[Federal Register Volume 86, Number 85 (Wednesday, May 5, 2021)]
[Notices]
[Pages 24109-24114]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-09281]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91696; File No. SR-Phlx-2021-24]


Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change to the Exchange's 
Pricing Schedule at Options 7 To Adopt Pricing for Index Options on the 
Nasdaq 100 Micro Index

April 28, 2021.
    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 April 15, 2021, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's Pricing Schedule at 
Options 7 to adopt pricing for index options on the Nasdaq 100 Micro 
Index, as described further below.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/phlx/rules, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

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

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

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

1. Purpose
    The Exchange recently received approval to list index options on 
the Nasdaq 100 Micro Index (``XND'') on a pilot basis.\3\ XND will be 
same in all respects as the current Nasdaq 100 Index options contract 
(``NDX'') listed on the Exchange, except it will be based on 1/100th of 
the value of Nasdaq 100 Index, and will be P.M. settled with an 
exercise settlement value based on the closing index value of Nasdaq 
100 Index on the day of expiration.\4\ The Exchange will begin to list 
XND on April 15, 2021.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 91524 (April 9, 
2021) (SR-Phlx-2021-07).
    \4\ Id. The Exchange notes that similar features are available 
with other index options contracts listed on the Exchange, including 
P.M. settled options on the full value of the Nasdaq-100 Index 
(``NDXP'').
---------------------------------------------------------------------------

    The Exchange now proposes to amend its Pricing Schedule to adopt 
pricing for XND. By way of background, certain proprietary products 
such as NDX and NDXP are commonly excluded from a variety of fee 
programs. The Exchange notes that the reason for such exclusion is 
because the Exchange has expended considerable resources developing and 
maintaining its proprietary products. Similar to NDX and NDXP, XND is a 
proprietary product. As such, the Exchange proposes to establish 
transaction fees for XND that are similarly structured to the 
transaction fees for NDX and NDXP with some differences as noted below. 
The Exchange also proposes to exclude XND from several pricing programs 
in the same manner as which NDX and NDXP are excluded today.

[[Page 24110]]

Options 7, Section 1.B
    Today, the Customer \5\ Rebates in Section 1.B of the Pricing 
Schedule are not paid on NDX or NDXP in any rebate category. However, 
NDX or NDXP contracts count toward the volume requirement to qualify 
for a Customer Rebate Tier. The Exchange proposes to apply the Customer 
Rebate program in the same manner for XND.
---------------------------------------------------------------------------

    \5\ 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)).
---------------------------------------------------------------------------

Options 7, Section 4
Options Transaction Charges and Surcharges
    Today, as set forth in Options 7, Section 4, electronic (both 
simple and complex orders) and floor Options Transaction Charges for 
NDX and NDXP are $0.75 per contract for all Non-Customers.\6\ No 
Options Transaction Charges for NDX and NDXP apply to Customers. 
Furthermore, a $0.25 per contract surcharge is assessed to Non-
Customers in NDX and NDXP.
---------------------------------------------------------------------------

    \6\ The term ``Non-Customer'' applies to transactions for the 
accounts of Lead Market Makers, Market Makers, Firms, Professionals, 
Broker-Dealers and JBOs.
---------------------------------------------------------------------------

    The Exchange now proposes to establish a similar pricing structure 
for XND where all Non-Customers will be assessed a uniform Options 
Transaction Charge for electronic (simple and complex orders) and floor 
transactions, and Customers will not be assessed any Options 
Transaction Charges. Specifically, the Exchange proposes to assess Non-
Customers a uniform electronic and floor Options Transaction Charge of 
$0.10 per contract in XND. As noted above, Customers will receive free 
executions in XND. The Exchange also proposes to assess Non-Customers a 
surcharge of $0.10 per contract in XND. The Exchange is proposing to 
assess a lower Options Transaction Charge and surcharge for XND as 
compared to NDX and NDXP because XND is based on 1/100 of the value of 
the Nasdaq 100 Index whereas both NDX and NDXP are based on the full 
value of the Nasdaq 100 Index. The Exchange therefore seeks to assess 
corresponding reduced fees for XND.
Fee Programs
    Today, NDX and NDXP are excluded from a variety of fee programs in 
Options 7, Section 4. The Exchange proposes to update Options 7, 
Section 4 to similarly exclude XND from these fee programs.
    NDX and NDXP are currently excluded from the $0.12 per contract 
surcharge assessed to electronic Complex Orders that remove liquidity 
from the Complex Order Book and auctions, excluding PIXL, in Non-Penny 
Symbols.\7\ The Exchange proposes to extend this exclusion to XND.
---------------------------------------------------------------------------

    \7\ See Options 7, Section 4, note 7. The Exchange notes that 
XND, like NDX and NDXP, is a Non-Penny Symbol.
---------------------------------------------------------------------------

    Today, Lead Market Makers \8\ and Market Makers \9\ are subject to 
a ``Monthly Market Maker Cap'' of $500,000 for: (i) Electronic Option 
Transaction Charges, excluding surcharges and excluding options 
overlying NDX and NDXP; and (ii) QCC Transaction Fees (as defined in 
Exchange Options 3, Section 12 and Floor QCC Orders, as defined in 
Options 8, Section 30(e)). The Exchange proposes to similarly exclude 
XND from the Monthly Market Maker Cap.
---------------------------------------------------------------------------

    \8\ The term ``Lead Market Maker'' applies to transactions for 
the account of a Lead Market Maker (as defined in Options 2, Section 
12(a)).
    \9\ The term ``Market Maker'' is defined in Options 1, Section 
1(b)(28) as a member of the Exchange who is registered as an options 
Market Maker pursuant to Options 2, Section 12(a).
---------------------------------------------------------------------------

    Today, Firms \10\ are subject to a maximum fee of $75,000 
(``Monthly Firm Fee Cap'') where Firm Floor Option Transaction Charges 
and QCC Transaction Fees, in the aggregate, for one billing month will 
not exceed the Monthly Firm Fee Cap per member organization when such 
members are trading in their own proprietary account. NDX and NDXP 
transactions are currently excluded from the Monthly Firm Fee Cap. The 
Exchange proposes to likewise exclude XND transactions from the Monthly 
Firm Fee Cap.
---------------------------------------------------------------------------

    \10\ The term ``Firm'' applies to any transaction that is 
identified by a member or member organization for clearing in the 
Firm range at OCC.
---------------------------------------------------------------------------

    Today, the Exchange waives the Firm Floor Options Transaction 
Charges in Options 7, Section 4 for members executing facilitation 
orders pursuant to Options 8, Section 30 when such members are trading 
in their own proprietary account (including Cabinet Options Transaction 
Charges). The Firm Floor Options Transaction Charges will be waived for 
the buy side of a transaction if the same member or its affiliates 
under Common Ownership \11\ represents both sides of a Firm transaction 
when such members are trading in their own proprietary account. In 
addition, the Broker-Dealer \12\ Floor Options Transaction Charge 
(including Cabinet Options Transaction Charges) will be waived for 
members executing facilitation orders pursuant to Options 8, Section 30 
when such members would otherwise incur this charge for trading in 
their own proprietary account contra to a Customer (``BD-Customer 
Facilitation''), if the member's BD-Customer Facilitation average daily 
volume (including both FLEX and non-FLEX transactions) exceeds 10,000 
contracts per day in a given month.\13\ NDX and NDXP transactions are 
currently excluded from each of the waivers set forth in the above 
paragraph. The Exchange proposes to likewise exclude XND transactions 
from the foregoing waivers.
---------------------------------------------------------------------------

    \11\ The term ``Common Ownership'' shall mean members or member 
organizations under 75% common ownership or control.
    \12\ The term ``Broker-Dealer'' applies to any transaction which 
is not subject to any of the other transaction fees applicable 
within a particular category.
    \13\ The Exchange will correct the typo in the rule text from 
``BDCustomer Facilitation'' to ``BD-Customer Facilitation.''
---------------------------------------------------------------------------

    Today, transactions in NDX and NDXP are excluded from the 
``Strategy Caps'' in Options 7, Section 4. Strategy Caps limit the fees 
that otherwise apply to certain categories of market participants when 
they engage in floor options transactions while employing strategies 
set forth in the Pricing Schedule, namely dividend, merger, short stock 
interest, reversal and conversion, jelly roll, or box spread 
strategies. The Exchange proposes to likewise exclude transactions in 
XND from Strategy Caps.
    Today, no Marketing Fees are assessed on transactions in NDX or 
NDXP. The Exchange proposes to likewise exclude XND transactions from 
the Marketing Fees.
Options 7, Section 6
PIXL Pricing
    Today, options overlying NDX and NDXP are not subject to Options 7, 
Section 6.A. PIXL Pricing.\14\ The Exchange proposes to likewise 
exclude XND from PIXL Pricing in Options 7, Section 6.A. Like NDX and 
NDXP transactions, XND transactions in PIXL will be subject to Options 
7, Section 5.A pricing.\15\
---------------------------------------------------------------------------

    \14\ The Exchange will remove the stray comma from the rule 
text.
    \15\ As discussed later in this filing, the Exchange is also 
proposing to relocate NDX and NDXP pricing from Options 7, Section 4 
into a separate schedule with XND pricing within Options 7, Section 
5.A. Accordingly, the current reference to Options 7, Section 4 NDX 
and NDXP pricing within the PIXL pricing schedule will be updated to 
Options 7, Section 5.A.
---------------------------------------------------------------------------

FLEX Transaction Fees
    Today, FLEX options are assessed the transaction fees set forth in 
Options 7,

[[Page 24111]]

Section 6.B.\16\ Pursuant to this Section 6.B, the NDX and NDXP options 
surcharge of $0.25 per contract applies to FLEX NDX and NDXP options 
for all Non-Customers.\17\ Furthermore, the NDX and NDXP Options 
Transaction Charges of $0.75 per contract (Non-Customer) and $0.00 per 
contract (Customer) currently within Options 7, Section 4 apply to FLEX 
NDX and NDXP options.\18\
---------------------------------------------------------------------------

    \16\ The characteristics of a FLEX option are described in 
Options 8, Section 34.
    \17\ The Exchange will correct the typo in the rule text from 
``Section 6, B'' to ``Section 6.B.''
    \18\ See supra note 15. All current references to Options 7, 
Section 4 NDX and NDXP pricing within the FLEX transaction fees 
schedule will be updated to Options 7, Section 5.A.
---------------------------------------------------------------------------

    The Exchange proposes to charge FLEX XND options in a similar 
manner. Specifically, the Exchange will apply the proposed XND options 
surcharge of $0.10 per contract to Non-Customers in FLEX XND options. 
Further, the Exchange will apply the proposed XND Options Transaction 
Charges of $0.10 per contract (Non-Customer) and $0.00 per contract 
(Customer) to FLEX XND options.
Market Access and Routing Subsidy (``MARS'')
    Today, as set forth in Options 7, Section 6.E, the Exchange 
provides MARS Payments to Phlx members that have System Eligibility 
\19\ and have routed the requisite number of Eligible Contracts \20\ 
daily in a month, which were executed on Phlx. Currently, NDX and NDXP 
are not considered Eligible Contracts. Under this proposal, XND will 
likewise be excluded from Eligible Contracts.
---------------------------------------------------------------------------

    \19\ To qualify for MARS, a Phlx member's routing system 
(``hereinafter System'') would be required to: (1) Enable the 
electronic routing of orders to all of the U.S. options exchanges, 
including Phlx; (2) provide current consolidated market data from 
the U.S. options exchanges; and (3) be capable of interfacing with 
Phlx's API to access current Phlx match engine functionality. 
Further, the member's System would also need to cause Phlx to be the 
one of the top five default destination exchanges for individually 
executed marketable orders if Phlx is at the national best bid or 
offer (``NBBO''), regardless of size or time, but allow any user to 
manually override Phlx as a default destination on an order-by-order 
basis. Notwithstanding the above, with respect to Complex Orders a 
Phlx member's routing system would not be required to enable the 
electronic routing of orders to all of the U.S. options exchanges or 
provide current consolidated market data from the U.S. options 
exchanges. Any Phlx member would be permitted to avail itself of 
this arrangement, provided that its order routing functionality 
incorporates the features described above and satisfies Phlx that it 
appears to be robust and reliable. The member remains solely 
responsible for implementing and operating its system.
    \20\ For the purpose of qualifying for the MARS Payment, 
Eligible Contracts include the following: Firm, Broker-Dealer, Joint 
Back Office or ``JBO'' or Professional equity option orders that are 
electronically delivered and executed. Eligible Contracts do not 
include floor-based orders, qualified contingent cross or ``QCC'' 
orders, price improvement or ``PIXL'' orders, or Singly Listed 
Orders.
---------------------------------------------------------------------------

Options 7, Section 5
    In connection with the foregoing changes to adopt pricing for XND, 
the Exchange proposes to relocate the pricing for NDX and NDXP and 
related notes presently set forth in Options 7, Section 4 regarding the 
Options Transaction Charges and the Non-Customer surcharge, and to 
group them with the proposed Options Transaction Charges and proposed 
Non-Customer surcharge for XND.\21\ The Exchange proposes to set forth 
the foregoing fees in new Section 5.A of Options 7, and title this 
section ``Broad-Based Index Options.'' As proposed, the pricing 
schedule in Options 7, Section 5.A, which will apply to electronic 
(simple and complex orders) and floor transactions, will be as follows:
---------------------------------------------------------------------------

    \21\ In particular, note 5 will be deleted in Options 7, Section 
4 and relocated into new note 1 in Options 7, Section 5.A. Further, 
the note 8 language in Options 7, Section 4 will be copied into a 
new bullet point in Options 7, Section 5.A.

                                           Options Transaction Charges
----------------------------------------------------------------------------------------------------------------
                                                                    Lead market
             Symbol                  Customer      Professional      maker and     Broker-dealer       Firm
                                                                   market maker
----------------------------------------------------------------------------------------------------------------
NDX \1\.........................           $0.00           $0.75           $0.75           $0.75           $0.75
NDXP \1\........................            0.00            0.75            0.75            0.75            0.75
XND \2\.........................            0.00            0.10            0.10            0.10            0.10
----------------------------------------------------------------------------------------------------------------
 These fees are per contract.
 Floor transaction fees will apply to any ``as of'' or ``reversal'' adjustments for manually processed
  trades originally submitted electronically or through FBMS.
\1\ A surcharge for NDX and NDXP of $0.25 per contract will be assessed to Non-Customers.
\2\ A surcharge for XND of $0.10 per contract will be assessed to Non-Customers.

    As shown above, the rates for NDX and NDXP are not changing; 
rather, the existing Options Transaction Charges and Non-Customer 
surcharges in Options 7, Section 4 are being relocated into Options 7, 
Section 5.A and grouped together with the proposed pricing for XND. The 
Exchange considers it appropriate to separate out NDX, NDXP, and XND 
pricing in the manner described above so that Phlx's pricing for these 
index options may be easily located within its Pricing Schedule. For 
the sake of clarity, the Exchange also proposes to amend the Options 
Transaction Charge header for Non-Penny Symbols in Options 7, Section 
4, which already excludes NDX and NDXP, to add XND to the list of 
excluded Non-Penny Symbols that will not be subject to this fee. The 
Exchange further proposes to amend its Pricing Schedule to update all 
current references to Options 7, Section 4 NDX and NDXP pricing to 
Options 7, Section 5.A.\22\
---------------------------------------------------------------------------

    \22\ In particular, the Exchange will update references within 
Options 7, Sections 6.A and 6.B.
---------------------------------------------------------------------------

    The Exchange also proposes non-substantive, clean-up changes in 
Options 7, Section 5 to restructure the existing rule text. With the 
changes proposed above to add new Section 5.A of Options 7 to set forth 
NDX, NDXP, and XND pricing, the Exchange proposes to set forth Singly 
Listed Options pricing in new Section 5.B. The Exchange also proposes 
to set forth FX Options pricing in new Section 5.C, and further 
proposes to relocate the language regarding U.S. dollar-settled foreign 
currency options into the new Section 5.C header. Accordingly, new 
Section 5.C will be titled, ``FX Options: U.S. dollar-settled foreign 
currency options include XDB, XDE, XDN, XDS, XDA, XDZ and XDC.'' The 
Exchange is not amending any of the existing rates for Singly Listed 
Options or FX Options with this proposal. Lastly, the Exchange proposes 
to retitle Options 7, Section 5 as ``Index and Singly Listed Options 
(Includes options overlying FX Options, equities, ETFs, ETNs, and 
indexes not listed on another exchange).''

[[Page 24112]]

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\23\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\24\ 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.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78f(b).
    \24\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

Options 7, Section 1.B
    The Exchange's proposal to not pay the Customer Rebates in Options 
7, Section 1.B on XND, but to count XND volume toward qualifying for a 
Customer Rebate Tier, similar to NDX and NDXP, is reasonable because 
the Exchange seeks to treat XND in the same manner as NDX and NDXP 
under this rebate program. NDX, NDXP, and XND represent similar options 
on the same underlying Nasdaq 100 Index. Further, it is reasonable to 
not pay Customer Rebates on XND in any rebate category because this 
index option will be exclusively listed on Phlx only. The original 
intent of the Customer Rebate Program was to pay rebates on 
electronically-delivered multiply-listed options. By definition, XND 
will not be a multiply-listed option, and the Exchange does not desire 
to pay rebates on XND because of the exclusivity of this option. While 
the Exchange will not pay any Customer Rebates on XND transactions, the 
Exchange also believes it is reasonable to count XND in the total 
volume to qualify a market participant for these rebates as market 
participants would be incentivized to transact in XND to qualify for 
the Customer Rebate Tiers.
    The Exchange believes that its proposal to not pay Customer Rebates 
on XND, but to count XND volume toward the volume requirement to 
qualify for a rebate tier is equitable and not unfairly discriminatory 
because the Exchange would apply the rebate program as described 
uniformly for all market participants. Any market participant is 
eligible to earn a Customer Rebate.
Options 7, Section 4
Options Transaction Charges and Surcharges
    The Exchange believes it is reasonable to assess the proposed 
Options Transaction Charge and Non-Customer surcharge as discussed 
above for XND because the proposed pricing reflects the exclusive and 
proprietary nature of this product. Similar to NDX and NDXP, the 
Exchange seeks to recoup the operational costs for listing proprietary 
products.\25\ 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.\26\ Further, the Exchange notes that with its 
products, market participants are offered an opportunity to transact in 
NDX, NDXP, or XND, or separately execute options overlying PowerShares 
QQQ Trust (``QQQ'').\27\ Offering such proprietary products provides 
market participants with a variety of choices in selecting the product 
they desire to utilize in order to transact in 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.
---------------------------------------------------------------------------

    \25\ 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.
    \26\ See pricing for the Mini-RUT Index options (``MRUT'') on 
Cboe Exchange, Inc.'s Fees Schedule.
    \27\ QQQ is an exchange-traded fund based on the same Nasdaq 100 
Index as NDX, NDXP, and XND.
---------------------------------------------------------------------------

    Further, the Exchange believes that the proposed rates for XND are 
reasonable because they are well within the range of fees assessed for 
the Exchange's other proprietary products, namely NDX and NDXP.\28\ The 
Exchange believes it is reasonable to charge lower rates for XND 
compared to NDX and NDXP because XND is based on 1/100 of the value of 
the Nasdaq 100 Index while both NDX and NDXP are based on the full 
value of the Nasdaq 100 Index. The Exchange therefore seeks to assess 
corresponding reduced fees for this product.
---------------------------------------------------------------------------

    \28\ Specifically, the Exchange is proposing to assess Non-
Customers an Options Transaction Charge of $0.10 per contract in XND 
while Customers will receive free executions. Today, the Exchange 
assesses Non-Customers an Options Transaction Charge of $0.75 per 
contract for both NDX and NDXP, and does not assess Customers an 
Options Transaction Charge. Additionally, the Exchange is proposing 
to assess Non-Customers a surcharge of $0.10 per contract for XND 
whereas today, Non-Customers are assessed a surcharge of $0.25 per 
contract for NDX and NDXP.
---------------------------------------------------------------------------

    The Exchange's proposal to assess the $0.10 per contract Options 
Transaction Charge in XND is equitable and not unfairly discriminatory 
because the Exchange will assess this fee uniformly to all Non-
Customers. The Exchange similarly believes that the proposed $0.10 per 
contract XND surcharge is equitable and not unfairly discriminatory 
because it will apply uniformly to all Non-Customers. The Exchange 
believes it is equitable and not unfairly discriminatory to assess no 
transaction fees to Customers for XND because 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 Lead Market Makers 
and Market Makers. An increase in the activity of these market 
participants in turn facilitates tighter spreads, which may cause an 
additional corresponding increase in order flow from other market 
participants.
Fee Programs
    The Exchange believes that the proposed updates in Options 7, 
Section 4 in connection with the application of certain fee programs to 
XND are reasonable, equitable, and not unfairly discriminatory. 
Particularly, the Exchange believes that it is reasonable to exclude 
XND from the Non-Penny complex surcharge in note 7 of Options 7, 
Section 4, Monthly Market Maker Cap, Monthly Firm Fee Cap, Floor 
Options Transaction Charge waivers, Strategy Caps, and Marketing Fees 
in the same manner in which NDX and NDXP are currently excluded from 
the same programs today. The Exchange believes it is appropriate to 
update these fee programs in a manner that similarly situates XND with 
NDX and NDXP as these are all proprietary products that are based on 
the Nasdaq 100 Index. In addition, similar to NDX and NDXP, the 
Exchange seeks to recoup the operational costs for listing proprietary 
products by excluding XND from programs that cap or waive transaction 
fees for market participants. As it relates to the Marketing Fee, the 
Exchange believes it is reasonable to exclude XND from this fee, 
similar to NDX and NDXP today, because the purpose of the Marketing Fee 
is to generate more Customer order flow to the Exchange. Because XND 
will be an exclusively listed product on Phlx, the Exchange does not 
believe that applying a marketing fee is necessary for this product.
    The Exchange's proposal to exclude XND from the various fee 
programs in Options 7, Section 4 as discussed above is equitable and 
not unfairly discriminatory because the programs will equally exclude 
in the same manner all market participants' orders in XND. The Exchange 
notes that its proposal does not alter any of the existing fee 
programs, but instead merely proposes to exclude XND in

[[Page 24113]]

those programs in the same way that NDX and NDXP are currently 
excluded.
Options 7, Section 6
PIXL Pricing
    The Exchange's proposal to exclude XND from PIXL pricing in Options 
7, Section 6.A, and instead assess XND transactions in PIXL the 
proposed Options 7, Section 5.A pricing is reasonable because the 
Exchange intends to assess the same fees across the board for XND 
transactions (i.e., $0.10 per contract for Non-Customers and free 
executions for Customers). This will align the pricing structure for 
XND with NDX and NDXP, which are currently assessed the same $0.75 per 
contract Non-Customer fee across the board while Customers receive free 
executions.
    The proposed changes are equitable and not unfairly discriminatory 
because the Exchange will uniformly exclude NDXP from PIXL pricing for 
all market participants, and instead uniformly charge them the Options 
7, Section 5.A pricing.
FLEX Transaction Fees
    The Exchange believes that its proposal to assess FLEX XND options 
the Options Transaction Charge and Non-Customer options surcharge in 
Options 7, Section 5.A is reasonable because the Exchange intends to 
assess the same fees across the board for XND transactions. 
Specifically, the Exchange will apply the proposed XND options 
surcharge of $0.10 per contract to Non-Customers in FLEX XND options. 
Further, the Exchange will apply the proposed XND Options Transaction 
Charges of $0.10 per contract (Non-Customer) and $0.00 per contract 
(Customer) to FLEX XND options. FLEX NDX and NDXP options are likewise 
assessed the same Options Transaction Charge and Non-Customer options 
surcharge that NDX and NDXP options are assessed today. The Exchange's 
proposal is equitable and not unfairly discriminatory because the 
Exchange will uniformly apply these fees to FLEX NDX and NDXP options 
to all similarly situated market participants.
MARS
    The Exchange believes it is reasonable to exclude XND from Eligible 
Contracts for purposes of qualifying for a MARS Payment in the same 
manner in which NDX and NDXP are currently excluded today. The Exchange 
believes it is appropriate to update its MARS program in a manner that 
similarly situates XND with its other proprietary products, NDX and 
NDXP, which are all based on the Nasdaq 100 Index.
    The Exchange believes that its proposal is equitable and not 
unfairly discriminatory because the Exchange will uniformly exclude XND 
from MARS for all market participants.
Options 7, Section 5
    The Exchange believes that the proposed changes to relocate and 
group the transaction fees for NDX, NDXP, and XND within Options 7, 
Section 5.A, and all of the non-substantive changes related to the 
relocation, each as discussed above, are reasonable, equitable, and not 
unfairly discriminatory. The proposed changes are all intended to bring 
greater clarity, and will ensure that the Exchange's pricing for NDX, 
NDXP, and XND may be easily located within its Pricing Schedule. The 
Exchange further believes that the proposed non-substantive changes in 
Options 7, Section 5 to restructure the existing rule text and retitle 
various section headers are reasonable, equitable, and not unfairly 
discriminatory as they will facilitate the use of the Pricing Schedule 
by market participants.

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 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. The Exchange notes that with its products, 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 utilize to transact in the Nasdaq 
100 Index.
    Further, the Exchange does not believe that the proposed rule 
change will impose any burden on intra-market competition that is not 
necessary or appropriate in furtherance of the purposes of the Act 
because the proposed XND pricing will apply uniformly to all similarly 
situated market participants. Specifically, all Non-Customers will be 
assessed a uniform Options Transaction Charge and options surcharge 
while Customers receive free executions. As discussed above, Customer 
liquidity benefits all market participants by providing more trading 
opportunities, which attracts other market participants, thus 
facilitating tighter spreads and increased order flow.

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.\29\
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2021-24 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-2021-24. 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 (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule

[[Page 24114]]

change that are filed with the Commission, and all written 
communications relating to the proposed rule change between the 
Commission and any person, other than those that may be withheld from 
the public in accordance with the provisions of 5 U.S.C. 552, will be 
available for website viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE, Washington, DC 20549, on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
the filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change. Persons submitting comments are cautioned that we do 
not redact or edit personal identifying information from comment 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
Phlx-2021-24 and should be submitted on or before May 26, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
---------------------------------------------------------------------------

    \30\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-09281 Filed 5-4-21; 8:45 am]
BILLING CODE 8011-01-P


