Notice2023-27676
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend the Fees for Options on the Nasdaq 100 Index in the Exchange's Pricing Schedule at Options 7
Primary source
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Published
December 18, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 241 (Monday, December 18, 2023)</title>
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[Federal Register Volume 88, Number 241 (Monday, December 18, 2023)]
[Notices]
[Pages 87466-87468]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-27676]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99141; File No. SR-Phlx-2023-55]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change to Amend the Fees
for Options on the Nasdaq 100 Index in the Exchange's Pricing Schedule
at Options 7
December 12, 2023.
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 November 30, 2023, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I, II, and III, below,
which Items have been prepared by the Exchange. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the fees for Nasdaq 100 Index
options in the Exchange's Pricing Schedule at Options 7, Section 5A.
While these amendments are effective upon filing, the Exchange has
designated the proposed amendments to be operative on December 1, 2023.
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
The purpose of the proposed rule change is to amend the fees for
NDX \3\ and NDXP.\4\ As set forth in Options 7, Section 5A, the
Exchange currently charges all Non-Customer \5\ orders in NDX and NDXP
a $0.75 per contract transaction fee. Customer \6\ orders receive free
executions in NDX and NDXP today. These transaction fees apply to
electronic simple and complex executions as well as floor transactions.
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\3\ NDX represents A.M.-settled options on the full value of the
Nasdaq 100 Index traded under the symbol NDX.
\4\ NDXP represents P.M.-settled options on the full value of
the Nasdaq 100 Index traded under the symbol NDXP.
\5\ The term ``Non-Customer'' applies to transactions for the
accounts of Lead Market Makers, Market Makers, Firms, Professionals,
Broker-Dealers and JBOs.
\6\ The term ``Customer'' applies to any transaction that is
identified by a member or member organization for clearing in the
Customer range at The Options Clearing Corporation (``OCC'') which
is not for the account of a broker or dealer or for the account of a
``Professional'' (as that term is defined in Options 1, Section
1(b)(45)).
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The Exchange now proposes to begin assessing Customer NDX and NDXP
orders a $0.25 per contract transaction fee. The Exchange notes that
the proposed fee amount is in line with customer transaction fees
assessed on other index products.\7\ The Exchange also proposes to
assess a surcharge of $0.50 per contract to all Non-Customer complex
executions in NDX and NDXP, and a surcharge of 0.25 per contract to all
Customer complex executions in NDX and NDXP.\8\ The Exchange notes that
the proposed surcharge amounts are within the range of various
surcharges assessed at another options exchange.\9\
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\7\ For example, Cboe Options (``Cboe'') currently assesses a
$0.25 per contract customer transaction fee for MXEA and MXEF
options, $0.35 per contract for OEX and XEO options, and $0.36 per
contract (if premium < $1.00) or $0.45 per contract (if premium >=
$1.00) for SPX and SPESG options. See Cboe Fees Schedule.
\8\ See proposed notes 5 and 6 of Options 7, Section 5.A.
\9\ For example, Cboe currently assesses customers a $0.25 per
contract exotic surcharge and a $0.21 per contract execution
surcharge in SPX and SPESG options. Cboe also assesses non-customers
a $0.45 per contract license surcharge in RUT, and LEAPS surcharge
fees in SPX ranging from $1.00 to $2.50 per contract, according to
time-to-expiration. See Cboe Fees Schedule.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with section
6(b) of the Act,\10\ in general, and furthers the objectives of
sections 6(b)(4) and 6(b)(5)
[[Page 87467]]
of the Act,\11\ 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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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes it is reasonable to begin assessing a $0.25
per contract transaction fee to all Customer orders in NDX and NDXP, a
$0.25 per contract complex surcharge to Customer complex orders in NDX
and NDXP, and a $0.50 per contract complex surcharge to Non-Customer
complex orders in NDX and NDXP because the proposed pricing reflects
the proprietary nature of this product. Similar to other proprietary
products like options overlying the Nasdaq 100 Micro Index (``XND''),
the Exchange seeks to recoup the operational costs of listing
proprietary products.\12\ 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.\13\ Further, the Exchange notes that
market participants are offered different ways to gain exposure to the
Nasdaq 100 Index, whether through the Exchange's proprietary products
like options overlying NDX, NDPX, or XND, or separately through multi-
listed options overlying Invesco QQQ Trust (``QQQ'').\14\ Offering such
products provides market participants with a variety of choices in
selecting the product they desire to utilize in order to gain exposure
to the Nasdaq 100 Index. When exchanges are able to recoup costs
associated with offering proprietary products, it incentivizes growth
and competition for the innovation of additional products.
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\12\ 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.
\13\ See supra note 7.
\14\ QQQ is an exchange-traded fund based on the same Nasdaq 100
Index as NDX, NDXP, and XND.
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The Exchange further believes that the proposed pricing described
above is reasonable because the proposal is designed to update fees for
the Exchange's services to reflect their current value--rather than
their value when the Exchange last updated NDX and NDXP pricing five
years ago \15\--based on the Exchange's ability to deliver value to its
customers by offering proprietary products on its market like NDX and
NDXP.
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\15\ The Exchange has not amended NDX and NDXP transaction fees
since 2018, so the fees have remained at $0.75 per contract for Non-
Customers and $0.00 for Priority Customers during this time. See
Securities Exchange Act Release No. 82499 (January 12, 2018), 83 FR
2834 (January 19, 2018) (SR-Phlx-2018-02).
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While NDX and NDXP pricing is increasing for all market
participants under this proposal, the Exchange believes that the
proposal is reasonable and would continue to incentivize market
participants to transact in NDX and NDXP, and especially in Customer
NDX and NDXP orders because Customers would continue to be charged at a
lower rate for NDX and NDXP than Non-Customers. As a result, the
Exchange believes that the proposed pricing is structured in a way that
continues to encourage market participants, especially Customers, to
transact in NDX and NDXP on Phlx. An increase in Customer order flow
would benefit all market participants through quality of order
interaction and increased trading opportunities. As noted above, the
proposed fee and surcharge amounts are in line with fees and surcharges
assessed on other products at another options exchange.\16\
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\16\ See supra notes 7 and 9.
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The Exchange's proposal to assess a $0.25 per contract transaction
fee to Customer orders in NDX and NDXP is equitable and not unfairly
discriminatory it will apply uniformly to all similarly situated market
participants. The Exchange believes it is equitable and not unfairly
discriminatory to continue charging Customers a lower transaction fee
for NDX and NDXP orders because Customer orders bring valuable
liquidity to the market by providing more trading opportunities, which,
in turn, attracts 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 to the benefit
of all market participants.
The Exchange also believes that it is equitable and not unfairly
discriminatory to assess the $0.25 per contract surcharge to Customer
complex orders in NDX and NDXP and the $0.50 per contract surcharge to
Non-Customer complex orders in NDX and NDXP because the proposed
surcharges will apply uniformly to all similarly situated participants.
The Exchange believes it is equitable and not unfairly discriminatory
to assess a lower complex surcharge to Customers than Non-Customers as
the Exchange has historically provided more favorable pricing to
Customers in its Pricing Schedule.\17\ In addition, Customer orders
bring valuable liquidity to the market by providing more trading
opportunities. This, in turn, attracts Market Maker activity, which
facilitates tighter spreads, which may cause an additional
corresponding increase in order flow to the benefit of all market
participants.
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\17\ For example, the Exchange offers a Customer Rebate Program
in Options 7, Section 2.
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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. As noted above, market participants are offered an
opportunity to transact in NDX, NDXP, or XND, or separately execute
options overlying QQQ. Offering these products provides market
participants with a variety of choices in selecting the product they
desire to use to gain exposure to the Nasdaq 100 Index. Furthermore,
the proposed fee amounts are in line with customer transaction fees and
surcharges assessed on other products at another options exchange.\18\
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\18\ See supra notes 7 and 9.
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Further, the Exchange does not believe that the proposed changes
will impose an undue burden on intra-market competition because
Customers will continue to be assessed lower fees in NDX and NDXP than
Non-Customers, which is in line with how the Exchange historically
assessed fees. As discussed above, Customer order flow enhances
liquidity on the Exchange for the benefit of all market participants.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to section
19(b)(3)(A)(ii) of the Act.\19\
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\19\ 15 U.S.C. 78s(b)(3)(A)(ii).
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At any time within 60 days of the filing of the proposed rule
change, the
[[Page 87468]]
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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#681a1d040d450b0705050d061c1b281b0d0b460f071e"><span class="__cf_email__" data-cfemail="f587809990d8969a9898909b8186b5869096db929a83">[email protected]</span></a>. Please include
file number SR-Phlx-2023-55 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-2023-55. 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="https://www.sec.gov/rules/sro.shtml">https://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,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-Phlx-2023-55 and should be
submitted on or before January 8, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27676 Filed 12-15-23; 8:45 am]
BILLING CODE 8011-01-P
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