17468 Federal Register / Vol. 76, No. 60 / Tuesday, March 29, 2011 / Notices 

19See Stoll, H. R., ‘‘The supply of dealer services 

in securities of markets,’’ Journal of Finance 33 

(1978), at 1133–51; Glosten, L. and P. Milgrom, ‘‘Bid 

ask and transaction prices in a specialist market 

with heterogeneously informed agents,’’ Journal of 

Financial Economics 14 (1985), at 71–100; and 

Copeland, T., and D. Galai, ‘‘Information effects on 

the bid-ask spread,’’ Journal of Finance 38 (1983), 

at 1457–69. 

20 Id. 

21See Citadel Letter II, supra note 4, at 6. 

22See Securities Exchange Act Release No. 37542 

(August 8, 1996) (File No. 3–8919) (Report Pursuant 

to Section 21(a) of the Securities Exchange Act of 

1934 Regarding the NASD and the Nasdaq Market), 

at 5. 

23See Citadel Letter II, supra note 4, at 6. 

24See Securities Exchange Act Release No. 37542, 

supra note 22, at 59. 

25See ISE Rule 811(e). 

26See Amex Letter, supra note 4, at 2. 

27 Id. 

28 15 U.S.C. 78f(b)(5). 

29 15 U.S.C. 78s(b)(2). 

30 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3A Registered Options Trader (‘‘ROT’’) includes a 

Streaming Quote Trader (‘‘SQT’’), a Remote 

Streaming Quote Trader (‘‘RSQT’’) and a Non-SQT 

ROT, which by definition is neither a SQT or a 

RSQT. A ROT is defined in Exchange Rule 1014(b) 

as a regular member or a foreign currency options 

participant of the Exchange located on the trading 

floor who has received permission from the 

Exchange to trade in options for his own account. 

See Exchange Rule 1014(b)(i) and (ii). 

4A Specialist is an Exchange member who is 

registered as an options specialist pursuant to Rule 

1020(a). 

PIM and guarantee a price better than 

the ISE BBO and equal to or better than 

the NBBO to such order, or to release 

the order to the book. The DMM’s 

decision about whether to choose to 

guarantee a particular order at a price 

better than the ISE BBO and equal to or 

better than the NBBO may be affected by 

this proposal because it provides DMMs 

with information to differentiate 

between orders from informed traders 

(i.e., their competitors) and orders from 

uninformed traders. It is well known in 

academic literature and industry 

practice that prices tend to move against 

market makers after trades with 

informed traders, often resulting in 

losses for market makers.19 Thus, there 

is a strong economic rationale for 

market makers not providing informed 

traders price improvement. Uninformed 

investors end up bearing the cost of 

these market maker losses through 

wider spreads that market makers need 

to quote to uninformed investors due to 

informed order flow.20

Citadel also argues that the 

Commission has previously sought to 

eliminate similar anti-competitive 

practices allowed by self-regulatory 

organizations (‘‘SROs’’) involving lack of 

order anonymity.21 In particular, Citadel 

cites a 1996 investigation of NASD and 

Nasdaq Stock Market in which ‘‘[s]ome 

market makers, without disclosure to 

their customers, shared information 

with each other about their customers’ 

orders, including the size of the order 

and, on occasion, the identity of the 

customer.’’ 22 Citadel asserts that the 

‘‘Commission concluded that this anticompetitive behavior violated the 

antifraud provisions of the Exchange 

Act, among other provisions.’’ 23

The Commission does not believe that 

the proposal will result in market maker 

conduct like that in the NASD case, 

which found that market makers were 

collaborating with other market 

participants against the interests of their 

customers contrary to the fair dealing 

obligations of market makers.24 Unlike 

the NASD case, the interests of the 

DMM’s customers are not harmed by 

this proposal because information 

pertaining to a DMM’s Directed Orders 

is not shared among competing DMMs 

and all orders sent to ISE must be 

executed at a price no worse than the 

NBBO.25

Finally, Amex contends that the 

proposal is anti-competitive because 

providing the identity of an EAM to 

DMMs provides them with the ability to 

enter into anti-competitive customer 

allocation arrangements.26 Amex argues 

that if ISE Market Makers know the 

identities of order flow providers, they 

could agree to allocate those order flow 

providers among themselves and 

provide price improvement to only 

those that each has been allocated.27

There is, however, no evidence that 

customer allocation arrangements exist 

between Market Makers. The 

Commission is today approving only the 

proposed rule change, which permits a 

DMM to determine from which EAM it 

will accept Directed Orders. The 

Commission is not approving any 

customer allocation arrangements 

among Market Makers. 

For the foregoing reasons, the 

Commission finds that the proposed 

rule change is consistent with the Act 

and the rules and regulations 

thereunder applicable to a national 

securities exchange, and, in particular 

with Section 6(b)(5) of the Act.28

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,29 that the 

proposed rule change (SR–ISE–2006–01) 

is approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.30

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–7285 Filed 3–28–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64113; File No. SR–Phlx– 

2011–36] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by NASDAQ 

OMX PHLX LLC Relating to the Equity 

Options Monthly Cap 

March 23, 2011. 

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 March 17, 

2011, 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend the 

Exchange’s Fee Schedule to lower the 

monthly cap applicable to Registered 

Options Traders (‘‘ROTs’’) 3 and 

Specialists 4 for equity options 

transactions. The Exchange also 

proposes to assess a $0.05 per contract 

fee on ROTs and Specialists in certain 

circumstances when they have reached 

the monthly cap. 

While changes to the Fee Schedule 

pursuant to this proposal are effective 

upon filing, the Exchange has 

designated these changes to be operative 

on April 1, 2011. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://nasdaqtrader.com/ 

micro.aspx?id=PHLXfilings, at the 

principal office of the Exchange, and at 

the Commission’s Public Reference 

Room. 


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Federal Register / Vol. 76, No. 60 / Tuesday, March 29, 2011 / Notices 17469 

5A complex order is any order involving the 

simultaneous purchase and/or sale of two or more 

different options series in the same underlying 

security, priced at a net debit or credit based on the 

relative prices of the individual components, for the 

same account, for the purpose of executing a 

particular investment strategy. Furthermore, a 

complex order can also be a stock-option order, 

which is an order to buy or sell a stated number 

of units of an underlying stock or exchange-traded 

fund (‘‘ETF’’) coupled with the purchase or sale of 

options contract(s). See Exchange Rule 1080, 

Commentary .08(a)(i). 

6The trading activity of separate ROTs and 

Specialist member organizations are aggregated in 

calculating the Monthly Cap if there is at least 75% 

common ownership between the member 

organizations. 

7An SQT is defined in Exchange Rule 

1014(b)(ii)(A) as an ROT who has received 

permission from the Exchange to generate and 

submit option quotations electronically in options 

to which such SQT is assigned. 

8A RSQT is defined in Exchange Rule in 

1014(b)(ii)(B) as an ROT that is a member or 

member organization with no physical trading floor 

presence who has received permission from the 

Exchange to generate and submit option quotations 

electronically in options to which such RSQT has 

been assigned. An RSQT may only submit such 

quotations electronically from off the floor of the 

Exchange. 

9The Exchange defines a ‘‘professional’’ as any 

person or entity that (i) is not a broker or dealer in 

securities, and (ii) places more than 390 orders in 

listed options per day on average during a calendar 

month for its own beneficial account(s) (hereinafter 

‘‘Professional’’). 

10See Exchange’s Fee Schedule at Section II, 

Equity Options Fees. 

11 15 U.S.C. 78f(b). 

12 15 U.S.C. 78f(b)(4). 

13See Securities Exchange Act Release No. 62518 

(July 16, 2010), 75 FR 43219 (July 23, 2010) (SR– 

Phlx–2010–90). See also the Exchange’s Fee 

Schedule at Section II, Equity Options Fees. 

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 this rule change is to 

reduce the monthly transaction fee cap 

applicable to ROTs and Specialists for 

equity options transactions (‘‘Monthly 

Cap’’). The Exchange believes that by 

reducing the Monthly Cap, a greater 

number of members may benefit from 

the Monthly Cap and the Exchange will 

attract additional order flow. In 

addition, another purpose of this 

proposed rule change is to establish a 

$0.05 per contract transaction fee when 

ROTs and Specialists participate as the 

contra-side of a Customer complex 

order 5 execution after they have 

reached the maximum Monthly Cap. 

The Exchange proposes this amendment 

to defray the cost of paying Customer 

complex order rebates, which attracts 

additional Customer order flow to the 

Exchange. 

The Exchange currently applies a 

Monthly Cap of $600,000 on equity 

option transaction fees to ROTs and 

Specialists, as set forth in Section II of 

the Exchange’s Fee Schedule titled 

‘‘Equity Options Fees.’’ The Exchange is 

proposing to reduce the Monthly Cap 

from $600,000 to $550,000.6

The Exchange is also proposing to 

assess ROTs and Specialists a $0.05 per 

contract transaction fee when such 

ROTs and Specialists: (i) participate as 

the contra-side of a Customer complex 

order; and (ii) have reached the 

maximum Monthly Cap, which is 

proposed to be $550,000. The Exchange 

currently pays a rebate of $0.05 per 

contract for Customer complex orders 

that are electronically-delivered and 

executed against a non-Customer such 

as a Specialist, ROT, SQT,7 RSQT,8

Professional,9 Firm or Broker-Dealer, 

contra-side complex order or if any of 

the components of such Customer 

complex order are executed against a 

non-Customer individual order or 

quote.10 The Exchange proposes this fee 

to defray the cost of the aforementioned 

rebate. The $.05 per contract transaction 

fee would only apply to those contracts 

that are executed after the affected ROT 

or Specialist has reached the Monthly 

Cap. For example, when a ROT or 

Specialist exceeds the proposed 

$550,000 Monthly Cap, a $0.05 per 

contract fee would be added to the 

Monthly Cap over those trades that were 

counted in reaching the $550,000 

Monthly Cap, when such ROT or 

Specialist is on the contra-side of a 

Customer complex order. The ROT or 

Specialist would not be assessed the 

$0.05 per contract fee until the Monthly 

Cap is exceeded. The Exchange 

proposes to amend the current language 

in the Fee Schedule at Section II to 

reflect the proposal. The Exchange also 

proposes to make certain typographical 

and conforming changes to Section II of 

the Fee Schedule to make the language 

consistent in that section. 

2. Statutory Basis 

The Exchange believes that its 

proposal to amend its Fee Schedule is 

consistent with Section 6(b) of the Act 11

in general, and furthers the objectives of 

Section 6(b)(4) of the Act 12 in 

particular, in that it is an equitable 

allocation of reasonable fees and other 

charges among Exchange members and 

other persons using its facilities. 

The Exchange believes that the 

proposal to lower the Monthly Cap is 

reasonable because it lowers potential 

transaction fees for ROTs and Specialist 

providing liquidity on the Exchange. 

The Exchange believes that the 

proposal to lower the Monthly Cap is 

equitable because it would uniformly 

apply to all ROTs and Specialists 

transacting equity options. 

The Exchange believes that assessing 

a $0.05 per contract fee on ROTs and 

Specialists who have reached the 

Monthly Cap and are on the contra-side 

of a Customer complex order is 

reasonable because it would serve to 

defray the cost of paying the Customer 

complex order rebate, which is offered 

in certain circumstances. The Customer 

complex order rebate serves to attract 

Customer order flow to the Exchange, 

thereby benefiting all market 

participants. 

The Exchange believes that assessing 

a $0.05 per contract fee on ROTs and 

Specialists who have reached the 

Monthly Cap and are on the contra-side 

of a Customer complex order is 

equitable because this fee would only be 

assessed once the Monthly Cap is 

reached and will uniformly apply to all 

ROTs and Specialists that have reached 

the Monthly Cap. In addition, this 

proposed transaction fee is based upon 

the $0.05 per contract fee that the 

Exchange currently assesses Firms who 

have reached the Firm Related Equity 

Option Cap and are on the contra-side 

of a Customer complex order.13

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. 

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 


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17470 Federal Register / Vol. 76, No. 60 / Tuesday, March 29, 2011 / Notices 

14 15 U.S.C. 78s(b)(3)(A)(ii). 15 17 CFR 200.30–3(a)(12). 

19(b)(3)(A)(ii) of the Act.14 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 

necessary or appropriate in the public 

interest, for the protection of investors, 

or 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 e-mail to rulecomments@sec.gov. Please include File 

Number SR–Phlx–2011–36 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–Phlx–2011–36. This file 

number should be included on the 

subject line if e-mail 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 

a.m. and 3 p.m. Copies of such filing 

will also 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 No. SR–Phlx–2011– 

36 and should be submitted on or before 

April 19, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–7282 Filed 3–28–11; 8:45 am] 

BILLING CODE 8011–01–P 

DEPARTMENT OF TRANSPORTATION 

Office of the Secretary of 

Transportation 

[Docket No. 2011–0059] 

Notice of Transportation Services’ 

Transition From Paper to Electronic 

Fare Media 

AGENCY: Office of the Secretary, DOT. 

ACTION: Notice. 

SUMMARY: The Office of Transportation 

Services (TRANServe) located in the 

U.S. Department of Transportation, 

Office of the Secretary of Transportation 

within the Office of the Assistant 

Secretary for Administration is adopting 

a new program distribution 

methodology. TRANServe is planning to 

shift to electronic fare media in 

particular areas, beginning in New York 

and parts of the National Capitol 

Region, where paper vouchers are not 

available for redemption through the 

Transit Authority. The shift allows for 

the most effective and efficient delivery 

mechanism for the qualified 

transportation fringe benefit in those 

areas. TRANServe provides services to 

Federal Government agencies for the 

qualified transportation fringe benefit. 

To date, TRANServe has distributed 

these fringe benefits via a paper voucher 

process. 

DATES: TRANServe will consider all 

comments received on or before April 

19, 2011. 

ADDRESSES: You may submit comments 

by the following methods: 

• Federal eRulemaking Portal: Go to 

(http://www.regulations.gov Web 

address) to submit or view comments 

and to view supporting and related 

materials available electronically. 

• Postal Mail/Commercial Delivery: 

Please send one copy of your comment 

to Docket No. DOT–OST–2011–0059, 

DOT/TRANServe, 1200 New Jersey 

Ave., SE., Washington, DC 20590. 

Reading Room (Public Terminal): You 

may read any comments that we receive 

on this docket in our reading room 

(Public Terminal). The reading room is 

located in Room W12–140 of the U.S. 

DOT, 1200 New Jersey Avenue, SW., 

Washington, DC. Normal reading room 

hours are 8 a.m. to 4:30 p.m. Monday 

through Friday, except holidays. To be 

sure someone is there to help you please 

call (202) 366–9826 or (202) 366–9317 

before arriving. 

Other Information: Additional 

information about TRANServe is 

available on the Internet at (http:// 

transerve.dot.gov/index.html). 

FOR FURTHER INFORMATION CONTACT: Ms. 

Denise P. Wright, Business Office 

Manager, 1200 New Jersey Avenue SE., 

Washington, DC 20590. 

SUPPLEMENTARY INFORMATION: 

Background 

Under the authority of 49 U.S.C. 327, 

Administrative Working Capital Fund 

and 26 U.S.C. 132(f)(3), Qualified 

Transportation Fringe, Cash 

Reimbursement, TRANServe conducts 

its Program operations as the service 

provider by distributing the qualified 

transportation fringe benefit. Since the 

enactment of Public Law 103–172, 

Federal Employees Clean Air Incentives 

Act, Executive Order 13150, Federal 

Workforce Transportation, and other 

enabling legislation, TRANServe has 

maintained its servicing operations for 

the distribution of transit benefits to 

Federal employees via a paper voucher 

process. 

Since 2000, TRANServe has operated 

a highly sophisticated ordering/ 

inventory/distribution program. 

TRANServe’s program is supported by a 

complex network of activities, such as 

statistical forecasting for nationwide 

distribution, multi-million dollar 

contract awards, support arrangements 

for travel and distribution, and an 

elaborate array of financial analysis for 

Federal Agency billing. April 2000 

served as the transaction baseline year 

for TRANServe, when significant and 

measurable transaction activity occurred 

that accounted for an estimated 800% 

increase in Federal Agency participant 

growth. Over time, many State and local 

transit authorities are transitioning or 

have transitioned to electronic fare 

media; thus, compelling the shift from 

a paper based system (vouchers) to an 

electronic fare media structure. 

In addition to rising program costs 

related to inventory, travel, and 


jlentini on DSKJ8SOYB1PROD with NOTICES