Notice2021-26859
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Affiliated Entity Program and Relocate Certain Rules
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Published
December 13, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 236 (Monday, December 13, 2021)</title>
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[Federal Register Volume 86, Number 236 (Monday, December 13, 2021)]
[Notices]
[Pages 70879-70882]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-26859]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93729; File No. SR-Phlx-2021-71]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Exchange's Affiliated Entity Program and Relocate Certain Rules
December 7, 2021.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on December 1, 2021, Nasdaq PHLX LLC (``Phlx'' or
``Exchange'') filed with the Securities and Exchange Commission
(``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\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Phlx's Pricing Schedule at Options
7, Section 1, General Provisions, and Section 2, Collection of Exchange
Fees and Other Claims.
While the changes proposed herein are effective upon filing, the
Exchange has designated the amendments become operative on December 1,
2021.
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/phlx/rules">https://listingcenter.nasdaq.com/rulebook/phlx/rules</a>, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Phlx proposes to amend its Pricing Schedule at Options 7, Section
1, General Provisions. Specifically, Phlx proposes to amend the way it
administers its Affiliated Entity program.
The Exchange also proposes to relocate rule text within Options 7,
Section 1 and Section 2, Collection of Exchange Fees and Other Claims.
As a result of these rule text relocations, the Exchange also proposes
to update citations within Options 7, Section 3, Rebates and Fees for
Adding and Removing Liquidity in SPY; Options 7, Section 4, Multiply
Listed Options Fees (Includes options overlying equities, ETFs, ETNs
and indexes which are Multiply Listed) (Excludes SPY); Options 7,
Section 6, Other Transaction Fees; and Options 7, Section 7, Routing
Fees. Each change will be described below.
[[Page 70880]]
Affiliated Entity
The Exchange proposes to amend the way Exchange member
organizations indicate their participation in the Affiliated Entity
Program. Specifically, the Exchange proposes to amend the description
of ``Affiliated Entity'' within Options 7, Section 1, General
Provisions. Currently, the term ``Affiliated Entity'' is described as,
a relationship between an Appointed MM and an Appointed OFP for
purposes of qualifying for certain pricing specified in the Pricing
Schedule. Market Makers or Lead Market Makers, and OFPs are required
to send an email to the Exchange to appoint their counterpart, at
least 3 business days prior to the last day of the month to qualify
for the next month. The Exchange will acknowledge receipt of the
emails and specify the date the Affiliated Entity is eligible for
applicable pricing, as specified in the Pricing Schedule. Each
Affiliated Entity relationship will commence on the 1st of a month
and may not be terminated prior to the end of any month. An
Affiliated Entity relationship will terminate after a one (1) year
period, unless either party terminates earlier in writing by sending
an email to the Exchange at least 3 business days prior to the last
day of the month to terminate for the next month. Affiliated Entity
relationships must be renewed annually. Members and member
organizations under Common Ownership may not qualify as a
counterparty comprising an Affiliated Entity. Each member or member
organization may qualify for only one (1) Affiliated Entity
relationship at any given time.
Today, member organizations are required to annually renew their
Affiliate Entity relationship at the end of one year if they desire to
continue the relationship. The parties must both send an email to the
Exchange to avoid termination of the relationship, provided the
relationship was not terminated earlier in the year. The Exchange
believes that this process is burdensome for member organizations that
desire to remain in the program. The consequence of not renewing is
termination. The Exchange desires to remove the administrative burden
associated with the requirement to annually renew and instead provide
that the Affiliated Entity relationship will automatically renew each
month, unless otherwise terminated. The proposed new rule text would
provide,
The term ``Affiliated Entity'' is a relationship between an
Appointed MM and an Appointed OFP for purposes of qualifying for
certain pricing specified in the Pricing Schedule. Market Makers or
Lead Market Makers, and OFPs are required to send an email to the
Exchange to appoint their counterpart, at least 3 business days
prior to the last day of the month to qualify for the next month.
The Exchange will acknowledge receipt of the emails and specify the
date the Affiliated Entity is eligible for applicable pricing, as
specified in the Pricing Schedule. Each Affiliated Entity
relationship will commence on the 1st of a month and may not be
terminated prior to the end of any month. An Affiliated Entity
relationship will automatically renew each month until or unless
either party terminates earlier in writing by sending an email to
the Exchange at least 3 business days prior to the last day of the
month to terminate for the next month. Members and member
organizations under Common Ownership may not qualify as a
counterparty comprising an Affiliated Entity. Each member or member
organization may qualify for only one (1) Affiliated Entity
relationship at any given time.
As is the case today, parties to the Affiliated Entity relationship may
decide to terminate the relationship during any month by sending an
email to the Exchange at least 3 business days prior to the last day of
the month to terminate for the next month. Cboe Exchange, Inc.
(``Cboe'') has a similar automatic renewal process for its Appointed
OFP and Appointed Market-Maker Program.\4\ The Exchange believes that
this amendment will streamline the workflow for member organizations by
not requiring member organizations to renew each year to continue the
affiliated relationship.
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\4\ See Cboe's Fees Schedule at footnote 23 ``A Market-Maker may
designate an Order Flow Provider (``OFP'') as its ``Appointed OFP''
and an OFP may designate a Market-Maker to be its ``Appointed
Market-Maker'' for purposes of qualifying for credits under AVP. In
order to effectuate the appointment, the parties would need to
submit the Appointed Affiliate Form to the Exchange by 3:00 p.m. CST
on the first business day of the month in order to be eligible to
qualify for credits under AVP for that month. The Exchange will
recognize only one such designation for each party once every
calendar month, which designation will automatically renew each
month until or unless the Exchange receives an email from either
party indicating that the appointment has been terminated. A Market-
Maker that has both an Affiliate OFP and Appointed OFP will only
qualify based upon the volume of its Appointed OFP. The volume of an
OFP that has both an Affiliate Market-Maker and Appointed Market-
Maker will only count towards qualifying the Appointed Market-Maker.
Volume executed in open outcry is not eligible to receive a credit
under AVP.''
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Rule Text Relocations
The Exchange proposes to relocate rule text to reorganize the
Options 7 rules. Specifically, the Exchange proposes to relocate rule
text within current Options 7, Section 2, Collection of Exchange Fees
and Other Claims, into Options 7, Section 1, General Provisions,
without change. The Exchange proposes to add an ``(e)'' and the title
``Collection of Fees and Other Claims'' before the relocated rule text.
Also, the Exchange proposes to add a ``(c)'' before the
descriptions of market participants and a ``(d)'' before the Affiliate
Entity program.\5\ The new lettering will make it easier to reference a
specific section within Options 7, Section 1. The Exchange believes
that the policy for the collection of fees should be within Options 7,
Section 1 which describes other billing practices.
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\5\ The Exchange also proposes to re-letter and re-number the
subparagraphs in new ``(d)'' to align with other lettering and
numbering.
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The Exchange proposes to delete Section A of Options 7, Section 1,
which is currently reserved.
The Exchange proposes to relocate Section B, Customer Rebate
Program, to Options 7, Section 2 with the title, ``Customer Rebate
Program,'' without change. The Exchange believes that the Customer
Rebates should be relocated to their own section for easy reference. As
a result of that relocation, the Exchange proposes to update references
to the Customer Rebate Program from ``Section B'' to ``Options 7,
Section 2'' within Options 7, Section 3, Rebates and Fees for Adding
and Removing Liquidity in SPY; Options 7, Section 4, Multiply Listed
Options Fees (Includes options overlying equities, ETFs, ETNs and
indexes which are Multiply Listed) (Excludes SPY); Options 7, Section
6, Other Transaction Fees; and Options 7, Section 7, Routing Fees.
The amendments to relocate rule text are non-substantive amendments
that are intended solely to reorganize the current rule text.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\6\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\7\ 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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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(4) and (5).
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Affiliated Entity
The Exchange's proposal to amend the way Exchange member
organizations indicate their participation in the Affiliated Entity
Program is reasonable. Today, member organizations are required to
annually renew their Affiliated Entity relationship at the end of one
year if they desire to continue the relationship. The parties must both
send an email to the Exchange to avoid termination of the relationship,
provided the relationship was not terminated earlier in the year. The
Exchange believes that this process
[[Page 70881]]
is burdensome for member organizations that desire to remain in the
program. The consequence of not renewing is termination of their
participation in the program. The Exchange desires to remove the
administrative burden associated with the requirement to annually renew
and instead provide that the Affiliated Entity relationship will
automatically renew each month, unless otherwise terminated. As is the
case today, parties to the Affiliated Entity relationship may decide to
terminate the relationship during any month by sending an email to the
Exchange at least 3 business days prior to the last day of the month to
terminate for the next month. Also, Cboe has a similar automatic
renewal process for its Appointed OFP and Appointed Market-Maker
Program.\8\ The Exchange believes that this amendment will streamline
the workflow for member organizations by not requiring member
organizations to renew each year to continue the affiliated
relationship.
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\8\ See Cboe's Fees Schedule at footnote 23 ``A Market-Maker may
designate an Order Flow Provider (``OFP'') as its ``Appointed OFP''
and an OFP may designate a Market-Maker to be its ``Appointed
Market-Maker'' for purposes of qualifying for credits under AVP. In
order to effectuate the appointment, the parties would need to
submit the Appointed Affiliate Form to the Exchange by 3:00 p.m. CST
on the first business day of the month in order to be eligible to
qualify for credits under AVP for that month. The Exchange will
recognize only one such designation for each party once every
calendar month, which designation will automatically renew each
month until or unless the Exchange receives an email from either
party indicating that the appointment has been terminated. A Market-
Maker that has both an Affiliate OFP and Appointed OFP will only
qualify based upon the volume of its Appointed OFP. The volume of an
OFP that has both an Affiliate Market-Maker and Appointed Market-
Maker will only count towards qualifying the Appointed Market-Maker.
Volume executed in open outcry is not eligible to receive a credit
under AVP.''
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The Exchange's proposal to amend the way Exchange member
organizations indicate their participation in the Affiliated Entity
Program is equitable and not unfairly discriminatory. Today, any member
organization may participate in the Affiliated Entity Program. The
proposed changes would impact all member organizations that voluntarily
elect to participate in the Affiliated Entity Program in a uniform
manner.
Rule Text Relocations
The Exchange's proposal to relocate rule text to reorganize the
Options 7 rules is reasonable. The relocation of rule text within
current Options 7, Section 2, Collection of Exchange Fees and Other
Claims, into Options 7, Section 1, General Provisions, without change,
and the re-lettering of rule text does not substantively amend the
current rules. Also, the proposal to delete Section A of Options 7,
Section 1 is non-substantive as the section is currently reserved.
Finally, the proposal to relocate Section B, Customer Rebate Program,
to Options 7, Section 2, without change, does not substantively amend
the current rules. These relocations and updates to citations will make
the current rules easier to reference.
The Exchange's proposal to relocate rule text to reorganize the
Options 7 rules is equitable and not unfairly discriminatory as the
amendments are non-substantive and are intended solely to reorganize
the current rule text for easy reference.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
Inter-Market Competition
The proposal does not impose an undue burden on inter-market
competition. Cboe has a similar automatic renewal process for its
Appointed OFP and Appointed Market-Maker Program \9\ as proposed herein
for the Affiliated Entity Program. Also, the rule relocation amendments
are non-substantive.
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\9\ Id.
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Intra-Market Competition
The Exchange's proposal to amend the way Exchange member
organizations indicate their participation in the Affiliated Entity
Program does not impose an undue burden on competition. Today, any
member organization may participate in an Affiliated Entity
relationship. The proposed changes would impact all member
organizations that voluntarily elect to participate in the Affiliated
Entity Program in a uniform manner.
The Exchange's proposal to relocate rule text to reorganize the
Options 7 rules does not impose an undue burden on competition as the
amendments are non-substantive and are intended solely to reorganize
the current rule text for easy reference.
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.\10\
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\10\ 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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#d5a7a0b9b0f8b6bab8b8b0bba1a695a6b0b6fbb2baa3"><span class="__cf_email__" data-cfemail="592b2c353c743a3634343c372d2a192a3c3a773e362f">[email protected]</span></a>. Please include
File Number SR-Phlx-2021-71 on the subject line.
Paper Comments
<bullet> 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-2021-71. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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,
[[Page 70882]]
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-2021-71, and should be
submitted on or before January 3, 2022.
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\11\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-26859 Filed 12-10-21; 8:45 am]
BILLING CODE 8011-01-P
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