
[Federal Register Volume 80, Number 139 (Tuesday, July 21, 2015)]
[Notices]
[Pages 43151-43156]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-17754]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75455; File No. SR-Phlx-2015-61]


Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Customer Rebate Program, Multiply Listed Options, and Singly-Listed 
Options

July 15, 2015.
    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 1, 2015, NASDAQ OMX 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 modify the Phlx Pricing Schedule 
(``Pricing Schedule''). Specifically, the Exchange proposes to amend 
pricing in Section B, entitled ``Customer Rebate Program,'' \3\ Section 
II, entitled ``Multiply Listed Options Fees,'' \4\ and Section III, 
entitled ``Singly Listed Options,'' \5\ of the Pricing Schedule. The 
Exchange proposes these amendments in order to: (i) Increase the 
rebates specifically for Tier 4 and Tier 5 (Category B) electronic 
Complex \6\ and Complex PIXL \7\ Orders \8\; (ii) increase the 
assessment of Multiply Listed Options fees for non-Penny Pilot \9\ 
Options for electronic Professional,\10\ Broker-Dealer,\11\ and Firm 
\12\ orders; (iii) delete Customer Rebate Tier 2 and Tier 3 from notes 
13 [sic] and 14 dealing with Common Ownership; \13\ and (iv) increase 
the assessment of Singly-Listed FX options \14\ fees for Professional, 
Broker-Dealer, and Firm orders.
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    \3\ 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 broker or dealer or for the account of a 
``Professional'' (as that term is defined in Rule 1000(b)(14).
    \4\ This includes options overlying equities, exchange traded 
funds (``ETFs''), exchange traded notes (``ETNs'') and indexes which 
are Multiply Listed.
    \5\ This includes options overlying foreign exchange (``FX''), 
equities, ETFs, ETNs, and indexes not listed on another exchange.
    \6\ A Complex Order is any order involving the simultaneous 
purchase and/or sale of two or more different options series in the 
same underlying security, priced at 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. Furthermore, a Complex Order can also be a stock-option 
order, which is an order to buy or sell a stated number of units of 
an underlying stock or ETF coupled with the purchase or sale of 
options contract(s). See Exchange Rule 1080, Commentary .07(a)(i).
    \7\ PIXL\SM\ is the Exchange's price improvement mechanism known 
as Price Improvement XL or PIXL. See Rule 1080(n).
    \8\ A transaction resulting from an order that was 
electronically delivered utilizes Phlx XL. See Exchange Rules 1014 
and 1080. Electronically delivered orders do not include orders 
transacted on the Exchange floor. A transaction resulting from an 
order that is non-electronically-delivered is represented on the 
trading floor by a floor broker. See Exchange Rule 1063. All orders 
are either electronically or non-electronically delivered.
    \9\ The Penny Pilot was established in January 2007 and was last 
extended in 2015. See Securities Exchange Act Release Nos. 55153 
(January 23, 2007), 72 FR 4553 (January 31, 2007) (SR-Phlx-2006-74) 
(notice of filing and approval order establishing Penny Pilot); and 
75286 (June 24, 2015) (SR-Phlx-2015-54) (notice of filing and 
immediate effectiveness extending the Penny Pilot through June 30, 
2016). Non-Penny Pilot Options are options other than Penny Pilot 
Options listed on the Exchange (e.g. AAPL, BAC, EEM, FB, FXI, IWM, 
QQQ, TWTR, VXX and XLF), which can be found at http://www.nasdaqtrader.com/Micro.aspx?id=phlx.
    \10\ The term ``Professional'' 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 Rule 
1000(b)(14).
    \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.
    \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.
    \13\ The term ``Common Ownership'' means members or member 
organizations under 75% common ownership or control.
    \14\ FX options include XDB, XDE, XDN, XDS, XDA, XDM, XEH, XEV, 
XDZ, XDC, and XDV.
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqomxphlx.cchwallstreet.com/, 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

[[Page 43152]]

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 this filing is to modify the Pricing Schedule to 
specifically amend fees in Section B, entitled ``Customer Rebate 
Program,'' Section II, entitled ``Multiply Listed Options Fees,'' and 
Section III, entitled ``Singly Listed Options.'' The Exchange proposes 
these amendments in order to: (i) Increase the rebates specifically for 
Tier 4 and Tier 5 (Category B) electronic Complex and Complex PIXL 
Orders; (ii) increase the assessment of Multiply Listed Options fees 
for non-Penny Pilot Options for electronic Professional, Broker-Dealer, 
and Firm orders; (iii) delete Customer Rebate Tier 2 and Tier 3 from 
notes 13 [sic] and 14 dealing with Common Ownership; and (iv) increase 
the assessment of Singly-Listed FX options fees for Professional, 
Broker-Dealer, and Firm orders.
Section B--Customer Rebate Program
    Currently, the Exchange has a Customer Rebate Program consisting of 
five tiers that pays Customer Rebates on two categories, A and B, of 
transactions. A Phlx member qualifies for a certain rebate tier based 
on the percentage of total national customer volume in Multiply Listed 
equity and ETFs options classes, excluding SPY \15\ options that it 
transacts monthly on Phlx. The Exchange calculates Customer volume in 
Multiply Listed Options (including SPY options) by totaling 
electronically-delivered and executed volume, excluding volume 
associated with electronic Qualified Contingent Cross (``QCC'') 
Orders,\16\ as defined in Exchange Rule 1080(o).\17\ The Exchange 
proposes, as discussed below, to increase the Tier 4 and Tier 5 Complex 
PIXL Orders (Category B) rebates.
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    \15\ SPY is the SPDR[supreg] S&P 500[supreg] ETF Trust. 
S&P[supreg], S&P 500[supreg], SPDR[supreg], and Standard & 
Poor's[supreg] are registered trademarks of Standard & 
Poor's[supreg] Financial Services LLC.
    \16\ A QCC Order is comprised of an order to buy or sell at 
least 1000 contracts that is identified as being part of a qualified 
contingent trade, as that term is defined in Rule 1080(o)(3), 
coupled with a contra-side order to buy or sell an equal number of 
contracts. The QCC Order must be executed at a price at or between 
the National Best Bid and Offer and be rejected if a Customer order 
is resting on the Exchange book at the same price. A QCC Order shall 
only be submitted electronically from off the floor to the PHLX XL 
II System. See Rule 1080(o). See also Securities Exchange Act 
Release No. 64249 (April 7, 2011), 76 FR 20773 (April 13, 2011) (SR-
Phlx-2011-47) (a rule change to establish a QCC Order to facilitate 
the execution of stock/option Qualified Contingent Trades (``QCTs'') 
that satisfy the requirements of the trade through exemption in 
connection with Rule 611(d) of the Regulation NMS).
    \17\ Members and member organizations under common ownership may 
aggregate their Customer volume for purposes of calculating the 
Customer Rebate Tiers and receiving rebates. Common ownership means 
members or member organizations under 75% common ownership or 
control.
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    Currently, a Category A rebate is paid to members executing 
electronically-delivered Customer Simple Orders in Penny Pilot Options 
and Customer Simple Orders in non-Penny Pilot Options in Section II 
symbols. Rebates are paid on Customer PIXL Orders in Section II symbols 
that execute against non-Initiating Order interest. In the instance 
where member organizations qualify for Tier 4 or higher in the Customer 
Rebate Program, Customer PIXL Orders that execute against a PIXL 
Initiating Order are paid a rebate of $0.14 per contract. Rebates on 
Customer PIXL Orders will be capped at 4,000 contracts per order for 
Simple PIXL Orders.
    Currently, a Category B rebate is paid to members executing 
electronically-delivered Customer Complex Orders in Penny Pilot Options 
and non-Penny Pilot Options in Section II symbols. Rebates are paid on 
Customer PIXL Complex Orders in Section II symbols that execute against 
non-Initiating Order interest. Customer Complex PIXL Orders that 
execute against a Complex PIXL Initiating Order will not be paid a 
rebate under any circumstances. The Category B rebate will not be paid 
when an electronically-delivered Customer Complex Order, including a 
Customer Complex PIXL Order, executes against another electronically-
delivered Customer Complex Order. Rebates on Customer PIXL Orders are 
capped at 4,000 contracts per order leg for Complex PIXL Orders. 
Moreover, the Exchange will pay a $0.02 per contract Category A rebate 
and a $0.03 per contract Category B rebate in addition to the 
applicable Tier 2 and 3 rebate to a Specialist or Market Maker or its 
member or member organization affiliate under Common Ownership provided 
the Specialist or Market Maker has reached the Monthly Market Maker 
Cap, as defined in Section II.
    Now, the rebates in all tiers (Category A and Category B) are as 
follows:

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                                                    Percentage thresholds of
                                                   national customer volume in
             Customer rebate tiers               multiply-listed equity and ETF     Category A      Category B
                                                 options classes, excluding spy
                                                        options (monthly)
----------------------------------------------------------------------------------------------------------------
Tier 1........................................  0.00%-0.60%.....................           $0.00           $0.00
Tier 2........................................  Above 0.60-1.10.................           *0.10           *0.17
Tier 3........................................  Above 1.10-1.60.................           *0.12           *0.17
Tier 4........................................  Above 1.60-2.50.................            0.16            0.20
Tier 5........................................  Above 2.50......................            0.17            0.20
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    The Exchange proposes to change the Tier 4 Customer Rebate 
(Category B) from $0.20 to $0.22. The Exchange also proposes to change 
the Tier 5 Customer Rebate (Category B) from $0.20 to $0.22.\18\ The 
Exchange believes that the proposed increased Category B rebates will 
continue to encourage members to send Customer liquidity to Phlx 
despite the cap on PIXL Complex Order rebates at the proposed 4,000 
contracts per order leg. The Exchange believes that the proposed two 
cent increase is reasonable. Moreover, the Exchange believes that the 
resulting 5 cents difference between Category B Tiers 3 and 4 ($0.17 
and $0.22) is reasonable and fair since, comparatively, the current 
difference between Tiers 1 and 2 is 17 cents.
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    \18\ This is similar to the Chicago Board Options Exchange 
(``CBOE''). See CBOE's Fee Schedule.
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Section II--Multiply Listed Options
    Currently, the Exchange charges Customers, Professionals, 
Specialists and Market Makers, Broker-Dealers, and Firms Options 
Transaction Fees for Multiply Listed Options (including options 
overlying equities, ETFs, ETNs, and indexes which are Multiply Listed). 
The fees are different for Penny Pilot Options and non-Penny Pilot 
Options.

[[Page 43153]]

    Now, the Multiply-Listed Options fees, per contract, are as 
follows:

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                                                                      Professional         Specialist and         Broker-dealer             Firm
------------------------------------------------------           ----------------------     market maker     -------------------------------------------
                                                        Customer                       ----------------------
                                                                   Electronic   Floor    Electronic   Floor    Electronic   Floor    Electronic   Floor
--------------------------------------------------------------------------------------------------------------------------------------------------------
Options Transaction Charge (Penny Pilot).............      $0.00   \13\ $0.48    $0.25        $0.22    $0.30   \13\ $0.48    $0.25    \12\ \13\    $0.25
                                                                                                                                          $0.48
Options Transaction Charge (non-Penny Pilot).........       0.00    \13\ \14\     0.25    \15\ 0.25     0.30    \13\ \14\     0.25    \12\ \13\     0.25
                                                                         0.70                                        0.70             \14\ 0.70
Options Surcharge in MNX and NDX.....................        N/A         0.20     0.20         0.20     0.20         0.20     0.20         0.20     0.20
Options Surcharge in BKX.............................        N/A         0.10     0.10         0.10     0.10         0.10     0.10         0.10     0.10
Cabinet Options......................................       0.00          N/A     0.10          N/A     0.10          N/A     0.10          N/A     0.10
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    The Exchange offers a discount to Professional, Broker-Dealer, and 
Firm for certain orders. Today, notes 13 and 14 apply to fees assessed 
to a Professional, Broker-Dealer, and Firm for electronic orders in 
certain non-Penny Pilot Options. Note 13 states that electronic Complex 
Orders will be assessed $0.35 per contract. Note 14 states that any 
member or member organization under Common Ownership with another 
member or member organization that qualifies for Customer Rebate Tiers 
2, 3, 4 or 5 in Section B of the Pricing Schedule will be assessed 
$0.60 per contract. In addition, note 12 applies to fees assessed to a 
Firm for electronic orders in certain non-Penny Pilot Options. Note 12 
states that Firm electronic simple orders in AAPL, BAC, EEM, FB, FXI, 
IWM, QQQ, TWTR, VXX, and XLF \19\ will be assessed $0.34.
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    \19\ All are currently in the Penny Pilot.
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    The Exchange proposes to amend the discounted amount that is 
currently assessed to a Professional, Broker- Dealer, and Firm for 
electronic orders in certain Multiply Listed non-Penny Pilot Options. 
Whereas today the Exchange assesses a Professional, Broker-Dealer, and 
Firm each a $0.70 per contract Options Transaction Charge for Non-Penny 
Pilot Options, the Exchange proposes to increase this fee to $0.75. 
Despite the increase in the fee, the Exchange believes that its fee 
structure will continue to incentivize Professionals, Firms, and 
Broker-Dealers to transact electronic non-Penny Pilot volume on the 
Exchange.
    The Exchange offers a discount to Specialists and Market Makers for 
certain orders. Today, note 15 applies to a Specialist or Market Maker 
that transacts electronic orders in non-Penny Pilot Options. Note 15 
states that any member or member organization under Common Ownership 
with another member or member organization that qualifies for Customer 
Rebate Tiers 2, 3, 4 or 5 in Section B of the Pricing Schedule will be 
assessed $0.23 per contract. The Exchange is proposing to delete the 
reference to Customer Rebate Tiers 2 and 3 in note 14 and note 15. 
Thus, note 15 would continue to apply to Specialists and Market Makers 
such that after the proposal, per note 15 any member or member 
organization under Common Ownership with another member or member 
organization that qualifies for Customer Rebate Tiers 4 or 5 in Section 
B of the Pricing Schedule will be assessed $0.23 per contract.
    Today, note 14 applies to a Professional, Broker-Dealer, or Firm 
that transacts electronic orders in non-Penny Pilot Options. Note 14 
states that any member or member organization under Common Ownership 
with another member or member organization that qualifies for Customer 
Rebate Tiers 2, 3, 4 or 5 in Section B of the Pricing Schedule will be 
assessed $0.60 per contract. The Exchange is proposing to delete the 
reference in note 14 to Customer Rebate Tiers 2 and 3, just like in 
note 15. Thus, note 14 would continue to apply to Professionals, 
Broker-Dealers, and Firms such that after the proposal, per note 14 any 
member or member organization under Common Ownership with another 
member or member organization that qualifies for Customer Rebate Tiers 
4 or 5 in Section B of the Pricing Schedule will be assessed $0.60 per 
contract. The Exchange believes that the qualification for Customer 
Rebate Tiers 2 or 3 is no longer necessary for the discount incentive 
in notes 14 and 15, particularly where Professionals, Broker-Dealers, 
Specialists and Market Makers, and Firms can choose to earn the 
discount by qualifying for Customer Rebate Tiers 4 or 5 by bringing 
liquidity to the Exchange.
    Despite the proposed deletion of the reference to Customer Rebate 
Tiers 2 and 3 in notes 14 and 15, the Exchange believes that its fee 
structure will continue to incentivize Professionals, Firms, Broker-
Dealers, and Specialists and Market Makers to transact electronic non-
Penny Pilot Option volume on the Exchange. The Exchange believes that 
with the proposed deletion of the reference to Customer Rebate Tiers 2 
and 3, the incentive remains to bring more order flow to the Exchange 
to earn the discount.
Section III--Singly Listed Options
    Currently, fees for Singly Listed Options are located in Section 
III of the Pricing Schedule. The Singly-Listed Options fees, per 
contract, are as follows: \20\
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    \20\ While Singly-Listed Options fees also apply to FX options, 
these fees are not proposed to be changed and therefore, for 
purposes of brevity, are not reproduced here.

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                                                                                                        Specialist and
                                                                         Customer       Professional     market maker         Firm        Broker- dealer
--------------------------------------------------------------------------------------------------------------------------------------------------------
Options Transaction Charge.........................................           $0.40            $0.70            $0.40            $0.70            $0.70
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    Today, the Exchange assesses an Options Transaction Charge for 
Customers of $0.40 per contract, for Professionals, Firms, and Broker-
Dealers of $0.70 per contract, and for Specialists and Market Makers of 
$0.40 per contract. These fees apply to options overlying FX, equities, 
ETNs, ETFs, and indexes not listed on another exchange.\21\ The 
Exchange proposes to increase the Professional, Broker-Dealer, and Firm 
Options Transaction Charges from $0.70 to $0.75 per contract for Singly 
Listed Options.\22\ The increase

[[Page 43154]]

aligns these fees with the above-described proposed electronic non-
Penny Pilot fees in Section II of the Pricing Schedule.\23\ Despite the 
fee increase, the proposal will allow the Exchange to incentivize 
market participants to transact Singly Listed Options.
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    \21\ These Singly Listed Options include SOX, HGX, and OSX.
    \22\ The Exchange is not increasing the fees for Customers and 
Specialists and Market Makers. As discussed herein, Customer orders 
bring valuable liquidity to the market, which liquidity benefits 
other market participants; and Specialists and Market Makers have 
market obligations (e.g., to make continuous markets) that other 
market participants do not have.
    \23\ Professionals, Broker-Dealers, and Firms are proposed to be 
similarly assessed a $0.75 per contract electronic Options 
Transaction Charge in Multiply Listed [sic] Options.
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    The Exchange believes that the fees and rebates in its Pricing 
Schedule are structured to attract liquidity. Tier 4 and 5 of the 
Customer Rebate Schedule in Section B, for example, provide the highest 
relative rebates in the five tier Customer Rebate Program to those that 
bring the most liquidity to the Exchange, in particular where the 
percentage thresholds of national customer volume in multiply-listed 
equity and ETF Options classes, excluding SPY Options (monthly) are 
also the highest. In making the proposed changes to the Pricing 
Schedule, the Exchange continues to incentivize members to execute 
liquidity on the Exchange.
2. Statutory Basis
    The Exchange believes that its proposal to amend the Pricing 
Schedule is consistent with Section 6(b) of the Act \24\ in general, 
and furthers the objectives of Section 6(b)(4) and (b)(5) of the Act 
\25\ 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 or system which Phlx operates or 
controls, and is not designed to permit unfair discrimination between 
market participants to whom the Exchange's fees and rebates are 
applicable.
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    \24\ 15 U.S.C. 78f(b).
    \25\ 15 U.S.C. 78f(b)(4), (5).
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    Section B--Customer Rebates
    The Exchange believes that its proposal to change the Tier 4 
Customer Rebate (Category B) from $0.20 to $0.22, and to change the 
Tier 5 Customer Rebate (Category B) from $0.20 to $0.22, is reasonable. 
These proposed changes will allow the Exchange to continue to attract 
Customer liquidity to the Exchange. Customer orders bring valuable 
liquidity to the market, which liquidity benefits other market 
participants. Customer liquidity benefits all market participants by 
providing more trading opportunities, which attracts Specialists 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 the proposed increased Category B rebates 
will continue to encourage members to send Customer liquidity to Phlx 
despite the cap on PIXL Complex Order rebates at the proposed 4,000 
contracts per order leg. The Exchange believes that the proposed two 
cent increase is reasonable. Additionally, the CBOE has similar 
rebates.\26\
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    \26\ CBOE's VIP credit for certain orders in Tier 3 is $0.22 per 
contract. See CBOE's Fees Schedule. See also Securities Exchange Act 
Release No. 371588 (June 17, 2015), 80 FR 36021 (June 23, 2015) (SR-
CBOE-2015-058) (rule change increasing VIP credit for certain orders 
in Tier 3 from $0.16 per contract to $0.22 per contract, also in 
Tier 2 from $0.16 per contract to $0.21 per contract and in Tier 4 
from $0.17 per contract to $0.23 per contract).
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    The Exchange believes that its proposal to change the Tier 4 and 
Tier 5 Customer Rebate (Category B) from $0.20 to $0.22 is equitable 
and not unfairly discriminatory because these amendments to Category B 
apply uniformly to all market participants to whom Category B applies. 
Moreover, the Exchange believes that the resulting 5 cents difference 
between Category B Tiers 3 and 4 ($0.17 and $0.22) is reasonable and 
not unfair since, comparatively, the current difference between Tiers 1 
and 2 is 17 cents.
Section II--Multiply Listed Options
    The Exchange believes that increasing from $0.70 to $0.75 the 
amount that is currently assessed to a Professional, Broker-Dealer, and 
Firm for electronic orders in certain Multiply Listed non-Penny Pilot 
Options is reasonable. Despite the increase in the fee, the Exchange 
believes that its fee structure will continue to incentivize 
Professionals, Broker-Dealers, and Firms to transact electronic non-
Penny Pilot volume on the Exchange. The Exchange believes that the 
proposed fee, although higher, will continue to incentivize 
Professionals, Broker-Dealers, and Firms to send order flow to the 
Exchange. In addition, these modestly increased fees are consistent 
with similarly increased proposed fees for Singly Listed Options. The 
Exchange believes that it is reasonable for it to instill consistency 
in its pricing as discussed.
    The Exchange believes that increasing from $0.70 to $0.75 the 
amount that is currently assessed to a Professional, Broker-Dealer, and 
Firm for electronic orders in certain Multiply Listed non-Penny Pilot 
Options is equitable and not unfairly discriminatory because it applies 
uniformly to all. Further, the proposed amendment will continue to 
allow the Exchange to incentivize Professionals, Broker-Dealers, and 
Firms to send electronic order flow to the Exchange for execution. The 
Exchange's fees will be competitive with fees at other options markets. 
Although the Exchange will still be assessing Professionals, Broker-
Dealers, and Firms more than Customers (which do not pay the Option 
Transaction Charge in Penny Pilot or in non-Penny Pilot Options), 
Customer order flow enhances liquidity on the Exchange for the benefit 
of all market participants and benefits all market participants by 
providing more trading opportunities, which attracts Specialists 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. 
Although Professionals, Broker-Dealers, and Firms will still be charged 
more for non-Penny Pilot Options than Specialists and Market Makers, 
who are charged $0.25 and $0.30, respectively, Specialists and Market 
Makers have obligations to the market and regulatory requirements, 
which normally do not apply to other market participants.\27\ 
Specialists and Markets have obligations to make continuous markets, 
engage in a course of dealings reasonably calculated to contribute to 
the maintenance of a fair and orderly market, and not make bids or 
offers or enter into transactions that are inconsistent with a course 
of dealings.
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    \27\ See Rule 1014 titled ``Obligations and Restrictions 
Applicable to Specialists and Registered Options Traders.''
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    The Exchange believes it is reasonable to propose to delete the 
reference to Customer Rebate Tiers 2 and 3 in notes 14 and 15. Thus, 
note 15 would continue to apply to Specialists and Market Makers and 
after the proposal any member or member organization under Common 
Ownership with another member or member organization that qualifies for 
Customer Rebate Tiers 4 [sic] or 5 [sic] in Section B of the Pricing 
Schedule will be assessed $0.23 per contract. Similarly, note 14 would 
continue to apply to Professionals, Broker-Dealers, and Firms and after 
the proposal any member or member organization under Common Ownership 
with another member or member organization that qualifies for Customer 
Rebate Tiers 4 or 5 in Section B of the Pricing Schedule will be 
assessed $0.60 per contract. The Exchange believes that the 
qualification for Customer Rebate Tiers 4 or 5 is no

[[Page 43155]]

longer necessary for the discount incentive in notes 14 and 15, 
particularly where Professionals, Broker-Dealers, Specialists, and 
Market Makers, and Firms can choose to earn the discount by qualifying 
for Customer Rebate Tiers 4 or 5 by bringing liquidity to the Exchange. 
Despite the proposed deletion of the reference to Customer Rebate Tiers 
2 and 3 in notes 14 and 15, the Exchange believes that its fee 
structure will continue to incentivize Professionals, Firms, Broker-
Dealers, and Specialists and Market Makers to transact electronic non-
Penny Pilot volume on the Exchange. The Exchange believes that with the 
proposed deletion of the reference to Customer Rebate Tiers 2 and 3, 
the incentive remains to bring more order flow to the Exchange to earn 
the discount.
    The Exchange believes it is equitable and not unfairly 
discriminatory to increase from $0.70 to $0.75 the Multiply Listed non-
Penny Pilot Options fee, as well as to delete the reference to Customer 
Rebate Tiers 2 and 3 in notes 14 and 15. The Exchange believes that the 
proposed changes will enable to Exchange to continue to incentivize 
market participants to bring non-Penny Pilot Customer liquidity to the 
Exchange. Customer liquidity benefits all market participants by 
providing more trading opportunities, which attracts Specialists 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. 
Specialists and Market Makers are assessed lower electronic Options 
Transaction Charges in Penny Pilot Options as compared to 
Professionals, Broker-Dealers, and Firms because they have obligations 
to the market and regulatory requirements, which normally do not apply 
to other market participants.\28\ They have obligations to make 
continuous markets, engage in a course of dealings reasonably 
calculated to contribute to the maintenance of a fair and orderly 
market, and not make bids or offers or enter into transactions that are 
inconsistent with a course of dealings. The proposed differentiation as 
between Customers and Specialists and Market Makers and other market 
participants (e.g., Professionals, Broker-Dealers, and Firms) 
recognizes the differing contributions made to the liquidity and 
trading environment on the Exchange by these market participants. 
Moreover, the proposed changes to the fee structure and rebate 
structure will be applied uniformly to all.
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    \28\ See Rule 1014 titled ``Obligations and Restrictions 
Applicable to Specialists and Registered Options Traders.''
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Section III--Singly Listed Options
    The Exchange believes that increasing the Professional, Firm, and 
Broker-Dealer Options Transaction Charges is reasonable because the 
Exchange is seeking to conform fees to electronic Non-Penny Pilot 
Options \29\ pricing for Multiply Listed Options \30\ in order to 
recoup the operational costs \31\ for Singly Listed Options. Also, the 
Exchange believes the fees are reasonable because the proposed fees are 
within the range of similar fees assessed at other exchanges.\32\
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    \29\ All Singly Listed Options are Non-Penny Pilot Options.
    \30\ See Section II of the Pricing Schedule.
    \31\ 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 
Singly Listed Option, which requires additional analysis and 
administrative time to comply with Exchange rules to resolve an 
obvious error.
    \32\ CBOE assesses an $0.80 per contract fee to Customers, 
Broker-Dealers, Non-Trading Permit Holder Market Makers and 
Professional, Voluntary Professional and Joint Back-Office market 
participants for SPX Range Options (SRO) transactions, a proprietary 
index, in addition to a surcharge fee. SPX refers to options on the 
Standard & Poor's 500 Index. See CBOE's Fees Schedule. In addition, 
NASDAQ Options Market LLC (``NOM'') assesses Non-Penny Pilot Fees 
for Removing Liquidity ranging from $0.85 to $0.89 per contract 
depending on the market participant. See Chapter XV, Section 2 of 
NOM's Rules. The Exchange also assesses a Professional, Broker-
Dealer and Firm an electronic options transaction charge (non-Penny 
Pilot Options) of $0.70 per contract for transactions in Multiply 
Listed Options. See Section II of the Exchange's Pricing Schedule.
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    The Exchange believes that increasing the Professional, Firm, and 
Broker-Dealer Options Transaction Charges is equitable and not unfairly 
discriminatory because the pricing will be comparable among similar 
categories of market participants, as is the case today. Professionals, 
Firms, and Broker-Dealers will be assessed the same rates ($0.70 [sic] 
per contract) and Customers and Specialists and Market Makers will 
continue to be assessed lower rates as compared to other market 
participants. Customer order flow is, as discussed above, assessed the 
lowest fee because incentivizing members to continue to offer Customer 
trading opportunities in Singly Listed Options benefits all market 
participants through increased liquidity. The Exchange notes that 
Specialists and Market Makers are assessed lower options transaction 
charges as compared to other market participants, except Customers, 
because they have burdensome quoting obligations \33\ to the market 
which do not apply to Customers, Professionals, Firms, and Broker-
Dealers. The proposed differentiation as between Customers and 
Specialists and Market Makers as compared to Professionals, Firms, and 
Broker-Dealers recognizes the differing contributions made to the 
liquidity and trading environment on the Exchange by these market 
participants. The proposed changes to the Options Transactions Charge 
will be applied uniformly to all.
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    \33\ See Rule 1014 titled ``Obligations and Restrictions 
Applicable to Specialists and Registered Options Traders.''
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    The Exchange desires to continue to incentivize members and member 
organizations, through the Exchange's rebate and fee structure, to 
select Phlx as a venue for bringing liquidity and trading by offering 
competitive pricing. Such competitive, differentiated pricing exists 
today on other options exchanges. The Exchange's goal is creating and 
increasing incentives to attract orders to the Exchange that will, in 
turn, benefit all market participants through increased liquidity at 
the Exchange.

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.
    The Customer Rebate Program amendments in Section B of the Pricing 
Schedule do not create an undue burden on competition and, like all of 
the amendments proposed by the Exchange, will apply uniformly to all 
market participants. Moreover, the Section B amendments will enable the 
Exchange to continue to attract liquidity, which benefits all market 
participants by providing more trading opportunities, which attracts 
Specialists and Market Makers. The Exchange's proposal to increase the 
assessment for Professional, Broker-Dealer, and Firm Multiply-Listed 
Options electronic Orders in certain non-Penny options, and the 
deletion of Customer Rebate Tiers 2 and 3 from notes 14 and 15, does 
not place an undue burden on competition, but rather will similarly 
allow the Exchange to continue to attract liquidity. In addition, the 
proposed $0.75 fee in Section II is consistent with what is assessed by 
CBOE, as well as the Exchange proposal in Section III to increase the 
assessment applicable to Professionals, Broker-Dealers, and Firms that 
transact Singly-Listed. These increases do not create an undue burden 
on competition, but rather align the

[[Page 43156]]

proposed Singly-Listed Option fees in Section III with the proposed 
non-Penny Pilot Option fees in Section II of the Pricing Schedule, as 
well as with other exchanges. Despite these proposed fee and rebate 
changes, the Exchange's proposal will allow it to continue to 
incentivize market participants to bring liquidity to the Exchange, as 
described herein.
    The Exchange operates in a highly competitive market, comprised of 
twelve exchanges, in which market participants can easily and readily 
direct order flow to competing venues if they deem fee levels at a 
particular venue to be excessive or rebates to be inadequate. 
Accordingly, the fees that are assessed and the rebates paid by the 
Exchange, as described in the proposal, are influenced by these robust 
market forces and therefore must remain competitive with fees charged 
and rebates paid by other venues and therefore must continue to be 
reasonable and equitably allocated to those members that opt to direct 
orders to the Exchange rather than competing venues.
    The proposed fees are designed to ensure a fair and reasonable use 
of Exchange resources by allowing the Exchange to recoup costs while 
continuing to attract liquidity and offer connectivity at competitive 
rates to Exchange members and member organizations.

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.\34\ 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 necessary or appropriate in the public interest, 
for the protection of investors, or 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.
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    \34\ 15 U.S.C. 78s(b)(3)(A)(ii).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2015-61 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.
    All submissions should refer to File Number SR-Phlx-2015-61. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-Phlx-2015-61 and should be 
submitted on or before August 11, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
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    \35\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-17754 Filed 7-20-15; 8:45 am]
BILLING CODE 8011-01-P


