluding 
responses to a PIXL auction; and (ii) have reached the Monthly 
Market Maker Cap will be assessed fees as follows: $0.05 per 
contract Fee for Adding Liquidity in Penny Symbols; $0.18 per 
contract Fee for Removing Liquidity in Penny Symbols; $0.18 per 
contract in Non-Penny Symbols; and $0.18 per contract in a non-
Complex electronic auction, including the Quote Exhaust auction and, 
for purposes of this fee, the opening process. A Complex electronic 
auction includes, but is not limited to, the Complex Order Live 
Auction (``COLA''). Transactions which execute against an order for 
which the Exchange broadcast an order exposure alert in an 
electronic auction will be subject to this fee.
    \35\ See Options 7, Section 4.
    \36\ See Options 7, Section 4. Professional Floor Options 
Transaction Charges for Penny and Non-Penny Symbols are $0.05 per 
contract whereas Firm Floor Options Transaction Charges for Penny 
and Non-Penny Symbols are $0.25 per contract. The Exchange is 
proposing to reduce the Floor Options Transaction Charges to $0.00 
per contract.
    \37\ 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 is 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 Options 6D, Section 1. See Options 7, Section 1(c).
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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 venue in which to submit orders. 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
Floor Options Transaction Charges
    The Exchange's proposal to decrease the Professional Floor Options 
Transaction Charges in Multiply Listed Penny and Non-Penny Symbols in 
Penny and Non-Penny Symbols from $0.05 to $0.00 per contract does not 
impose an undue burden on competition. Today, Customers are not 
assessed an Options Transaction Charge in Multiply Listed Penny or Non-
Penny Symbols because Customer order flow is unique. Customer liquidity 
benefits all market participants by providing more trading 
opportunities, which attracts Lead Marker Makers 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 believes that lowering the Professional Floor Options 
Transaction Charges is similarly beneficial as the lower fees may cause 
market participants to select Phlx's Trading Floor as a venue to send 
Professional order flow, which benefits all market participants by 
attracting valuable liquidity to the market and thereby enhancing the 
trading quality and efficiency for all market participants. Today, Lead 
Market Makers and Market Makers are assessed the highest Penny and Non-
Penny Floor Options Transaction Charges. Customers are not assessed a 
Penny or Non-Penny Options Transaction Charge. With this proposal, 
Professionals would continue to be assessed a lower Floor Options 
Transaction Charges in Multiply Listed Penny and Non-Penny Symbols as 
compared to Lead Market Makers and Market Makers. Lead Market Makers 
and Market Makers have a time and place advantage on the Trading Floor 
with respect to orders, unlike other market participants. A 
Professional, Broker-Dealer or a Firm would necessarily require a Floor 
Broker to represent their trading interest on the Trading Floor as 
compared to a Lead Market Maker or Market Maker that could directly 
transact such orders on the Trading Floor. Further, the Exchange 
believes that to attract orders from Professionals, Broker-Dealers, or 
Firms, via a Floor Broker, the rates must be competitive with rates at 
other trading floors. With respect to Firms, the Exchange notes that 
Firms are subject to a Monthly Firm Fee Cap. Firm Floor Option 
Transaction Charges along with Qualified Contingent Cross Transaction 
Fees, in the aggregate, for one billing month may not exceed the 
Monthly Firm Fee Cap per member organization when such members are 
trading in their own proprietary account.\38\ Finally, with respect to 
Broker-Dealers, today the Exchange waives the Floor Options Transaction 
Charge for Broker-Dealers executing facilitation orders pursuant to 
Options 8, Section 30 when such members would otherwise incur this 
charge for trading in their own proprietary account contra to a 
Customer (``BD-Customer Facilitation''), if the member's BD-Customer 
Facilitation average daily volume (including both FLEX and non-FLEX 
transactions) exceeds 10,000 contracts per day in a given month.\39\ 
The Exchange notes that both Firms and Broker-Dealers have the ability 
to reduce their Options Transaction Charges as compared to 
Professionals. Further, the Exchange believes it does not impose an 
undue burden on competition to assess Professionals no Floor Options 
Transaction Charge the same as a Customer and more favorable than 
Firms, and Broker-Dealers, Lead Market Makers, and Market Makers. The 
potential increased volume would create better trading opportunities 
that benefit all market participants. Specifically, greater volume and 
liquidity from increased order flow could create more trading 
opportunities and tighter spreads. Assessing lower Floor Options 
Transaction Charges for Professional Customers compared to Lead Market 
Makers, Market Makers, Firms, and Broker-Dealers is not novel as BOX 
currently assesses lower fees for Professional Customers as compared to 
Broker Dealers and Market Makers.\40\
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    \38\ See Options 7, Section 4.
    \39\ See Options 7, Section 4.
    \40\ See supra 25 above.
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Monthly Firm Fee Cap
    The Exchange's proposal to increase the Monthly Firm Fee Cap from a 
cap of $200,000 to a monthly cap of $250,000 does not impose an undue 
burden on competition because other market participants benefit from an 
opportunity to pay reduced fees on Phlx as do Firms. Today, Customers 
are not assessed an Options Transaction Charge in Multiply Listed Penny 
or Non-Penny Symbols.\41\ Customer liquidity benefits all market 
participants by providing more trading opportunities. 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. Today, Lead Market Makers and 
Market Makers are subject to a Monthly Market Maker Cap.\42\ With 
respect to Broker-Dealers,

[[Page 20744]]

today, the Exchange waives the Floor Options Transaction Charge for 
Broker-Dealers executing facilitation orders pursuant to Options 8, 
Section 30 when such members would otherwise incur this charge for 
trading in their own proprietary account contra to a Customer (``BD-
Customer Facilitation''), if the member's BD-Customer Facilitation 
average daily volume (including both FLEX and non-FLEX transactions) 
exceeds 10,000 contracts per day in a given month.\43\ Finally, today, 
Professional Floor Options Transaction Charges are proposed to be $0.00 
per contract, similar to Customers and more favorable than Firms.\44\ 
Additionally, the Exchange believes that the proposal does not impose 
an undue burden on competition because members and member organizations 
that are JBOs \45\ could be subject to the Monthly Firm Fee Cap, as are 
other members, as long as the JBO trades for their own proprietary 
account. Additionally, the proposed change would encourage JBOs that 
are not members or member organizations to seek to become members or 
member organizations to further reduce their transaction fees. Finally, 
other market participants may interact with the order flow submitted by 
Firms to Phlx to reach the Monthly Firm Fee Cap.
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    \41\ See Options 7, Section 4.
    \42\ See Options 7, Section 4. Lead Market Makers and Market 
Makers are subject to a ``Monthly Market Maker Cap'' of $500,000 
for: (i) electronic Option Transaction Charges, excluding surcharges 
and excluding options overlying broad-based index options symbols 
listed within Options 7, Section 5.A; and (ii) QCC Transaction Fees 
(as defined in Exchange Options 3, Section 12 and Floor QCC Orders, 
as defined in Options 8, Section 30(e)). The trading activity of 
separate Lead Market Maker and Market Maker member organizations is 
aggregated in calculating the Monthly Market Maker Cap if there is 
Common Ownership between the member organizations. All dividend, 
merger, short stock interest, reversal and conversion, jelly roll 
and box spread strategy executions (as defined in this Options 7, 
Section 4) is excluded from the Monthly Market Maker Cap. Lead 
Market Makers or Market Makers that (i) are on the contra-side of an 
electronically-delivered and executed Customer order, excluding 
responses to a PIXL auction; and (ii) have reached the Monthly 
Market Maker Cap will be assessed fees as follows: $0.05 per 
contract Fee for Adding Liquidity in Penny Symbols; $0.18 per 
contract Fee for Removing Liquidity in Penny Symbols; $0.18 per 
contract in Non-Penny Symbols; and $0.18 per contract in a non-
Complex electronic auction, including the Quote Exhaust auction and, 
for purposes of this fee, the opening process. A Complex electronic 
auction includes, but is not limited to, the Complex Order Live 
Auction (``COLA''). Transactions which execute against an order for 
which the Exchange broadcast an order exposure alert in an 
electronic auction will be subject to this fee.
    \43\ See Options 7, Section 4.
    \44\ See Options 7, Section 4. Professional Floor Options 
Transaction Charges for Penny and Non-Penny Symbols are $0.05 per 
contract whereas Firm Floor Options Transaction Charges for Penny 
and Non-Penny Symbols are $0.25 per contract. The Exchange is 
proposing to reduce the Floor Options Transaction Charges to $0.00 
per contract.
    \45\ 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 is 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 Options 6D, Section 1. See Options 7, Section 1(c).
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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.\46\
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    \46\ 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-PHLX-2024-14 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-2024-14. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-PHLX-2024-14 and should be 
submitted on or before April 15, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\47\
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    \47\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-06175 Filed 3-22-24; 8:45 am]
BILLING CODE 8011-01-P