81320 Federal Register / Vol. 75, No. 247 / Monday, December 27, 2010 / Notices 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(1). 

4 17 CFR 240.19b–4. 

5This proposal refers to ‘‘PHLX XL’’ as the 

Exchange’s automated options trading system. In 

May 2009 the Exchange enhanced the system and 

adopted corresponding rules referring to the system 

as ‘‘Phlx XL II.’’ See Securities Exchange Act Release 

No. 59995 (May 28, 2009), 74 FR 26750 (June 3, 

2009) (SR–Phlx–2009–32). 

6Total return measures performance (rate of 

return) of price appreciation plus dividends over a 

given evaluation period. 

7 Daily total return values and Alpha Index values 

will be updated based upon prices of each reported 

transaction in the primary listing market. In the 

example below, closing prices are used simply for 

purposes of illustration. 

Dated: December 20, 2010. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–32372 Filed 12–23–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63575; File No. SR–Phlx– 

2010–176] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing of Proposed Rule Change 

Relating to Listing and Trading of 

Alpha Index Options 

December 17, 2010. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 2 thereunder, 

notice is hereby given that on December 

10, 2010, 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 and 

II 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, pursuant to Section 

19(b)(1) of the Act 3 and Rule 19b-4 

thereunder,4 proposes to amend certain 

of its rules to provide for the listing and 

trading of options on NASDAQ OMX 

Alpha Indexes SM (the ‘‘Alpha Indexes’’) 

on the Exchange’s electronic trading 

platform for options, Phlx XL.5

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://www.nasdaqtrader.com/

micro.aspx?id=PHLXRulefilings, 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 permit the Exchange to list 

and trade cash-settled, European-style 

options on Alpha Indexes, a family of 

indexes developed by NASDAQ OMX 

Group, Inc. (‘‘Nasdaq’’). Alpha Indexes 

measure relative total returns of one 

underlying stock and one exchange 

traded fund share (‘‘ETF’’) underlying 

options which are also traded on the 

Exchange (each such combination of 

two components is referred to as an 

‘‘Alpha Pair’’).6 Thus, an Alpha Index 

measures the relative total return of one 

stock and one ETF. The first component 

identified in an Alpha Pair (the ‘‘Target 

Component’’) is measured against the 

second component identified in the 

Alpha Pair (the ‘‘Benchmark 

Component’’). 

At this time the Exchange is 

requesting Commission approval to list 

and trade Alpha Index options only on 

the following Alpha Pairs: AAPL/SPY, 

AMZN/SPY, CSCO/SPY, F/SPY, GE/ 

SPY, GOOG/SPY, HPQ/SPY, IBM/SPY, 

INTC/SPY, KO/SPY, MRK/SPY, MSFT/ 

SPY, ORCL/SPY, PFE/SPY, RIMM/SPY, 

T/SPY, TGT/SPY, VZ/SPY and WMT/ 

SPY. The Exchange will not list Alpha 

Index options on other Alpha Pairs 

without filing a proposed rule change 

seeking Commission approval for the 

listing and trading of any such 

additional Alpha Pairs. 

Index Design and Calculation 

In order to calculate an Alpha Index, 

Nasdaq measures the total return 

performance of the Target Component 

relative to the total return performance 

of the Benchmark Component, based 

upon prices of transactions on the 

primary listing exchange of each 

underlying component. Any Target 

Component or Benchmark Component 

upon which an Alpha Index is based 

will meet the Exchange’s listing 

standards and options overlying them 

will already be listed and traded on the 

Exchange. Each Alpha Index will 

initially be set at 100.00. 

In order to calculate an Alpha Index, 

Nasdaq first calculates a daily total 

return for both the Target Component 

and the Benchmark Component of the 

Alpha Pair. For example, to calculate 

the daily total return today, the previous 

day’s closing market price for the 

component would be subtracted from 

today’s closing market price for the 

component to determine a price 

difference (the ‘‘Price Difference’’). The 

Price Difference would be added to any 

declared dividend if today were an ‘‘exdividend’’ date to yield the Price Plus 

Dividend Difference for the component. 

The Price Plus Dividend Difference for 

the component is then divided by the 

previous trading day’s closing market 

price for the component and the result 

is rounded, using simple rounding, to 

four decimal places to yield the total 

daily return. 

The total daily return for each 

component is then added to the whole 

number one (e.g., 0.0156 plus 1 equals 

1.0156) which permits the ultimate 

Alpha Index to be expressed in 

percentage terms. This figure for the 

Target Component is then divided by 

the comparable figure for the 

Benchmark Component, and then 

multiplied by previous trading day’s 

closing Alpha Index value. The 

resulting level depicts the Target 

Component’s total return performance 

versus that of the previous trading day. 

The following example illustrates the 

Alpha Index calculation for ABC stock 

as against SPY.7

Step 1.) For both ABC and SPY, the 

previous trading day’s closing market 

price is subtracted from today’s closing 

market price with the result added to 

any dividend declared today as the ‘‘exdividend’’ date. For example, today’s 

closing price for ABC (214.01) minus 

the previous day’s closing price (210.73) 

equals 3.28. Today is not an ex-dividend 

date for ABC; therefore, nothing is 

added to 3.28. Similarly, today’s closing 

price for SPY (113.33) minus the 

previous trading day’s closing price 

(111.44) equals 1.89. Today is not an exdividend date for SPY; therefore, 

nothing is added to 1.89. 

Step 2.) The step one result is divided 

by the previous trading day’s closing 

market price and the new result is 

rounded, using simple rounding, to four 

decimal places to yield the daily total 

return. For ABC, 3.28 would be divided 


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Federal Register / Vol. 75, No. 247 / Monday, December 27, 2010 / Notices 81321 

8See http://www.nasdaqtrader.com/

Trader.aspx?id=globalindexDS. 

9See Exchange Rule 1101A, Terms of Option 

Contracts, as proposed to be amended. 

10See Exchange Rule 1034, Minimum 

Increments, as proposed to be amended. 

11See Exchange Rule 1047A, Trading Rotations, 

Halts or Reopenings. 

12See Exchange Rules 1101A, Terms of Option 

Contracts, Commentary .01, and 101, Hours of 

Business. 

13See Exchange Rule 1079, FLEX Index, Equity 

and Currency Options, as proposed to be amended. 

The Exchange is proposing that separate position 

limits apply to FLEX Alpha Index options at the 

same levels applicable to non-FLEX Alpha Index 

options. 

by 210.73 to yield a daily total return of 

0.0156. Similarly, for SPY, 1.89 would 

be divided by 111.44 and yield a daily 

total return of 0.0170. 

Step 3.) The step two results above are 

added to the whole number one. For 

ABC, the daily total return of 0.0156 

would be added to 1 for a result of 

1.0156. For SPY the daily total return of 

0.0170 would be added to 1 for a result 

of 1.0170. 

Step 4.) In order to calculate the 

Alpha Index, the 1.0156 ABC figure is 

divided by the 1.0170 SPY figure and 

then multiplied by the previous trading 

day’s closing Alpha Index value. Thus, 

assuming in the example that the 

previous trading day’s closing Alpha 

Index value was 100.00, today’s closing 

Alpha Index value would be 99.86 

(1.0156/1.0170 × 100.00 = 99.86). The 

99.86 index level reflects that ABC’s 

total return performance today versus 

yesterday was ¥.14% relative to SPY. 

In the event of a corporate event 

which eliminates one of the underlying 

components of an Alpha Pair, Nasdaq 

will cease calculation of the Alpha 

Index for that Alpha Pair and all 

outstanding option positions will be 

immediately settled at the last 

disseminated price of that Alpha Index. 

In the event of a corporate event such 

as a spin off that affects the price of one 

of the underlying components, Nasdaq 

will make an appropriate one-time 

adjustment to the price of the 

underlying component used in the 

calculation to ensure that the Alpha 

Index continues to reflect the daily total 

return of the component. 

Alpha Index values will be 

disseminated every second over the 

NASDAQ OMX Global Index Data 

Service (GIDS), which also disseminates 

the NASDAQ–100 index, the spot 

values for the PHLX currency options 

and the PHLX sector indexes.8

Listing Requirements 

Alpha Index options will be listed 

only on Alpha Indexes comprised of 

Alpha Pairs that are actively traded. 

Rule 1009A, Designation of the Index, is 

being amended to provide that at the 

time of listing an Alpha Index option, 

options on each underlying component 

will also be listed and traded on the 

Exchange and will meet the 

requirements of Rule 1009, Criteria for 

Underlying Securities. Additionally, 

each underlying component’s trading 

volume (in all markets in which the 

underlying security is traded) must have 

averaged at least 2,250,000 shares per 

day in the preceding twelve months. 

Following the listing of an Alpha Index 

option, options on each of the 

component securities of the Alpha 

Index must continue to meet the 

continued listing standards set forth by 

Exchange Rule 1010, Withdrawal of 

Approval of Underlying Securities or 

Options. Additionally, each underlying 

component’s trading volume (in all 

markets in which the underlying 

security is traded) must have averaged 

at least 2,000,000 shares per day in the 

preceding twelve months. 

Finally, no Alpha Index option will 

be listed unless and until options 

overlying each of the Alpha Index 

component securities have been listed 

and traded on a national securities 

exchange with an average daily options 

trading volume during the three 

previous months of at least 10,000 

contracts. Following the listing of an 

Alpha Index option, options on each of 

the component securities of the Alpha 

Index must continue to meet this 

options average daily volume standard. 

Index Option Trading 

Strike prices will be set to bracket 

Alpha Indexes in 1 point increments; 

thus, the interval between strike prices 

will be no less than $1.00.9 Phlx 

anticipates less volatility in Alpha Index 

options than in existing stock options. 

Additionally, options on components of 

an Alpha Pair may also have strikes 

with $1.00 strikes. The Exchange 

therefore believes that $1.00 strike 

intervals are appropriate for this 

product. The Exchange proposes to list 

series at $1 or greater strike price 

intervals for each Alpha Index option, 

and to list at least two strike prices 

above and two strike prices below the 

current value of each Alpha Index 

option at about the time a series is 

opened for trading on the Exchange. The 

Exchange would also list additional 

strike prices at any price point, with a 

minimum of a $1.00 interval between 

strike prices, as required to meet the 

needs of customers. 

Under Phlx Rule 1033A, Meaning of 

Premium Bids and Offers, bids and 

offers in index options are to be 

expressed in terms of dollars and 

decimal equivalents of dollars per unit 

of the index (e.g., a bid of 5.50 would 

represent a bid of $5.50 per unit). The 

minimum tick size for series trading 

below $3 will be 0.05 and for series 

trading at or above $3 the minimum tick 

will be 0.10; provided, however, that if 

options on either component of an 

Alpha Pair have a minimum tick size of 

0.01, options on the Alpha Index will 

also have a minimum tick size of 0.01.10

Pursuant to Rule 1047A(c), trading in 

Alpha Index options may be halted with 

the approval of an Options Exchange 

Official, whenever trading on the 

primary market in one of the Alpha Pair 

components is halted or suspended. 

Additionally, trading shall be halted 

whenever an Options Exchange Official 

deems such action appropriate in the 

interests of a fair and orderly market 

and to protect investors. Rule 1047(c) is 

being amended to provide that the 

Exchange will also halt trading in the 

Alpha Index option whenever trading is 

halted in an option overlying one or 

both of the components of the Alpha 

Pair.11 Finally, if Nasdaq should cease 

calculation of the Alpha Index due to a 

corporate event (such as a merger) 

affecting one or more components of the 

Alpha Pair, the Exchange will halt 

trading in the option and all open 

contracts will be immediately settled at 

the last Alpha Index price to be 

disseminated. Re-openings are 

conducted pursuant to Rule 1047(d), 

which is being amended so that it 

clearly applies to Alpha Indexes in 

addition to stock indexes. 

Rule 1092, Obvious Errors and 

Catastrophic Errors, is being amended to 

provide that Alpha Index option trades 

on the Exchange will be nullified 

pursuant to Section (c)(iv)(C) of that rule 

if the trade occurred during a trading 

halt on the primary market in either 

component security of the Alpha Index. 

The word ‘‘percent’’ is added to the 

previous clause applicable to stock 

index options to correct an inadvertent 

omission in the existing rule text. 

The Phlx will trade consecutive and 

cycle month series pursuant to Phlx 

Rule 1101A. Specifically, there will be 

at least two expiration months from the 

March, June, September, December 

cycle plus two additional near-term 

months so that the three nearest term 

months will always be available. The 

trading hours for options on the Alpha 

Indexes will be from 9:30 AM to 4:15 

PM (Philadelphia Time).12 Alpha Index 

options are index options that are 

available for FLEX trading.13


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81322 Federal Register / Vol. 75, No. 247 / Monday, December 27, 2010 / Notices 

14See Exchange Rule 1001A, Position Limits, as 

proposed to be amended. 

15See Exchange Rule 721, Proper and Adequate 

Margin, as proposed to be amended. 

16 15 U.S.C. 78f(b). 

17 15 U.S.C. 78f(b)(5). 

Exercise and Settlement 

Options on any Alpha Index will 

expire on the Saturday following the 

third Friday of the expiration month. 

Trading in the expiring contract month 

will normally cease at 4:15 PM 

(Philadelphia Time) on the last day of 

trading. Exercise will result in delivery 

of cash on the business day following 

expiration. Alpha Index options will be 

A.M.-settled. The exercise settlement 

value will be based upon the opening 

prices of the individual stock or ETF 

from the primary listed market on the 

last trading day prior to expiration 

(usually a Friday). 

The exercise settlement amount of an 

Alpha Index option will be equal to the 

difference between the exercise 

settlement value and the exercise price 

of the option, multiplied by $100. When 

the last trading day is moved because of 

Exchange holidays, the last trading day 

for expiring options will be the day 

immediately preceding the last 

regularly-scheduled trading day. 

Clearing 

Alpha Index options are ‘‘Strategy 

Based Options’’ that will be cleared by 

the Options Clearing Corporation. 

Surveillance 

The surveillance for opening price 

manipulation will be in place for the 

launch of options on Alpha Indexes and 

other existing surveillance patterns will 

be utilized to monitor trading in options 

on each Alpha Index. The Exchange 

represents that these surveillance 

procedures are adequate to monitor the 

trading of options on Alpha Indexes. For 

surveillance purposes, the Exchange 

will have complete access to 

information regarding trading activity in 

the pertinent underlying securities and 

options thereon. 

Position Limits 

The Exchange is proposing that the 

position limit for an option on an Alpha 

Index shall be 60,000 contracts on the 

same side of the market. For purposes 

of determining compliance with 

position limits, positions in Alpha 

Index options will be aggregated with 

positions in equity options on the 

underlying securities.14 All position 

limit hedge exemptions will apply. 

Section (a) of Commentary .01 to Rule 

1001A, Position Limits, is being 

amended by the addition of clause (iii) 

providing that each Alpha Index option 

position to be exempted under the index 

hedge exemption must be hedged by a 

position in each of the component 

securities underlying the Alpha Index. 

Margin 

The Exchange will set customer 

margin levels for Alpha Index options at 

the level of the higher of the margin 

required for options on the Target 

Component or the margin required for 

the Benchmark Component.15

Exchange Rules Applicable 

Except as modified herein, the 

Exchange Rules 1000A–1107A, Rules 

Applicable to Trading of Options on 

Indices, will be applicable to Alpha 

Index options. The Exchange is 

proposing minor amendments to reflect 

trading of Alpha Index options which 

are not narrow-based or broad-based 

stock index options, which the 

Exchange currently trades, but rather 

strategy-based securities index options 

based upon an index whose 

construction and calculation differs 

from that of stock index options. 

Systems Capacity 

Additionally, the Exchange affirms 

that it possesses the necessary systems 

capacity to support new series that 

would result from the introduction of 

options on Alpha Indexes. The 

Exchange also has been informed that 

OPRA has the capacity to support such 

new series. 

Customer Protection 

Exchange rules designed to protect 

public customers trading in options 

would apply to Alpha Index options. 

Phlx Rule 1026 is designed to ensure 

that options, including Alpha Index 

options are sold only to customers 

capable of evaluating and bearing the 

risks associated with trading in the 

instruments. Phlx Rule 1024, applicable 

to the conduct of accounts, Phlx Rule 

1025 relating to the supervision of 

accounts, Phlx Rule 1028 relating to 

confirmations, and Phlx Rule 1029 

relating to delivery of options disclosure 

documents also would apply to trading 

in Alpha Index options. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 16 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 17

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 

it will permit trading in options based 

on Alpha Indexes pursuant to rules 

designed to prevent fraudulent and 

manipulative acts and practices and to 

promote just and equitable principles of 

trade, and thereby will provide 

investors with the ability to invest in 

options based on an additional index. 

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 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: 

(A) By order approve or disapprove 

the proposed rule change, or 

(B) Institute proceedings to determine 

whether the proposed rule change 

should be 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–2010–176 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. 


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Federal Register / Vol. 75, No. 247 / Monday, December 27, 2010 / Notices 81323 

18The text of the proposed rule change is 

available on the Commission’s Web site at 

www.sec.gov. 

19 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A). 

4 17 CFR 240.19b–4(f)(2). 

5See Securities Exchange Act Release No. 63318 

(November 16, 2010), 75 FR 71155 (November 22, 

2010) (SR–Phlx–2010–148). 

6Member Organizations operating through one or 

more Exchange markets that are able to demonstrate 

that 25% or more of its revenue, as reflected in the 

most recently submitted FOCUS Report or 

transactions as reflected on its purchased and sales 

blotter, are derived from securities transactions on 

the Exchange are exempt from the Examinations 

Fee. 

All submissions should refer to File 

Number SR–Phlx–2010–176. 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 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.18 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– 

2010–176 and should be submitted on 

or before January 18, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–32382 Filed 12–23–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63569; File No. SR–Phlx– 

2010–178] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Amend Its 

Fee Schedule 

December 17, 2010. 

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 December 

15, 2010, NASDAQ OMX PHLX LLC 

(‘‘Phlx’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. Phlx has filed the 

proposal pursuant to Section 19(b)(3)(A) 

of the Act 3 and Rule 19b–4(f)(2) 

thereunder,4 which renders the proposal 

effective upon filing with the 

Commission. 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 the Substance 

of the Proposed Rule Change 

The Exchange proposes to eliminate 

the Examinations Fee, amend the 

Exchange’s Permit Fees and Application 

Fee and create a Transfer of Affiliation 

Fee. The Exchange also proposes to 

make other technical non-substantive 

amendments to the proposal to update 

the Fee Schedule by removing obsolete 

language and adding clarifying 

language. 

While changes to the Exchange’s Fee 

Schedule pursuant to this proposal are 

effective upon filing, the Exchange has 

designated this proposal to be operative 

on January 3, 2011, except for the 

Lapsed Application Fee which the 

Exchange proposes to be operative on 

the approval of proposed rule change 

SR–Phlx–2010–148.5

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. 

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 eliminate the Exchange’s 

Examination Fee, amend the Permit Fee 

and Application Fee and propose a new 

Transfer of Affiliation Fee. 

Examinations Fee 

The Exchange is proposing to 

eliminate the Examinations Fee. The 

Exchange believes that the 

Examinations Fee is no longer necessary 

because the number of off-floor traders 

for which the Exchange is the 

Designated Examining Authority 

(‘‘DEA’’) has declined to under ten 

member organizations with a limited 

number of off-floor trades. Also, the 

Exchange believes that members should 

bear the burden of certain Exchange 

expenses associated with membership 

equally. The Exchange proposes to 

amend its Permit Fees, as described 

below, to differentiate between members 

who transact business at the Exchange 

and those members who do not transact 

business at the Exchange. Members who 

transact business at the Exchange pay 

transaction fees and other types of fees, 

as compared to members who do not 

transact business at the Exchange and 

do not pay such fees but still incur costs 

for the Exchange related to membership. 

The Exchange believes that eliminating 

the Examinations Fee and creating the 

proposed Permit Fees spreads Exchange 

costs equally among members. 

Currently, the Exchange assesses an 

Examinations Fee based on a tiered 

schedule. The fee is applicable to 

member organizations for which the 

Exchange is the DEA.6 The Exchange 

assesses the monthly Examinations Fee 

as follows: $2,100 is assessed to a 

member organization that has from 0–10 

off-floor traders; $2,600 is assessed to a 

member organization that has from 11– 

50 off-floor traders; $5,000 is assessed to 

a member organization that has from 

51–200 off-floor traders; and $12,500 is 

assessed to a member organization that 

has over 200 off-floor traders. 


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