[Federal Register Volume 79, Number 174 (Tuesday, September 9, 2014)]
[Notices]
[Pages 53494-53496]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-21362]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72968; File No. SR-Phlx-2014-57]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
Common Ownership
September 3, 2014.
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 August 20, 2014, 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 proposal to harmonize the treatment of the
aggregation of activity of affiliated member organizations for the
purposes of assessing charges or credits.
The Exchange requests that this filing become operative on December
1, 2014.
The text of the proposed rule change is set forth below. Proposed
new language is in italics; deleted text is in brackets.
NASDAQ OMX PHLX LLC \1\ PRICING SCHEDULE
ALL BILLING DISPUTES MUST BE SUBMITTED TO THE EXCHANGE IN WRITING
AND MUST BE ACCOMPANIED BY SUPPORTING DOCUMENTATION. ALL DISPUTES MUST
BE SUBMITTED NO LATER THAN SIXTY (60) DAYS AFTER RECEIPT OF A BILLING
INVOICE, EXCEPT FOR DISPUTES CONCERNING NASDAQ OMX PSX FEES,
PROPRIETARY DATA FEED FEES AND CO-LOCATION SERVICES FEES. AS OF JANUARY
3, 2011, THE EXCHANGE WILL CALCULATE FEES ON A TRADE DATE BASIS.
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\1\PHLX[supreg] is a registered trademark of The NASDAQ OMX Group,
Inc.
* * * * *
VIII. NASDAQ OMX PSX FEES
* * * * *
Aggregation of Activity of Affiliated Member Organizations
(a) No Change
(b) No Change
(c) For purposes of this provision, the term[s set forth below
shall have the following meanings:]
[(1) An] ``affiliate'' of a member organization shall mean any
[wholly owned subsidiary, parent, or sister of the ]member organization
under 75% common ownership or control of that [is also a ]member
organization.
[(2) A ``wholly owned subsidiary'' shall mean a subsidiary of a
member organization, 100% of whose voting stock or comparable ownership
interest is owned by the member organization, either directly or
indirectly through other wholly owned subsidiaries.]
[(3) A ``parent'' shall mean an entity that directly or indirectly
owns 100% of the voting stock or comparable ownership interest of a
member organization.]
[(4) A ``sister'' shall mean an entity, 100% of whose voting stock
or comparable ownership interest is owned by a parent that also owns
100% of the voting stock or comparable ownership interest of a member
organization.]
* * * * *
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.
[[Page 53495]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing to amend Chapter VIII of the Pricing
Schedule to harmonize the treatment of the aggregation of activity of
affiliated member organizations for the purposes of assessing charges
or credits by making it consistent with the definition of ``Common
Ownership'' in the Preface of the Pricing Schedule which relates to
options pricing. For purposes of applying any PSX charge or credit
where the charge assessed, or credit provided, by Phlx depends upon the
volume of a member organization's activity. A member organization may
request that the Exchange aggregate its activity with the activity of
its affiliates.\3\ Therefore, for purposes of applying any PSX charge
or credit where the charge assessed, or credit provided, by Phlx
depends upon the volume of a member organization's activity, references
to an entity (including references to a ``member organization'', or a
``participant'') shall be deemed to include the entity and its
affiliates that have been approved for aggregation.\4\
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\3\ See Chapter VIII of the Pricing Schedule.
\4\ Id.
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Currently, PSX Rules state that for purposes of applying any PSX
charge or credit where the charge assessed, or credit provided, by Phlx
depends upon the volume of a member organization's activity, a member
organization may request that the Exchange aggregate its activity with
the activity of its affiliates.\5\ The Exchange proposes to amend
Chapter VIII of the Pricing Schedule to conform that rule to that of
Phlx Options Pricing Rules so that equities and options members/member
organizations are treated consistently with respect to affiliations of
member organizations for purposes of pricing. Phlx's Options Rule
provides, ``Common Ownership'' shall mean Participants under 75 percent
common ownership or control.\6\ The Exchange desires to take the
current standard of 100 percent for equities member organizations and
align that standard to the 75 percent standard for options members and
member organizations.
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\5\ An ``affiliate'' of a member organization shall mean any
wholly owned subsidiary, parent, or sister of the member
organization that is also a member organization. A ``wholly owned
subsidiary'' shall mean a subsidiary of a member organization, 100
percent of whose voting stock or comparable ownership interest is
owned by the member organization, either directly or indirectly
through other wholly owned subsidiaries. A ``parent'' shall mean an
entity that directly or indirectly owns 100 percent of the voting
stock or comparable ownership interest of a member organization. A
``sister'' shall mean an entity, 100 percent of whose voting stock
or comparable ownership interest is owned by a parent that also owns
100 percent of the voting stock or comparable ownership interest of
a member organization. See Chapter VIII of the Pricing Schedule.
\6\ See the Preface of the Pricing Schedule.
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Pursuant to Chapter VIII of the Pricing Schedule, a member
organization requesting aggregation of affiliate activity shall be
required to certify to the Exchange the affiliate status of entities
whose activity it seeks to aggregate prior to receiving approval for
aggregation, and shall be required to inform the Exchange immediately
of any event that causes an entity to cease to be an affiliate. In
addition, the Exchange reserves the right to request information to
verify the affiliate status of an entity.\7\
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\7\ See Chapter VIII of the Pricing Schedule.
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The Exchange intends to amend the Phlx options rules to similarly
require the certifications and approvals as noted herein. The Exchange
intends that this rule change and the options rule changes noted herein
harmonize the process by which the Exchange gathers information related
to affiliated member organizations and then in turn, for purposes of
pricing, treat both equities and options members alike with respect to
the application of aggregated pricing.
The Exchange proposes to apply this pricing as of December 1, 2014
and issue an Options Trader Alert to its members.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \8\ in general, and furthers the objectives of Section
6(b)(5) of the Act \9\ in particular, in that it is designed to promote
just and equitable principles of trade, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general to protect investors and the public interest,
in that the proposal will harmonize the treatment of the aggregation of
activity of affiliated member organizations for the purposes of
assessing charges or credits with the treatment of the aggregation of
activity of affiliated member organizations in relation to options
pricing so that more member organizations will be able to benefit from
lower charges and/or increased credits. The proposal will further serve
to reduce disparity of treatment between member organizations with
regards to the pricing of different services and reduce any potential
for confusion in how activity can be aggregated. The Exchange believes
the rule change avoids disparate treatment of members that have divided
their various business activities between separate corporate entities
as compared to members that operate those business activities within a
single corporate entity. By way of example, subject to appropriate
information barriers, many firms that are members of the Exchange
operate both a market making desk and a public customer business within
the same corporate entity. In contrast, other members may be part of a
corporate structure that separates those business lines into different
corporate affiliates, either for business, compliance or historical
reasons, and those affiliates are not also considered wholly owned
affiliates. Those corporate affiliates, in turn, are required to
maintain separate memberships with the Exchange. Absent the proposed
change, such corporate affiliates that cannot be considered wholly
owned but are under common control would not receive the same treatment
as members who are considered wholly owned affiliates. Accordingly, the
Exchange believes that its proposed policy is fair and equitable, and
not unreasonably discriminatory in permitting both wholly owned and
common control. In addition to ensuring fair and equal treatment of its
members, the Exchange does not want to create incentives for its
members to restructure their business operations or compliance
functions simply due to the Exchange's pricing structure.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that this proposed rule change may enable
additional equity member organizations to aggregate pricing because the
standard will be reduced from 100 percent to 75 percent for these
member organizations. There are no current equity member organizations
that would no longer be entitled to the aggregation as a result of this
rule change. Further, the Exchange seeks to harmonize the manner in
which aggregated pricing is treated on its three markets, The NASDAQ
Stock Market LLC, NASDAQ OMX BX, Inc. and Phlx and as between equities
and options, by developing one standard for aggregated pricing and one
method for collecting such information on aggregated pricing to ensure
proper validation of that pricing in the manner in which it is
occurring on Phlx for equity member organizations today.
Today, BATS Exchange, Inc. (``BATS'') equity members are permitted
to aggregate share volume calculations for wholly owned affiliates. The
Exchange [sic] allows a member to aggregate volume with other members
[[Page 53496]]
that control, are controlled by, or are under common control with such
member.\10\ To the extent two or more affiliated companies maintain
separate Exchange memberships and can demonstrate their affiliation by
showing they control, are controlled by, or are under common control
with each other, the Exchange will permit such members to count overall
volume of the affiliates in calculating volume. BATS does not specify a
specific percentage for such aggregation. The Exchange is specifying 75
percent, similar to the percentage applied to Options Participants.
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\10\ See Securities Exchange Act Release No. 64211 (April 6,
2011), 76 FR 20414 (April 12, 2014) [sic] (SR-BATS-2011-012).
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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. The Exchange is merely seeking
to harmonize the treatment of the aggregation of activity of affiliated
member organizations for the purposes of assessing charges or credits
with those rules contained in Chapter XV which relate to options
pricing. The Exchange also believes that certain market participants
may be able to aggregate because the standard is decreasing from 100
percent to 75 percent.
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
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(ii) of the Act \11\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\12\
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\11\ 15 U.S.C. 78s(b)(3)(a)(ii).
\12\ 17 CFR 240.19b-4(f)(6).
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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.
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 [email protected]. Please include
File Number SR-Phlx-2014-57 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 SRPhlx-2014-57. 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-2014-57 and should be
submitted on or before September 30, 2014.
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\13\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-21362 Filed 9-8-14; 8:45 am]
BILLING CODE 8011-01-P