[Federal Register Volume 89, Number 100 (Wednesday, May 22, 2024)]
[Notices]
[Pages 45036-45044]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-11168]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100160; File No. SR-Phlx-2024-15]


Self-Regulatory Organizations; Nasdaq PHLX LLC; Suspension of and 
Order Instituting Proceedings To Determine Whether To Approve or 
Disapprove Proposed Rule Change To Amend the Exchange's Fees for Top of 
PHLX Options (TOPO), PHLX Orders, and TOPO Plus Orders

May 16, 2024.

I. Introduction

    On March 20, 2024, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'' or 
``SEC''), pursuant to Section 19(b)(1) of the Securities Exchange Act 
of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a proposed rule 
change (File Number SR-Phlx-2024-15) to increase fees for certain 
market data products (``Proposal''). The proposed rule change was 
immediately effective upon filing with the Commission pursuant to 
Section 19(b)(3)(A) of the Act.\3\ The proposed rule change was 
published for comment in the Federal Register on March 28, 2024.\4\ 
Pursuant to Section 19(b)(3)(C) of the Act,\5\ the Commission is 
hereby: (1) temporarily suspending the proposed rule change; and (2) 
instituting proceedings to determine whether to approve or disapprove 
the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A). A proposed rule change may take 
effect upon filing with the Commission if it is designated by the 
exchange as ``establishing or changing a due, fee, or other charge 
imposed by the self-regulatory organization on any person, whether 
or not the person is a member of the self-regulatory organization.'' 
15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ See Securities Exchange Act Release No. 99841 (March 22, 
2024), 89 FR 21648 (``Notice''). The Commission has received one 
comment letter on the proposed rule change. See Letter from Brookes 
Ross, received April 29, 2024 (``Ross Letter''). Comments received 
on the Proposal are available at: https://www.sec.gov/comments/sr-phlx-2024-15/srphlx202415.htm.
    \5\ 15 U.S.C. 78s(b)(3)(C).
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II. Background and Description of the Proposed Rule Change

    The Exchange states that the purpose of the proposed rule change is 
to amend the Exchange's proprietary data fees for Top of PHLX Options 
(``TOPO''),\6\ PHLX

[[Page 45037]]

Orders,\7\ and TOPO Plus Orders at Options 7, Section 10.\8\
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    \6\ See Notice, 89 FR at 21648 (citing Options 3, Section 
23(a)(1) (``Top of PHLX Options (`TOPO') is a direct data feed 
product that includes the Exchange's best bid and offer price, with 
aggregate size, based on displayable order and quoting interest on 
Phlx and last sale information for trades executed on Phlx. The data 
contained in the TOPO data feed is identical to the data 
simultaneously sent to the processor for the OPRA and subscribers of 
the data feed. The data provided for each options series includes 
the symbols (series and underlying security), put or call indicator, 
expiration date, the strike price of the series, and whether the 
option series is available for trading on Phlx and identifies if the 
series is available for closing transactions only.'')).
    \7\ See Notice, 89 FR at 21648 (citing Options 3, Section 
23(a)(1) (``PHLX Orders is a real-time full Limit Order book data 
feed that provides pricing information for orders on the PHLX Order 
book for displayed order types as well as market participant 
capacity. PHLX Orders is currently provided as part of the TOPO Plus 
Orders data product. PHLX Orders provides real-time information to 
enable users to keep track of the single and complex order book(s). 
The data provided for each options series includes the symbols 
(series and underlying security), put or call indicator, expiration 
date, the strike price of the series, leg information on complex 
strategies and whether the option series is available for trading on 
Phlx and identifies if the series is available for closing 
transactions only. The feed also provides auction and exposure 
notifications and order imbalances on opening/reopening (size of 
matched contracts and size of the imbalance)'')).
    \8\ The proposed changes were initially filed on November 16, 
2023, as SR-Phlx-2023-51. On December 5, 2023, SR-Phlx-2023-51 was 
withdrawn and replaced with SR-Phlx-2023-57. On January 29, 2024, 
SR-Phlx-2023-57 was withdrawn and replaced with SR-Phlx 2024-03. On 
March 20, 2024, SR-Phlx-2024-03 was withdrawn and replaced with the 
instant filing to provide additional detail regarding the proposal. 
See Notice, 89 FR at 21648.
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    The Exchange states that TOPO is a direct data feed that provides 
subscribers with PHLX Best Bid and Offer (``BBO'') \9\ and last sale 
information.\10\ The Exchange also states that the data distributed on 
TOPO is identical to the data simultaneously sent to the Options Price 
Reporting Authority (``OPRA'').\11\ The Exchange states that TOPO feed 
also provides administrative information to facilitate trading on the 
Exchange such as, for example, the list of symbols trading on a 
particular day.\12\ The Exchange states that TOPO reduces the 
transmission and processing latencies for top of book information 
relative to the OPRA feed by avoiding the latencies generated by the 
latter in consolidating data.\13\ The Exchange states that monthly fees 
for TOPO are currently $2,000 for Internal Distributors,\14\ $2,500 for 
External Distributors,\15\ $1 for a Non-Professional Subscriber,\16\ 
and $40 for a Professional Subscriber.\17\ The Exchange further states 
that none of these fees have changed for over a decade since January 
2013.\18\
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    \9\ See Notice, 89 FR at 21648. The Exchange states that Best 
Bid and Offer includes aggregate size information based on 
displayable order and quoting interest on the Exchange. Id. at n.6.
    \10\ See Notice, 89 FR at 21648 (citing PHLX, ``Top of Phlx 
Options,'' available at https://www.nasdaqtrader.com/
Micro.aspx?id=TOPO#:~:text=Top%20of%20PHLX%20Options%20(TOPO,in%20the
%20consolidated%20market%20feed).
    \11\ See Notice, 89 FR at 21648 (citing Options 3 (Options 
Trading Rules), Section 23(a)(1) (Data Feeds and Trade Information) 
(``The data contained in the TOPO data feed is identical to the data 
simultaneously sent to the processor for the OPRA and subscribers of 
the data feed.'')).
    \12\ See Notice, 89 FR at 21648 (citing Nasdaq, ``Top of Phlx 
Options Interface Specifications, Version 3.4'' Section 4.3 
available at https://www.nasdaqtrader.com/content/technicalsupport/specifications/dataproducts/topofphlx.pdf (describing the start of 
day options directory message, which lists all symbols eligible for 
the auction process)).
    \13\ See Notice, 89 FR at 21648.
    \14\ See Notice, 89 FR at 21648 (citing Options 7, Section 10 
(Proprietary Data Feed Fees) (Top of PHLX Options) (``A 
`distributor' of Nasdaq PHLX data is any entity that receives a feed 
or data file . . . directly from Nasdaq PHLX or indirectly through 
another entity and then distributes it either internally (within 
that entity) or externally (outside that entity). All distributors 
execute a Nasdaq PHLX distributor agreement.'')).
    \15\ See Notice, 89 FR at 21648 (citing Options 7, Section 10 
(Proprietary Data Feed Fees) (Top of PHLX Options)).
    \16\ See Notice, 89 FR at 21648 (citing Options 7, Section 10 
(Proprietary Data Feed Fees) (Top of PHLX Options) (``A Non-
Professional Subscriber is a natural person who is neither: (i) 
registered or qualified in any capacity with the Commission, the 
Commodities Futures Trading Commission, any state securities agency, 
any securities exchange or association, or any commodities or 
futures contract market or association; (ii) engaged as an 
`investment adviser' as that term is defined in Section 201(11) of 
the Investment Advisors Act of 1940 (whether or not registered or 
qualified under that Act); nor (iii) employed by a bank or other 
organization exempt from registration under federal or state 
securities laws to perform functions that would require registration 
or qualification if such functions were performed for an 
organization not so exempt. A Non-Professional Subscriber may only 
use the data provided for personal purposes and not for any 
commercial purpose.'')).
    \17\ See Notice, 89 FR at 21648 (citing Options 7, Section 10 
(Proprietary Data Feed Fees) (Top of PHLX Options) (``A Professional 
Subscriber is any Subscriber that is not a Non-Professional 
Subscriber. If the Nasdaq Subscriber agreement is signed in the name 
of a business or commercial entity, such entity would be considered 
a Professional Subscriber.'')).
    \18\ See Notice, 89 FR at 21649 (citing Securities Exchange Act 
Release No. 68576 (January 3, 2013), 78 FR 1886 (January 9, 2013) 
(SR-Phlx-2012-145)).
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    The Exchange states that PHLX Orders is a real-time order book feed 
with pricing information for displayed orders on the PHLX order 
book.\19\ The Exchange states that the data provided for each options 
series includes the symbols (series and underlying security), a put or 
call indicator, expiration date, and the strike price of the 
series.\20\ The Exchange states that it also provides the real-time 
status of simple and complex orders \21\ on the order book, including 
new orders and changes to orders resting on the PHLX book for all PHLX-
listed options.\22\ The Exchange states that PHLX Orders feed includes 
data on the opening imbalance, Price Improvement XL (PIXL),\23\ and 
Complex Order Live Auction (COLA).\24\ The Exchange further states that 
a notification message is sent for symbols entering an auction.\25\ The 
Exchange states that PHLX Orders also furnishes an historical record of 
all simple and complex order message data from the PHLX Orders data 
feed and that PHLX Orders information is not sent to OPRA.\26\
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    \19\ See Notice, 89 FR at 21649 (citing Options 3 (Options 
Trading Rules), Section 23(a)(2) (Data Feeds and Trade 
Information)).
    \20\ See Notice, 89 FR at 21649.
    \21\ See Notice, 89 FR at 21649 (citing Options 3 (Options 
Trading Rules), Section 23(a)(2) (Data Feeds and Trade Information); 
Section 14(a)(i) (``Complex Order. For purposes of the electronic 
trading of Complex Orders, a Complex Order is an order involving the 
simultaneous purchase and/or sale of two or more different options 
series in the same underlying security, priced as a net debit or 
credit based on the relative prices of the individual components, 
for the same account, for the purpose of executing a particular 
investment strategy.'')).
    \22\ See Notice, 89 FR at 21649 (citing Nasdaq, ``PHLX Orders,'' 
available at https://www.nasdaqtrader.com/Micro.aspx?id=PHLXOrders).
    \23\ See Notice, 89 FR at 21649 (citing Options 3 (Options 
Trading Rules), Section 23(a)(2); Section 13 (Price Improvement XL) 
(``A member may electronically submit for execution an order it 
represents as agent on behalf of a Public Customer, broker-dealer, 
or any other entity (`PIXL Order') against principal interest or 
against any other order (except as provided in sub-paragraph (a)(6) 
below) it represents as agent (an `Initiating Order') provided it 
submits the PIXL Order for electronic execution into the PIXL 
Auction (`Auction') pursuant to this Rule.'')).
    \24\ See Notice, 89 FR at 21649 (citing Options 3, Section 14(e) 
which describes the process for the Complex Order Live Auction 
(``COLA'')).
    \25\ Notice, 89 FR at 21649 (citing Nasdaq, ``PHLX Orders 
Interface Specification,'' (Version 1.92) available at https://www.nasdaqtrader.com/content/technicalsupport/specifications/dataproducts/topoplusorders.pdf (describing auction notification 
message)).
    \26\ See Notice, 89 FR at 21649 (citing Limited Liability 
Company Agreement of Options Price Reporting Authority, LLC Article 
V, Section 5.2(c)(i) (January 1, 2010), available at https://assets.website-files.com/5ba40927ac854d8c97bc92d7/5d0bd57d87d3ccca102102d7_OPRA%20Plan%20with%20Updated%20Exhibit%20A%20-%2006-19-2019.pdf 
(describing last sale and best bid and offer information 
disseminated by OPRA)).
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    The Exchange states that PHLX Orders is an alternative to PHLX 
Depth of Market and is an optimized technical channel designed to lower 
technology costs, reduce processing time, and facilitate the ingestion 
of data while still providing customers insight beyond the top of book 
by viewing active buy and sell orders.\27\ The Exchange further states 
that PHLX Orders excludes quotations by market makers and other 
authorized entities that is included in PHLX Depth of Market.\28\ 
Regarding the

[[Page 45038]]

utility of an orders-only data feed, the Exchange states that it 
provides customers with the opportunity to reduce bandwidth (and 
therefore data processing costs) by several orders of magnitude 
relative to the full depth of book feed, while retaining a view of 
market participant orders (setting aside symbols where participants 
have not placed orders).\29\
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    \27\ See Notice, 89 FR at 21649.
    \28\ See Notice, 89 FR at 21649 (citing Options 3 (Options 
Trading Rules), Section 23(a)(3) (Data Feeds and Trade Information) 
(``PHLX Depth of Market is a data product that provides: (i) order 
and quotation information for individual quotes and orders on the 
order book . . .'') (emphasis added); Section 4(b) (Entry and 
display of Quotes) (identifying the market participants authorized 
to submit quotes to the Exchange)).
    \29\ See Notice, 89 FR at 21649.
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    The Exchange states that the December 2023 bandwidth report shows 
that the PHLX Depth of Market feed transmitted a maximum of 14.3 
billion messages per day during the month of December, while the PHLX 
Orders feed transmitted a maximum of 53.6 million messages over the 
same period (41.5 million messages for simple orders, and 12.1 million 
messages for complex orders).\30\ The Exchange states that it's full 
depth of book feed requires the customer to process over 200 times more 
messages than the orders feed over the course of a day; replacing a 
depth of book feed with an orders feed allows a customer to reduce the 
maximum number of daily messages it receives by 99.6%.\31\ The Exchange 
states that, to cite another example, the 1 millisecond bandwidth peak 
for PHLX Depth of Market was 13.96 million messages; the comparable 
number of messages for orders was 1.45 million (891 thousand for simple 
and 561 thousand for complex orders).\32\ The Exchange states that 
replacing depth of book with orders can therefore reduce the number of 
messages processed at peak at the 1 millisecond bandwidth by nearly 
90%.\33\ The Exchange further states that approximately 56% of 
customers who take any data feed at all from the PHLX exchange take an 
orders feed (either Orders only or TOPO Plus Orders) without depth of 
book, another 38% of customers take both orders and depth feeds, and 
the remaining 6% take either top of book or depth of book alone.\34\
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    \30\ See Notice, 89 FR at 21649 (citing Nasdaq, ``December 2023 
Bandwidth Report,'' available at https://view.officeapps.live.com/op/view.aspx?src=https%3A%2F%2Fwww.nasdaqtrader.com%2Fcontent%2Ftechnicalsupport%2Fspecifications%2Fdataproducts%2Fbandwidthreport.xls&wdOrigin=BROWSELINK).
    \31\ See Notice, 89 FR at 21649.
    \32\ See Notice, 89 FR at 21649.
    \33\ See Notice, 89 FR at 21649.
    \34\ See Notice, 89 FR at 21649.
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    The Exchange states that in general, firms that only need 
information on actively trading options takes an order feed in lieu of 
depth.\35\ The Exchange explains that there are a great number of use 
cases that fit this broad description, but, for purposes of 
illustration, the Exchange is aware of at least two such types of 
customers.\36\ The Exchange states that the first is the market 
participant that does not engage in order routing--and that these are 
broker dealers that use third parties to route orders, either because 
the originating broker-dealer is not a member of the exchange or to 
save costs.\37\ The Exchanges states that without the need for 
additional information to inform routing decisions, such customers 
often focus on active trading alone, and therefore purchase the orders 
feed.\38\ The Exchange states that a second category of customers are 
those that use options data to analyze trends in other markets.\39\ The 
Exchange explains that one example of this type of customer is the 
equity trader that analyzes equity-based options to gauge market 
sentiment in the underlying equity.\40\ The Exchange states that for 
such customers, there is relatively little utility in the full depth 
feed, given that market sentiment is best gauged using options that are 
being actively traded, rather than those that are dormant.\41\
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    \35\ See Notice, 89 FR at 21649.
    \36\ See Notice, 89 FR at 21649.
    \37\ See Notice, 89 FR at 21649.
    \38\ See Notice, 89 FR at 21649.
    \39\ See Notice, 89 FR at 21649.
    \40\ See Notice, 89 FR at 21649.
    \41\ See Notice, 89 FR at 21649.
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    The Exchange states that there are some customers that purchase 
both orders and depth and that vendors are one example of this type of 
customer, purchasing market data solely for resale, not for trading on 
behalf of themselves or others.\42\ The Exchange explains that another 
example is the firm that uses orders for analysis and depth for order 
routing.\43\ The Exchange states that the orders feed can be useful for 
assessing sentiment in equity markets, while depth is often used in 
order routing decisions.\44\ The Exchange states that firms that engage 
in both functions can lower overall processing requirements by using 
orders for analytics and depth for routing.\45\
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    \42\ See Notice, 89 FR at 21649.
    \43\ See Notice, 89 FR at 21649.
    \44\ See Notice, 89 FR at 21649.
    \45\ See Notice, 89 FR at 21649.
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    The Exchange states that purchase of PHLX Orders is optional and 
that customers can obtain all of the data contained in PHLX Orders from 
PHLX Depth of Market feed, and may purchase the latter if they do not 
realize the cost savings offered by PHLX Orders.\46\ The Exchange 
states that PHLX Orders is a derivative product designed as a lower-
cost alternative to a depth of book feed.\47\ The Exchange further 
states that it is not a complement to any other product offered by the 
Exchange or any of its competitors.\48\ The Exchange explains that 
customers are free to purchase PHLX Orders or not, and can reject the 
feed for any reason, including the fee charged.\49\ The Exchange states 
that the current monthly fees for PHLX Orders are $3,000 for Internal 
Distributors, $3,500 for External Distributors, $1 for a Non-
Professional Subscriber, and $40 for a Professional Subscriber.\50\ The 
Exchange further states that none of these fees have changes for over a 
decade since January 2013.\51\
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    \46\ See Notice, 89 FR at 21650.
    \47\ See Notice, 89 FR at 21650.
    \48\ See Notice, 89 FR at 21650.
    \49\ See Notice, 89 FR at 21650.
    \50\ See Notice, 89 FR at 21650.
    \51\ See Notice, 89 FR at 21650 (citing Securities Exchange Act 
Release No. 68576 (January 3, 2013), 78 FR 1886 (January 9, 2013) 
(SR-Phlx-2012-145)).
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    The Exchange states that TOPO Plus is a direct market data product 
that offers subscribers both TOPO and PHLX Orders for a consolidated 
fee that is less than the combined fee of the two products.\52\ The 
Exchange states that the monthly fees for TOPO Plus Orders are 
currently $4,500 for Internal Distributors, $5,000 for External 
Distributors, $1 for a Non-Professional Subscriber, and $40 for a 
Professional Subscriber.\53\ The Exchange states that Internal 
Distributor fees for TOPO Plus Orders were modified in January 2018, 
over five years ago,\54\ but the other TOPO Plus Orders fees have not 
changed since January 2013.\55\
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    \52\ See Notice, 89 FR at 21650 (citing PHLX, TOPO Plus PHLX 
Orders, available at https://www.nasdaqtrader.com/Micro.aspx?id=TOPOPlusOrders).
    \53\ See Notice, 89 FR at 21650.
    \54\ See Notice, 89 FR at 21650 (citing Securities Exchange Act 
Release No. 82495 (January 12, 2018), 83 FR 2839 (January 19, 2018) 
(SR-Phlx-2018-08)).
    \55\ See Notice, 89 FR at 21650 (citing Securities Exchange Act 
Release No. 68576 (January 3, 2013), 78 FR 1886 (January 9, 2013) 
(SR-Phlx-2012-145)).
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    The Exchange states that different types of market participants 
purchase TOPO, PHLX Orders and TOPO Plus Orders, including market 
makers, vendors, banks, proprietary traders, agency brokers (brokers 
that route trades on behalf of other market participants), hedge funds, 
index providers and other firms.\56\ The Exchange states that in 
characterizing market participants, it must be clear that firms use 
data feeds for multiple tasks.\57\ The Exchange states that a market 
maker, for example, may use market data for order routing,

[[Page 45039]]

or for risk analysis used in quoting in their assigned option 
series.\58\ The Exchange states that banks may use market data for 
prime brokerage services, proprietary trading, or risk management.\59\ 
The Exchange states that market data vendors do not directly use the 
data at all, but rather disseminate data to market participants that 
use the data for a multiplicity of purposes.\60\ The Exchange states 
that other firms purchase options data to assess the value of equity 
securities.\61\
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    \56\ See Notice, 89 FR at 21650.
    \57\ See Notice, 89 FR at 21650.
    \58\ See Notice, 89 FR at 21650.
    \59\ See Notice, 89 FR at 21650.
    \60\ See Notice, 89 FR at 21650.
    \61\ See Notice, 89 FR at 21650. The Exchange states that it 
does not include ``High Frequency Trading Firm'' as a distinct 
category because many market participant may engage in low latency 
trading strategies to some degree, but the Exchange does not have 
sufficient information to be able to characterize any particular 
firm as a high frequency trader. Id.
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    The Exchange explains that, characterizing firms based on what the 
Exchange understands to be their primary market activity, and 
understanding that firms play multiple roles, the Exchange estimates 
that approximately half of the customers that take top of book data in 
any form, in combination with other products or alone, are market 
makers, and the remaining half are market data vendors, banks, 
proprietary traders, agency brokers, hedge funds, index providers, and 
others.\62\ The Exchange explains that roughly the same distribution 
applies to customers that purchase PHLX Orders, whether alone or in 
combination with other products.\63\ The Exchange states that although 
the distributions are roughly similar, different customers are 
purchasing different products in different combinations.\64\
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    \62\ See Notice, 89 FR at 21650.
    \63\ See Notice, 89 FR at 21650.
    \64\ See Notice, 89 FR at 21650.
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    The Exchange states that firms generally purchase PHLX Orders 
rather than depth of book data to lower technology costs and reduce 
processing time, while still providing customers insight into open 
executable orders that could impact the BBO.\65\ The Exchange states 
that a more specific explanation of how TOPO, PHLX Orders and TOPO Plus 
Orders is used will vary based on use case, with many firms employing 
multiple use cases.\66\ The Exchange states that market makers, banks, 
hedge funds, and proprietary traders often use top of book and orders 
feeds for trading, order routing and analysis.\67\ The Exchange states 
that banks may use market data for prime brokerage services, 
proprietary trading, or risk management.\68\ The Exchange states that 
clients of market data vendors will utilize the data for many different 
purposes.\69\ The Exchange explains that it does not have sufficient 
visibility into customers' businesses and proprietary processes to be 
able to determine precise data usage by customer category.\70\
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    \65\ See Notice, 89 FR at 21650.
    \66\ See Notice, 89 FR at 21650.
    \67\ See Notice, 89 FR at 21650.
    \68\ See Notice, 89 FR at 21650.
    \69\ See Notice, 89 FR at 21650.
    \70\ See Notice, 89 FR at 21650.
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    The Exchange states that: for TOPO, it proposes to increase the 
monthly charge for Internal Distributors from $2,000 to $2,500, and the 
monthly charge for External Distributors from $2,500 to $3,000; For 
PHLX Orders, it proposes to increase the monthly charge for Internal 
Distributors from $3,000 to $3,500, and the monthly charge for External 
Distributors from $3,500 to $4,000; and for TOPO Plus Orders, it 
proposes to increase the monthly charge for Internal Distributors from 
$4,500 to $5,500, and the monthly charge for External Distributors from 
$5,000 to $6,000.\71\ The Exchange states that no changes are proposed 
for Non-Professional and Professional Subscriber fees for TOPO, Phlx 
Orders, or TOPO Plus.\72\ The Exchange further states that the proposed 
changes are designed to update data fees to reflect their current 
value, rather than their value when these fees were set 5 or 10 years 
ago.\73\
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    \71\ See Notice, 89 FR at 21650.
    \72\ See Notice, 89 FR at 21650.
    \73\ See Notice, 89 FR at 21650.
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III. Suspension of the Proposed Rule Change

    Pursuant to Section 19(b)(3)(C) of the Act,\74\ at any time within 
60 days of the date of filing of an immediately effective proposed rule 
change pursuant to Section 19(b)(1) of the Act,\75\ the Commission 
summarily may temporarily suspend the change in the rules of a self-
regulatory organization (``SRO'') if it appears to the Commission that 
such action is necessary or appropriate in the public interest, for the 
protection of investors, or otherwise in furtherance of the purposes of 
the Act. A temporary suspension of the proposed rule changes is 
necessary and appropriate to allow for additional analysis of the 
proposed rule change's consistency with the Act and the rules 
thereunder.
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    \74\ 15 U.S.C. 78s(b)(3)(C).
    \75\ 15 U.S.C. 78s(b)(1).
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A. Exchange Statements in Support of the Proposal

    In support of the Proposal, the Exchange states that it believes 
that its proposal is consistent with Section 6(b) of the Act,\76\ in 
general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of 
the Act,\77\ 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.\78\ The Exchange explains that this belief is based on several 
factors: First, the Exchange states that exchange fees are constrained 
because market participants can choose among seventeen different venues 
for options trading, and therefore no single venue can charge excessive 
fees without losing customers and market share.\79\ Second, the 
Exchange states that fees for TOPO are constrained because the 
identical top of book data is sent to OPRA, and certain market 
participants may choose to rely exclusively on OPRA rather than 
purchasing the proprietary data product.\80\ Third, the Exchange states 
that the purchase of PHLX Orders is optional, that it is designed as a 
lower-cost alternative to depth of book--and, as such, is not a 
complement to any other product offered by the Exchange or any of its 
competitors, and that customers may purchase PHLX Orders or not, and 
can reject the feed for any reason--including the fee charged.\81\ 
Fourth, the Exchange states that the proposed fees are comparable to, 
and in some cases less than, those of similarly situated exchanges.\82\ 
Fifth, the Exchange states that the current fees do not properly 
reflect the value of the underlying product, as fees for the products 
in question have been static in nominal terms, and therefore falling in 
real terms (due to inflation), while the amount of information 
transmitted in those fees have more than doubled in just the past five 
years, reflecting a substantial increase in customer value due to the 
significantly higher levels of liquidity currently available on the 
Exchange.\83\ Sixth, the Exchange states that higher fees for the 
external distribution of TOPO, PHLX Orders, and TOPO Plus Orders are 
based on the

[[Page 45040]]

additional value vendors receive from distributing data to their own 
customers and typically charging for the service.\84\
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    \76\ 15 U.S.C. 78f(b).
    \77\ 15 U.S.C. 78f(b)(4) and (5).
    \78\ See Notice, 89 FR at 21650.
    \79\ See Notice, 89 FR at 21650.
    \80\ See Notice, 89 FR at 21650.
    \81\ See Notice, 89 FR at 21650.
    \82\ See Notice, 89 FR at 21650.
    \83\ See Notice, 89 FR at 21650-51.
    \84\ See Notice, 89 FR at 21651.
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    The Exchange states that customers face many choices in where to 
trade options. The Exchange explains that until recently, sixteen 
exchanges have offered options trading services, and they are now being 
joined by a 17th member.\85\ The Exchange states that not a single 
options exchange trades more than 11 percent of the options market by 
volume.\86\ The Exchange states that PHLX, the second largest options 
exchange by volume, only has 9 percent of the options market.\87\ The 
Exchange states that only one of the 17 options exchanges have a market 
share over 10 percent.\88\ The Exchange states that this broad 
dispersion of market share demonstrates that market participants can 
and do exercise choice in options trading venues.\89\ The Exchange also 
states that as the number of exchanges continues to grow, competition 
will become fiercer and customer choice will continue to expand.\90\
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    \85\ See Notice, 89 FR at 21651 (citing OPRA Plan, list of OPRA 
Participant Exchanges, available at https://www.opraplan.com/faqs, 
and Securities Exchange Act Release No. 98388 (September 14, 2023), 
88 FR 64963 (September 20, 2023) (File No. 4-443) (``Joint Industry 
Plan; Notice of Filing and Immediate Effectiveness of Amendment to 
the Plan for the Purpose of Developing and Implementing Procedures 
Designed To Facilitate the Listing and Trading of Standardized 
Options To Add MEMX LLC as a Plan Sponsor'')). The Exchange states 
that all options exchanges are members of the OPRA Plan. Id.
    \86\ See Notice, 89 FR at 21651 (citing Nasdaq, Options Market 
Statistics (Last updated November 3, 2023), available at https://www.nasdaqtrader.com/Trader.aspx?id=OptionsVolumeSummary). The 
Exchange states that on November 3, 2023, the total percentage of 
options market volume by exchange was as follows: ARCA: 11%; PHLX: 
9%; CBOE: 9%; BOX: 8%; ISE: 7%; EDGX: 7%; AMEX: 7%; MIAX: 7%; MPRL: 
7%; NOM: 6%; BATS: 6%; C2: 5%; EMLD: 4%; MRX: 3%; GEMX: 3%; BXOP: 
3%; MEMX: 0%. Id.
    \87\ See Notice, 89 FR at 21651.
    \88\ See Notice, 89 FR at 21651.
    \89\ See Notice, 89 FR at 21651.
    \90\ See Notice, 89 FR at 21651.
---------------------------------------------------------------------------

    The Exchange states that most option contracts on the TOPO, TOPO 
Plus, and Orders data feeds are traded on multiple exchanges.\91\ The 
Exchange states that a sample of trading on March 7, 2024, from The 
Options Clearing Corporation shows that 5,836 symbols were traded on 
PHLX's options exchange, of which only 53 symbols were listed on the 
PHLX options exchange only, and another 33 symbols were listed on 
multiple Nasdaq-affiliated options exchanges.\92\
---------------------------------------------------------------------------

    \91\ See Notice, 89 FR at 21651.
    \92\ See Notice, 89 FR at 21651.
---------------------------------------------------------------------------

    The Exchange states that, in order to remain competitive with other 
options exchanges, PHLX, like some options exchanges, offers several 
proprietary options products that are only traded on Nasdaq-affiliated 
exchanges.\93\ The Exchange states that these include products based on 
the Nasdaq 100[supreg] Index, such as NDX (Nasdaq 100 Index on PHLX, 
Nasdaq GEMX, LLC (``GEMX'') and Nasdaq ISE, LLC (``ISE'')), XND (Nasdaq 
100 Micro Index on PHLX and ISE), and NQX (Nasdaq 100 Micro Index on 
ISE), as well as volatility products such as VOLQ (Nasdaq-100[supreg] 
Volatility Index), foreign currency options, and other products.\94\
---------------------------------------------------------------------------

    \93\ See Notice, 89 FR at 21651.
    \94\ See Notice, 89 FR at 21651. The Exchange states that the 
NASDAQ-100 is an index which includes 100 of the world's largest 
non-financial companies listed on the wider NASDAQ Stock market, 
based on their market capitalization. See Notice, 89 FR at 21651.
---------------------------------------------------------------------------

    The Exchange states that some Nasdaq option proprietary products 
are subject to direct, substitution-based competition from other 
options exchanges and that all Nasdaq option proprietary products are 
subject to the competition among exchanges for membership and market 
share.\95\ The Exchange states that examples of substitution-based 
competition include the VOLQ, which can be substituted with the Cboe 
Volatility Index[supreg] (``VIX'').\96\ The Exchange states that NDX 
(listed in PHLX, GEMX and ISE), XND (listed on PHLX and ISE) and NQX 
(listed on ISE) all offer different ways of gaining exposure to the 
Nasdaq 100[supreg] Index, are therefore each serves as a direct 
substitute for the others.\97\ The Exchange also states that the Nasdaq 
100[supreg] Index products also have alternatives among other 
exchanges.\98\
---------------------------------------------------------------------------

    \95\ See Notice, 89 FR at 21651.
    \96\ See Notice, 89 FR at 21651 (citing Securities Exchange Act 
Release No. 95170 (June 29, 2022), 87 FR 40295 (July 6, 2022) (SR-
Phlx-2022-27) (explaining that the Nasdaq-100[supreg] Volatility 
Index (``VOLQ'') is subject to ``significant substitution-based 
competitive forces; market participants can substitute options on 
VOLQ for products offered by other exchanges, for example, the 
options on the Cboe Volatility Index[supreg] (``VIX'').'')).
    \97\ See Notice, 89 FR at 21651 (citing Securities Exchange Act 
Release No. 99141 (December 12, 2023), 88 FR 87466 (December 18, 
2023) (SR-Phlx-2023-55) (``[M]arket participants are offered 
different ways to gain exposure to the Nasdaq 100 Index, whether 
through the Exchange's proprietary products like options overlying 
NDX, NDPX, or XND, or separately through multi-listed options 
overlying Invesco QQQ Trust (``QQQ''); Securities Exchange Act 
Release No. 99171 (December 14, 2023), 88 FR 88206 (December 20, 
2023) (SR-ISE-2023-36) (explaining that NDX, XND and NQX provide 
``market participants with a variety of choices in selecting the 
product they desire to utilize in order to gain exposure to the 
Nasdaq 100 Index.'')).
    \98\ See Notice, 89 FR at 21651 (citing Securities Exchange Act 
Release No. 99141 n.7 (December 12, 2023), 88 FR 87466 (December 18, 
2023) (SR-Phlx-2023-55) (explaining that the fees for NDX and NDXP 
are in line with fees assessed by Cboe on its MXEA and MXEF options 
products)).
---------------------------------------------------------------------------

    The Exchange states that exchange proprietary products are also 
subject to competition among exchanges for membership and market 
share.\99\ The Exchange states that there are many factors that may 
cause a market participant to decide to become a member of a particular 
exchange; among these are product offerings.\100\ The Exchange states 
that introducing new and innovative products to the marketplace 
designed to meet customer demands may attract market participants to 
become a member of a particular options venue by allowing market 
participants greater trading opportunities and new avenues to manage 
risks.\101\ The Exchange states that an exchange's proprietary product 
offering may attract order flow to a particular exchange to trade a 
particular options product and generally make that exchange a more 
desirable venue to transaction options, thereby attracting membership 
to that exchange.\102\
---------------------------------------------------------------------------

    \99\ See Notice, 89 FR at 21651 (citing Securities Exchange Act 
Release No. 95170 (June 29, 2022), 87 FR 40295 (July 6, 2022) (SR-
Phlx-2022-27) (discussing the role of proprietary data products in 
the competition among exchanges)).
    \100\ See Notice, 89 FR at 21651.
    \101\ See Notice, 89 FR at 21651.
    \102\ See Notice, 89 FR at 21651.
---------------------------------------------------------------------------

    The Exchange states that, in light of the number of trading venues 
available to customers, the Exchange must price its products, including 
TOPO, PHLX Orders, and TOPO Plus Orders (as well as other products), 
competitively, otherwise customers would move to other venues.\103\ The 
Exchange states that, ``[i]f competitive forces are operative, the 
self-interest of the exchanges themselves will work powerfully to 
constrain unreasonable or unfair behavior'' and, accordingly, ``the 
existence of significant competition provides a substantial basis for 
finding that the terms of an exchange's fee proposal are equitable, 
fair, reasonable, and not unreasonably or unfairly discriminatory.'' 
\104\
---------------------------------------------------------------------------

    \103\ See Notice, 89 FR at 21651.
    \104\ See Notice, 89 FR at 21651 (citing Securities Exchange Act 
Release No. 59039 (December 2, 2008), 73 FR 74,770 (December 9, 
2008) (SR-NYSEArca-2006-21)).
---------------------------------------------------------------------------

    The Exchange states that the top of book data in TOPO is sent to 
OPRA; under OPRA rules, proprietary options information is available to 
customers that have equivalent access to OPRA information, and 
therefore is supplementary to the OPRA feed.\105\

[[Page 45041]]

The Exchange states that, specifically, Section 5.2(c)(iii) of the OPRA 
Plan provides that ``[a] Member [of the OPRA Plan] may disseminate its 
Proprietary Information,'' provided that ``such dissemination is 
limited to other Members and to persons who also have equivalent access 
to consolidated Options Information disseminated by OPRA for the same 
classes or series of options that are included in the Proprietary 
Information. . . .'' \106\ The Exchange states that ``Consolidated 
Options Information'' refers to ``consolidated Last Sale Reports 
combined with either consolidated Quotation Information or the BBO 
furnished by OPRA'' and that access is deemed to be ``equivalent'' ``if 
both if both kinds of information are equally accessible on the same 
terminal or work station. . . .'' \107\
---------------------------------------------------------------------------

    \105\ See Notice, 89 FR at 21651 (citing Limited Liability 
Company Agreement of Options Price Reporting Authority, LLC Sec.  
5.2(c)(iii) (January 1, 2010), available at https://assets.website-files.com/5ba40927ac854d8c97bc92d7/5d0bd57d87d3ccca102102d7_OPRA%20Plan%20with%20Updated%20Exhibit%20A%20-%2006-19-2019.pdf (``OPRA Plan'')).
    \106\ See Notice, 89 FR at 21651 (citing Section 5.2(c)(iii) of 
the OPRA Plan).
    \107\ See Notice, 89 FR at 21652 (citing Section 5.2(c)(iii) of 
the OPRA Plan).
---------------------------------------------------------------------------

    The Exchange states that any customer that purchases proprietary 
options data from the Exchange, including TOPO and TOPO Plus Orders, 
must also have equivalent access to the OPRA Plan.\108\ The Exchange 
states that the best bid and offer and last sale information available 
from TOPO and TOPO Plus Orders fees is identical to the information 
simultaneously sent to OPRA by the Exchange and that OPRA provides NBBO 
and last sale information on options transactions.\109\ The Exchange 
states that TOPO and TOPO Plus Orders provide additional administrative 
information unique to trading on the Exchange, and also reduce the 
transmission and processing latencies generated through the process of 
consolidating data into the OPRA feed.\110\ The Exchange states that 
because top of book and last sale information is available on OPRA as 
well as TOPO, and customers who purchase TOPO have equivalent access to 
the OPRA feed, certain customers may choose to rely on the OPRA feed in 
lieu of purchasing PHLX data, thereby limiting the ability of the 
Exchange from charging excessive fees for its TOPO and TOPO Plus Orders 
feeds.\111\
---------------------------------------------------------------------------

    \108\ See Notice, 89 FR at 21652.
    \109\ See Notice, 89 FR at 21652. The Exchange states that the 
TOPO feed includes administrative information (but not data) that is 
not provided on the OPRA feed, such as symbol directory messages. 
See Notice, 89 FR at 21652 (citing Nasdaq, ``Top of Phlx Options 
Interface Specifications, Version 3.4'' Section 4.3 available at 
https://www.nasdaqtrader.com/content/technicalsupport/specifications/dataproducts/topofphlx.pdf (describing the start of 
day options directory message, which lists all symbols eligible for 
the auction process)).
    \110\ See Notice, 89 FR at 21652. The Exchange states that bid 
and offer and last sale information provided with the TOPO Plus 
Orders product is identical to the data sent to OPRA, although the 
``orders'' component of TOPO Plus Orders is not. Id.
    \111\ See Notice, 89 FR at 21652.
---------------------------------------------------------------------------

    The Exchange states that purchase of PHLX Orders is optional and 
that customers can obtain all of the data contained in PHLX Orders from 
PHLX Depth of Market feed, and may purchase the latter if they do not 
realize the cost savings offered by PHLX Orders.\112\ The Exchange 
states that PHLX Orders is not a complement to any other product 
offered by the Exchange or any of its competitors; customers are free 
to purchase PHLX Orders or not, and can reject the feed for any reason, 
including the fee charged.\113\
---------------------------------------------------------------------------

    \112\ See Notice, 89 FR at 21652.
    \113\ See Notice, 89 FR at 21652.
---------------------------------------------------------------------------

    The Exchange states that the proposed fees are comparable to, and 
in some cases less than, those of other similarly situated exchange 
fees.\114\ The Exchange states that options market statistics show that 
PHLX has a market share of approximately 9%, and that ARCA, with an 11% 
market share, and CBOE, with a 9% market share, are its closest 
competitors.\115\ The Exchange states that to obtain top of book and 
depth of book information for internal distribution (including both 
simple and complex options) from ARCA, a customer would be required to 
pay an Access Fee of $3,000 per month, a Non-Display fee of at least 
$5,000 per month for simple options, and a Non-Display fee of $1,000 
for Complex Options, for a total of $9,000 per month.\116\ The Exchange 
states that to obtain the same information from PHLX under the new 
proposal, a customer would pay the Internal Distributor fee of $2,500 
for TOPO, and an Internal Distributor fee of $4,000 for PHLX Depth 
Data, for a total of $6,500 per month.\117\ The Exchange states that to 
obtain comparable information for Cboe Options, a customer would be 
required to pay a combined fee of $9,000 per month.\118\ The Exchange 
states that a PHLX customer would pay the Internal Distributor fee of 
$2,500 for TOPO, and an Internal Distributor fee of $4,000 for PHLX 
Depth Data, for a total of $6,500 per month.\119\ The Exchange states 
that as such, the proposed fees are comparable to fees charged by 
industry peers, and therefore presumptively reasonable.\120\
---------------------------------------------------------------------------

    \114\ See Notice, 89 FR at 21652.
    \115\ See Notice, 89 FR at 21652 (citing Nasdaq, Options Market 
Statistics (Last updated November 3, 2023), available at https://www.nasdaqtrader.com/Trader.aspx?id=OptionsVolumeSummary).
    \116\ See Notice, 89 FR at 21652 (citing NYSE Arca Options 
Proprietary Market Data Fees (as of July 3, 2023), available at 
https://www.nyse.com/publicdocs/nyse/data/NYSE_Arca_Options_Proprietary_Data_Fee_Schedule.pdf).
    \117\ See Notice, 89 FR at 21652 (citing Options 7, Section 10 
(Proprietary Data Feed Fees) (PHLX Depth Data)). The Exchange states 
that ARCA does not charge separately for top of book and depth of 
book. Id. The Exchange states that although PHLX is not proposing to 
change fees for depth of book information, PHLX depth of book 
information is included here to maintain comparability. Id.
    \118\ See Notice, 89 FR at 21652 (citing Cboe Data Services 
(CDS), Market Data Product Price List (updated July 1, 2023), 
available at https://cdn.cboe.com/resources/membership/US_Market_Data_Product_Price_List.pdf).
    \119\ See Notice, 89 FR at 21652 (citing Options 7, Section 10 
(Proprietary Data Feed Fees) (PHLX Depth Data)). The Exchange states 
that ARCA does not charge separately for top of book and depth of 
book. Although PHLX is not proposing to change fees for depth of 
book information, PHLX depth of book information is included here to 
ensure comparability. Id.
    \120\ See Notice, 89 FR at 21652.
---------------------------------------------------------------------------

    The Exchange states that the Internal Distributor fee for TOPO Plus 
Orders was increased in 2018, while none of the other fees have changed 
for over a decade, since January 2013, and that this means that fees 
for TOPO, PHLX Orders, and TOPO Plus Orders have fallen in real terms 
due to inflation.\121\ The Exchange explains that, using data generated 
by the Department of Commerce to estimate inflation in the market for 
portfolio management and investment services, inflation has increased 
prices by 63.9% since January 2013, when most of the fees at issue were 
set, and 15.7% since January 2018, when internal distributor fees for 
TOPO Plus Orders were last modified.\122\ The Exchange states that, at 
the same time, the average daily message count of PHLX has more than 
doubled in just five years, from approximately 3.0 billion messages per 
day in 2018 to approximately 8.2 billion messages in 2023.\123\ The 
Exchange states that PHLX

[[Page 45042]]

grew in conjunction with options trading overall, which in the 
aggregate grew at a faster pace than PHLX alone--specifically stating 
that between January 2018 and December 2023, options volume on PHLX 
grew by 31%, while options volume on all exchanges nearly doubled, from 
467 million options to 912 million instruments.\124\
---------------------------------------------------------------------------

    \121\ See Notice, 89 FR at 21652 (citing Securities Exchange Act 
Release No. 82495 (January 12, 2018), 83 FR 2839 (January 19, 2018) 
(SR-Phlx-2018-08) and Securities Exchange Act Release No. 68576 
(January 3, 2013), 78 FR 1886 (January 9, 2013) (SR-Phlx-2012-145)).
    \122\ See Notice, 89 FR at 21652 (citing Bureau of Economic 
Analysis, U.S. Department of Commerce, ``Personal Consumption 
Expenditures Price Index,'' available at https://www.bea.gov/data/personal-consumption-expenditures-price-index).
    \123\ See Notice, 89 FR at 21652 (citing PHLX Data (Average 
Daily Message Count was 2,979,919,551.32 in 2018, and 
8,243,516,029.17 thus far in 2023)). The Exchange states that the 
significant increases in data traffic have also required 
technological upgrades to manage the larger traffic volume and to 
respond to overall technological change in the industry. See Notice, 
89 FR at 21652 (citing See, e.g., Securities Exchange Act Release 
No. 82495 (January 12, 2018), 83 FR 2839 (January 19, 2018) (SR-
Phlx-2018-08) (discussing a number of functional enhancements to 
both TOPO and PHLX Orders)).
    \124\ See Notice, 89 FR at 21652 (citing Options Clearing 
Corporation, ``Volume and Open Interest,'' available at https://www.theocc.com/market-data/market-data-reports/volume-and-open-interest/volume-by-exchange).
---------------------------------------------------------------------------

    The Exchange states that growth in options trading means better 
value for the consumer, that the greater variety of options contracts 
traded means that customers have more choice, and that the greater 
number of buyers and sellers in the market means that there is more 
liquidity, resulting in tighter spreads and better consumer value on 
each trade.\125\ The Exchange further states that greater choice and 
tighter spreads mean that the consumer obtains more value from options 
markets overall, which should be reflected in fees for exchange 
services, including market data.\126\ The Exchange concludes that the 
proposal is therefore reasonable in light of the substantial increase 
in customer value generate by the higher levels of liquidity now 
available on the Exchange, coupled with the fall in real prices due to 
inflation.\127\
---------------------------------------------------------------------------

    \125\ See Notice, 89 FR at 21652.
    \126\ See Notice, 89 FR at 21652.
    \127\ See Notice, 89 FR at 21652-53.
---------------------------------------------------------------------------

    The Exchange states that External Distributors receive additional 
value not available to Internal Distributors by disseminating 
information externally and typically charging for the service and that 
this additional value supports higher fees for external distribution 
for TOPO, PHLX Orders, and TOPO Plus Orders.\128\ The Exchange states 
that higher fees for external distribution of data are common 
throughout the industry, and nearly universal among exchanges and that 
the difference in value between internal and external distribution is 
also reflected in the current fee schedule.\129\
---------------------------------------------------------------------------

    \128\ See Notice, 89 FR at 21653.
    \129\ See Notice, 89 FR at 21653.
---------------------------------------------------------------------------

    The Exchange states that, in summary, the proposal represents an 
equitable allocation of reasonable dues, fees and other charges 
because: (i) customers have a choice in trading venue, and will 
exercise that choice and trade at another venue if exchange fees are 
not set competitively; (ii) the top of book data sent in the TOPO feed 
are also sent to OPRA, and customers have the option of relying on OPRA 
data; (iii) the purchase of PHLX Orders is entirely optional as it is a 
low-cost alternative to the PHLX Depth of Market product; (iv) the 
proposed fees are comparable to those of other exchanges; (v) exchange 
fees have fallen in real terms while the amount of liquidity available 
on the exchange has increased, and (vi) external vendors receive 
additional value from distributing data to their own customers and 
typically charging for the service, and therefore charging higher fees 
for external distribution is fair and reasonable.\130\
---------------------------------------------------------------------------

    \130\ See Notice, 89 FR at 21653.
---------------------------------------------------------------------------

    The Exchange also states that the Proposal is not unfairly 
discriminatory.\131\ The Exchange states that the three market data 
feeds at issue here--TOPO, PHLX Orders, and TOPO Plus Orders--are used 
by a variety of market participants for a variety of purposes, and 
states that users include regulators, market makers, competing 
exchanges, media, retail, academics, portfolio managers.\132\ The 
Exchange states that market data feeds will be available to members of 
all of these groups on a non-discriminatory basis.\133\ The Exchange 
also 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.\134\ The Exchange states that nothing in the 
Proposal burdens inter-market competition (the competition among self-
regulatory organizations) because approval of the Proposal does not 
impose any burden on the ability of other options exchanges to 
compete.\135\ The Exchange states that PHLX fees are comparable to, and 
in some cases less than, those of other exchanges.\136\ The Exchange 
finally states that nothing in the Proposal burdens intra-market 
competition (the competition among consumers of exchange data) because 
PHLX market data is available to any customer under the same fee 
schedule as any other customer, and any market participant that wishes 
to purchase PHLX market data can do so on a non-discriminatory 
basis.\137\
---------------------------------------------------------------------------

    \131\ See Notice, 89 FR at 21653.
    \132\ See Notice, 89 FR at 21653.
    \133\ See Notice, 89 FR at 21653.
    \134\ See Notice, 89 FR at 21653.
    \135\ See Notice, 89 FR at 21653.
    \136\ See Notice, 89 FR at 21653.
    \137\ See Notice, 89 FR at 21653.
---------------------------------------------------------------------------

B. Suspension

    When exchanges file their proposed rule changes with the 
Commission, including fee filings like the Exchange's present proposal, 
they are required to provide a statement supporting the proposal's 
basis under the Act and the rules and regulations thereunder applicable 
to the exchange.\138\ The instructions to Form 19b-4, on which 
exchanges file their proposed rule changes, specify that such statement 
``should be sufficiently detailed and specific to support a finding 
that the proposed rule change is consistent with [those] 
requirements.'' \139\
---------------------------------------------------------------------------

    \138\ See 17 CFR 240.19b-4 (Item 3 entitled ``Self-Regulatory 
Organization's Statement of the Purpose of, and Statutory Basis for, 
the Proposed Rule Change''). To date, the Commission has received 
one comment letter on proposed rule change, which does not appear to 
be relevant to the instant filing. See Ross Letter.
    \139\ See id.
---------------------------------------------------------------------------

    Section 6 of the Act, including Sections 6(b)(4), (5), and (8), 
require the rules of an exchange to: (1) provide for the equitable 
allocation of reasonable fees among members, issuers, and other persons 
using the exchange's facilities; \140\ (2) perfect the mechanism of a 
free and open market and a national market system, protect investors 
and the public interest, and not be designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers; \141\ 
and (3) not impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act.\142\
---------------------------------------------------------------------------

    \140\ 15 U.S.C. 78f(b)(4).
    \141\ 15 U.S.C. 78f(b)(5).
    \142\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    In temporarily suspending the Exchange's proposed rule change, the 
Commission intends to further consider whether the Proposal to increase 
market data fees is consistent with the statutory requirements 
applicable to a national securities exchange under the Act. In 
particular, the Commission will consider whether the proposed rule 
change satisfies the standards under the Act and the rules thereunder 
requiring, among other things, that an exchange's rules provide for the 
equitable allocation of reasonable fees among members, issuers, and 
other persons using its facilities; not permit unfair discrimination 
between customers, issuers, brokers or dealers; and do not impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act.\143\
---------------------------------------------------------------------------

    \143\ See 15 U.S.C. 78f(b)(4), (5), and (8), respectively.
---------------------------------------------------------------------------

    Therefore, the Commission finds that it is appropriate in the 
public interest, for the protection of investors, and otherwise in 
furtherance of the purposes of the Act, to temporarily suspend the 
proposed rule change.\144\
---------------------------------------------------------------------------

    \144\ For purposes of temporarily suspending the proposed rule 
change, the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).

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

[[Page 45043]]

IV. Proceedings To Determine Whether To Approve or Disapprove the 
Proposed Rule Changes

    In addition to temporarily suspending the Proposal, the Commission 
also hereby institutes proceedings pursuant to Sections 19(b)(3)(C) 
\145\ and 19(b)(2)(B) of the Act \146\ to determine whether the 
Exchange's proposed rule change should be approved or disapproved. 
Institution of proceedings does not indicate that the Commission has 
reached any conclusions with respect to any of the issues involved. 
Rather, the Commission seeks and encourages interested persons to 
provide additional comment on the proposed rule change to inform the 
Commission's analysis of whether to approve or disapprove the proposed 
rule change.
---------------------------------------------------------------------------

    \145\ 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily 
suspends a proposed rule change, Section 19(b)(3)(C) of the Act 
requires that the Commission institute proceedings under Section 
19(b)(2)(B) to determine whether a proposed rule change should be 
approved or disapproved.
    \146\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Act,\147\ the Commission is 
providing notice of the grounds for possible disapproval under 
consideration:
---------------------------------------------------------------------------

    \147\ Id. Section 19(b)(2)(B) of the Act also provides that 
proceedings to determine whether to disapprove a proposed rule 
change must be concluded within 180 days of the date of publication 
of notice of the filing of the proposed rule change. See id. The 
time for conclusion of the proceedings may be extended for up to 60 
days if the Commission finds good cause for such extension and 
publishes its reasons for so finding, or if the exchange consents to 
the longer period. See id.
---------------------------------------------------------------------------

     Whether the Exchange has demonstrated how the proposed 
fees are consistent with Section 6(b)(4) of the Act, which requires 
that the rules of a national securities exchange ``provide for the 
equitable allocation of reasonable dues, fees, and other charges among 
its members and issuers and other persons using its facilities''; \148\
---------------------------------------------------------------------------

    \148\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

     Whether the Exchange has demonstrated how the proposed 
fees are consistent with Section 6(b)(5) of the Act, which requires, 
among other things, that the rules of a national securities exchange 
not be ``designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers''; \149\ and
---------------------------------------------------------------------------

    \149\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

     Whether the Exchange has demonstrated how the proposed 
fees are consistent with Section 6(b)(8) of the Act, which requires 
that the rules of a national securities exchange ``not impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of [the Act].'' \150\
---------------------------------------------------------------------------

    \150\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    As discussed in Section III above, the Exchange made various 
arguments in support of the Proposal. There are questions as to whether 
the Exchange has provided sufficient information to demonstrate that 
the proposed fees are consistent with the Act and the rules thereunder. 
The Commission will specifically consider, among other things, whether 
the Exchange has provided sufficient evidence to demonstrate that the 
proposed market data fees are reasonable and equitably allocated, are 
not unfairly discriminatory, and do not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.
    Under the Commission's Rules of Practice, the ``burden to 
demonstrate that a proposed rule change is consistent with the [Act] 
and the rules and regulations issued thereunder . . . is on the [SRO] 
that proposed the rule change.'' \151\ The description of a proposed 
rule change, its purpose and operation, its effect, and a legal 
analysis of its consistency with applicable requirements must all be 
sufficiently detailed and specific to support an affirmative Commission 
finding,\152\ and any failure of an SRO to provide this information may 
result in the Commission not having a sufficient basis to make an 
affirmative finding that a proposed rule change is consistent with the 
Act and the applicable rules and regulations.\153\
---------------------------------------------------------------------------

    \151\ 17 CFR 201.700(b)(3).
    \152\ See id.
    \153\ See id.
---------------------------------------------------------------------------

    The Commission is instituting proceedings to allow for additional 
consideration and comment on the issues raised herein, including as to 
whether the proposed fees are consistent with the Act, and 
specifically, with its requirements that exchange fees be reasonable 
and equitably allocated, not be unfairly discriminatory, and not impose 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.\154\
---------------------------------------------------------------------------

    \154\ See 15 U.S.C. 78f(b)(4), (5), and (8).
---------------------------------------------------------------------------

V. Commission's Solicitation of Comments

    The Commission requests written views, data, and arguments with 
respect to the concerns identified above as well as any other relevant 
concerns. Such comments should be submitted by June 12, 2024. Rebuttal 
comments should be submitted by June 26, 2024. Although there do not 
appear to be any issues relevant to approval or disapproval that would 
be facilitated by an oral presentation of views, data, and arguments, 
the Commission will consider, pursuant to Rule 19b-4, any request for 
an opportunity to make an oral presentation.\155\
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    \155\ 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants 
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is 
appropriate for consideration of a particular proposal by an SRO. 
See Securities Acts Amendments of 1975, Report of the Senate 
Committee on Banking, Housing and Urban Affairs to Accompany S. 249, 
S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975).
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    The Commission asks that commenters address the sufficiency and 
merit of the Exchange's statements in support of the Proposal, in 
addition to any other comments they may wish to submit about the 
proposed rule changes.
    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-2024-15 on the subject line.

Paper Comments

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

All submissions should refer to file number SR-Phlx-2024-15. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (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

[[Page 45044]]

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-2024-15 and should be submitted on or before June 12, 2024. 
Rebuttal comments should be submitted by June 26, 2024.

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(3)(C) of the 
Act,\156\ that File No. SR-Phlx-2024-15, be and hereby is, temporarily 
suspended. In addition, the Commission is instituting proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
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    \156\ 15 U.S.C. 78s(b)(3)(C).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\157\
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    \157\ 17 CFR 200.30-3(a)(57).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-11168 Filed 5-21-24; 8:45 am]
BILLING CODE 8011-01-P