[Federal Register Volume 89, Number 145 (Monday, July 29, 2024)]
[Notices]
[Pages 60956-60958]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-16549]



[[Page 60956]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100579; File No. SR-Phlx-2024-33]


Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the Fees 
for Nasdaq 100 Index Options in Options 7, Section 5.A

July 23, 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 July 12, 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 the fees for Nasdaq 100 Index 
options in the Exchange's Pricing Schedule at Options 7, Section 5.A.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/phlx/rules, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend the fees for 
NDX \3\ and NDXP.\4\ The Exchange initially filed the proposed pricing 
changes on July 1, 2024 (SR-Phlx-2024-30). On July 12, 2024, the 
Exchange withdrew that filing and submitted this filing.
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    \3\ NDX represents A.M.-settled options on the full value of the 
Nasdaq 100 Index traded under the symbol NDX.
    \4\ NDXP represents P.M.-settled options on the full value of 
the Nasdaq 100 Index traded under the symbol NDXP.
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    As set forth in Options 7, Section 5.A, the Exchange currently 
charges all Non-Customer \5\ orders in NDX and NDXP a $0.75 per 
contract transaction fee. Customer \6\ orders are currently assessed a 
$0.25 per contract transaction fee in NDX and NDXP. These transaction 
fees apply to electronic simple and complex executions as well as floor 
transactions.
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    \5\ The term ``Non-Customer'' applies to transactions for the 
accounts of Lead Market Makers, Market Makers, Firms, Professionals, 
Broker-Dealers and JBOs.
    \6\ The term ``Customer'' applies to any transaction that is 
identified by a member or member organization for clearing in the 
Customer range at The Options Clearing Corporation (``OCC'') which 
is not for the account of a broker or dealer or for the account of a 
``Professional'' (as that term is defined in Options 1, Section 
1(b)(45)).
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    The Exchange now proposes to assess a surcharge of $0.25 per 
contract to all market participants for simple and complex executions 
in NDX and NDXP with a premium price of $25.00 or greater.\7\ The fees 
for simple and complex executions in NDX and NDXP with a premium price 
of less than $25.00 will remain unchanged under this proposal. The 
Exchange notes that charging different fees based on the option premium 
is consistent with how other options are priced at another options 
exchange.\8\ The Exchange further notes that the proposed surcharge 
amount is within the range of surcharges assessed for transactions in 
other products at other options exchanges.\9\
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    \7\ See proposed note 7 in Options 7, Section 5.A.
    \8\ For example, Cboe Options (``Cboe'') currently assesses 
customers a $0.36 per contract fee (if premium < $1.00) or $0.45 per 
contract fee (if premium >= $1.00) for SPX and SPESG options. Cboe 
also currently assesses market-makers a $0.05 per contract fee (if 
premium is $0.00-$0.10) or $0.23 per contract (if premium >= $0.11) 
for VIX options. See Cboe Fees Schedule.
    \9\ For example, Cboe currently assesses customers a $0.25 per 
contract exotic surcharge and a $0.21 per contract execution 
surcharge in SPX and SPESG options. See Cboe Fees Schedule. In 
addition, the Exchange's affiliate, Nasdaq Phlx LLC (``Phlx'') 
current assesses a $0.25 per contract complex surcharge for 
executions in singly-listed U.S. dollar-settled foreign currency 
options. See Phlx Options 7, Section 5.D.
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    The Exchange notes that less than 50% of total NDX and NDXP 
executed volume is in NDX and NDXP contracts with a premium of $25.00 
or greater, as shown in the chart below.\10\
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    \10\ The chart includes A.M. and P.M. settled options on the 
full value of the Nasdaq 100[supreg] Index on Nasdaq ISE, LLC, 
Nasdaq GEMX, LLC, and Nasdaq Phlx LLC.

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[GRAPHIC] [TIFF OMITTED] TN29JY24.001

    Notably, the majority of NDX and NDXP contracts have a premium 
price of below $25.00. The Exchange believes that on the whole, while 
it is proposing a $0.25 per contract surcharge on NDX and NDXP 
executions with a premium price of $25.00 or greater, market 
participants will continue to be incentivized to transact in NDX and 
NDXP, especially given that the majority of such transactions would 
occur below the threshold at which the proposed surcharge would be 
assessed.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\11\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\12\ 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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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that its proposal to add a $0.25 per contract 
surcharge to all market participants for simple and complex executions 
in NDX and NDXP with a premium price of $25.00 or greater is reasonable 
because the proposed pricing reflects the proprietary nature of these 
products. Similar to other proprietary products like options overlying 
the Nasdaq 100 Micro Index (``XND''), the Exchange seeks to recoup the 
operational costs of listing proprietary products.\13\ Also, pricing by 
symbol is a common practice on many U.S. options exchanges as a means 
to incentivize order flow to be sent to an exchange for execution in 
particular products. Other options exchanges price by symbol and based 
on the option premium.\14\ Further, the Exchange notes that market 
participants are offered different ways to gain exposure to the Nasdaq 
100 Index, whether through the Exchange's proprietary products like 
options overlying NDX, NDXP, or XND, or separately through multi-listed 
options overlying Invesco QQQ Trust (``QQQ'').\15\ Offering such 
products provides 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. When exchanges are able to recoup costs 
associated with offering proprietary products, it incentivizes growth 
and competition for the innovation of additional products. The Exchange 
further believes that the proposed surcharge described above is 
reasonable because the new fee is in line with surcharges assessed on 
other index products at other options exchanges.\16\
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    \13\ By way of example, in analyzing an obvious error, the 
Exchange would have additional data points available in establishing 
a theoretical price for a multiply listed option as compared to a 
proprietary product, which requires additional analysis and 
administrative time to comply with Exchange rules to resolve an 
obvious error.
    \14\ See supra note 8.
    \15\ QQQ is an exchange-traded fund based on the same Nasdaq 100 
Index as NDX, NDXP, and XND.
    \16\ See supra note 9.
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    The Exchange believes that its proposal is equitable and not 
unfairly discriminatory because it will be applied uniformly to all 
market participants. Assessing a surcharge only for executions in NDX 
and NDXP whose premium is $25.00 or greater is equitable and not 
unfairly discriminatory for the reasons that follow. As shown in the 
chart above, the majority of NDX and NDXP contracts have a premium of 
less than $25.00, and the Exchange is limiting the proposed surcharge 
to higher-priced NDX and NDXP contracts (i.e., $25.00 or greater), 
while maintaining lower costs on lower-priced NDX and NDXP contracts 
(i.e., below $25.00). As such, the Exchange believes that its proposal 
will continue to promote liquidity in these products, to the benefit of 
all market participants because the majority of NDX contracts would not 
incur the proposed $0.25 surcharge as they would fall below the premium 
price threshold at which the surcharge would be assessed.

[[Page 60958]]

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.
    In terms of intra-market competition, the Exchange will apply the 
proposed surcharge uniformly to all market participants. As discussed 
above, the majority of NDX and NDXP contracts have a premium of less 
than $25.00 and these contracts would not incur the proposed $0.25 
surcharge as they would fall under the premium price threshold at which 
the surcharge would be assessed. By limiting the proposed surcharge to 
higher-priced NDX and NDXP contracts (i.e., with a premium price of 
$25.00 or higher), the Exchange believes that its proposal will 
continue to promote liquidity in these products by maintaining lower 
costs for lower-priced NDX and NDXP contracts. Greater liquidity 
benefits all market participants by providing more trading 
opportunities, tighter spreads, and added market transparency and price 
discovery.
    In terms of inter-market competition, 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 
options 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. As noted above, market participants are offered 
an opportunity to transact in NDX, NDXP, or XND, or separately execute 
options overlying QQQ. Offering these products provides market 
participants with a variety of choices in selecting the product they 
desire to use to gain exposure to the Nasdaq 100 Index. Furthermore, 
the proposed surcharge is in line with surcharges assessed on other 
products at another options exchange.\17\
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    \17\ See supra note 9.
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    In addition to the Exchange, market participants have alternative 
options exchanges that they may participate on and direct their order 
flow, which list proprietary products that compete with NDX and 
NDXP.\18\ In sum, if the changes proposed herein are unattractive to 
market participants, it is likely that the Exchange will lose market 
share as a result. Accordingly, the Exchange does not believe that the 
proposed changes will impair the ability of members or competing 
options exchanges to maintain their competitive standing in the 
financial markets.
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    \18\ See e.g., pricing for Russell 2000 Index (``RUT'') on 
Cboe's Fees Schedule and Cboe C2 Exchange, Inc.'s (``C2'') Fees 
Schedule. See also SPX pricing on Cboe's Fees Schedule. Both RUT and 
SPX are proprietary products on the Cboe markets that are broad-
based index options, like NDX and NDXP.
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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.\19\
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    \19\ 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-2024-33 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-2024-33. 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-2024-33 and should be 
submitted on or before August 19, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-16549 Filed 7-26-24; 8:45 am]
BILLING CODE 8011-01-P