[Federal Register Volume 83, Number 81 (Thursday, April 26, 2018)]
[Notices]
[Pages 18360-18362]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-08729]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83080; File No. SR-18-31]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Exchange's Pricing Schedule at Section II To Clarify Fees Applicable To
Correcting ``As/of'' or ``Reversal'' Trades
April 20, 2018.
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 17, 2018, 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\ 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 Exchange's Pricing Schedule at
Section II to clarify fees applicable to correcting ``as/of'' or
``reversal'' trades, as described below. The text of the proposed rule
change is available on the Exchange's website at http://nasdaqphlx.cchwallstreet.com/, at the principal office of the Exchange,
and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The 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 Section II of
the Exchange's Pricing Schedule to clarify that when the Exchange
processes an ``as/of'' or ``reversal'' trade at the request of a member
to correct clearing, the new trade will incur the ``Floor'' category of
Options Transaction Charges for the correction, even if the underlying
trade that the Exchange is correcting was electronic, because the
Exchange must process all corrections manually and in accordance with
procedures applicable to Floor trades.
Pursuant to its Policy for Amended Billing Information, which is
set forth in the introduction to the Pricing Schedule, the Exchange
entertains written requests (with supporting documentation) that its
members submit
[[Page 18361]]
to correct or reverse erroneous trades after the date when such trades
clear. The corrections that the Exchange makes in response to such
requests are to errors that the requesting member or other members
associated with the trade have made with respect to executed orders.
These errors are not Exchange errors.
Provided that the Exchange determines that the correction or
reversal request is valid, the Exchange must process the correction or
reversal manually, using a paper trade ticket, even if the underlying
trade that the Exchange is correcting or reversing was electronic in
nature. The Exchange presently does not possess a means of
electronically correcting or reversing a trade after settlement date of
the trade. Accordingly, even if the Exchange originally charged a
member the ``Electronic'' rate for the Options Transaction Charge that
applied to the underlying trade, the Exchange will charge the member
the ``Floor'' rate to correct or reverse the trade. Although this is
the existing practice of the Exchange, the Exchange now proposes to
make this practice explicit in its Pricing Schedule. Specifically, the
Exchange proposes adding a footnote 8 to Section II of the Pricing
Schedule stating that ``Floor transaction fees will apply to any `as
of' or `reversal' adjustments for manually processed trades originally
submitted electronically or through FBMS.'' \3\
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\3\ For the avoidance of doubt, the Exchange notes that the
transaction fee that the Exchange charges to reverse or correct a
trade is in addition to, rather than in lieu of, the transaction fee
charged to execute the underlying trade that is subject to reversal
or correction.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\4\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\5\ 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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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that it is reasonable to charge members an
Options Transactions Charge to correct or reverse erroneous trades
because processing such corrections and reversals requires the Exchange
to execute additional options transactions. Moreover, the trade
corrections and reversals at issue occur at the request of members and
pursuant to errors for which members, rather than the Exchange, are
responsible. Additionally, it is reasonable for the Exchange to charge
members the ``Floor'' rate to correct or reverse trades--including to
correct or reverse both Floor-based and electronic trades--because the
Exchange must process all such requests manually, using trade tickets,
and in accordance with its Floor-based procedures.
The Exchange believes that its proposal is an equitable allocation
and is not unfairly discriminatory because the ``Floor'' rate that the
Exchange charges for corrections or reversals is reflective of the
Exchange's manual process of correcting or reversing a trade rather
than the nature of the underlying trade that the Exchange is correcting
or reversing. Moreover, the Exchange notes that it will assess the same
fee to all similarly situated members that request corrections or
reversals.
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. In such an environment, the Exchange must continually adjust
its fees to remain competitive with other exchanges and with
alternative trading systems that have been exempted from compliance
with the statutory standards applicable to exchanges. Because
competitors are free to modify their own fees in response, and because
market participants may readily adjust their order routing practices,
the Exchange believes that the degree to which fee changes in this
market may impose any burden on competition is extremely limited.
In this instance, the proposed changes to the Pricing Schedule
compensate the Exchange for effecting transactions, using a manual
process, that are necessary to correct or reverse trades at a member's
request. The proposals also clarify and render more transparent the
existing practices of the Exchange with respect to its fees for
processing member requests for corrections and reversals. The Exchange
does not intend or expect that the proposals will have any impact on
inter-market or intra-market competition.
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.\6\
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\6\ 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
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-2018-31 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-2018-31. 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 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
[[Page 18362]]
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-2018-31 and should be
submitted on or before May 17, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-08729 Filed 4-25-18; 8:45 am]
BILLING CODE 8011-01-P