Federal Register / Vol. 74, No. 170 / Thursday, September 3, 2009 / Notices 45663 

5See Securities Exchange Act Release No. 60405 

(July 30, 2009), 74 FR 39362 (August 6, 2009). 

6Section 5(a)(i) of the New Plan. 

7See Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496 (June 29, 2005) (File 

No. S7–10–04); 17 CFR 242.600 et seq. 

8Section 5(a)(ii) of the New Plan. 

9Section 6 of the New Plan. 

10 In approving the proposed Amendments, the 

Commission has considered the Amendments’ 

impact on efficiency, competition, and capital 

formation. 15 U.S.C. 78c(f). 

11 15 U.S.C. 78k–1. 

12 17 CFR 242.608. 

13See Securities Exchange Act Release Nos. 

60525 (August 18, 2009) (SR–NASDAQ–2009–056); 

60526 (August 18, 2009) (SR–NYSEAmex–2009– 

19); 60527 (August 18, 2009) (SR–NYSEArca–2009– 

45); 60530 (August 18, 2009) (SR–BX–2009–028); 

60550 (August 20, 2009) (SR–Phlx–2009–61); 60551 

(August 20, 2009) (SR–CBOE–2009–040); and 60559 

(August 21, 2009) (SR–ISE–2009–27). 

14 15 U.S.C. 78k–1. 

15 17 CFR 242.608. 

16 17 CFR 200.30–3(a)(29). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 60147 

(June 19, 2009), 74 FR 30651 (‘‘Notice’’). 4See letter from Angelo Evangelou, Assistant 

General Counsel, Chicago Board Options Exchange 

(‘‘CBOE’’), to Elizabeth M. Murphy, Secretary, 

Commission, dated July 16, 2009 (‘‘CBOE Letter’’) 

and letter from Gerald D. O’Connell, Chief 

Compliance Officer, Susquehanna International 

Group, LLP (‘‘SIG’’), to Elizabeth M. Murphy, 

Secretary, Commission, dated August 10, 2009 

(‘‘SIG Letter’’). 5See letter from Michael J. Simon, Secretary and 

General Counsel, ISE, to Elizabeth M. Murphy, 

Secretary, Commission, dated August 20, 2009 

(‘‘ISE Letter’’). 6See Securities Exchange Act Release No. 43086 

(July 28, 2000), 65 FR 48023 (August 4, 2000) (File 

No. 4–429). 7A trade-through is a transaction in a given 

options series at a price that is inferior to the best 

price available in the market (‘‘Trade-Through’’). 

See Section 2(21) of the New Plan and Section 2(29) 

of the Current Plan. 8Current Plan Section 2(3) and 8(c)(i)(C). 

9See Securities Exchange Act Release No. 60405 

(July 30, 2009), 74 FR 39362 (August 6, 2009) (File 

No. 4–546). The Exchange has also proposed 

revisions to its rules to implement the New Plan 

(‘‘New Linkage Rules’’). See Securities Exchange 

Act Release No. 60559 (August 21, 2009), 74 FR 

44425 (August 28, 2009) (SR–ISE–2009–27). 10Proposed ISE Rule 715(j), proposed 

Supplementary Material .01 to ISE Rule 715, and 

proposed ISE Rule 721(b). 11A Qualified Contingent Trade is a transaction 

consisting of two or more component orders, 

Continued 

membership in the Options Order 

Protection and Locked/Crossed Market 

Plan (‘‘New Plan’’), which was approved 

by the Commission on July 30, 2009.5

The New Plan requires its participants 

to establish, maintain and enforce 

written procedures and policies that are 

reasonably designed to prevent tradethroughs.6 The Participants state that 

the New Plan will accomplish this in a 

more efficient manner than the Linkage 

Plan. Specifically, the New Plan 

eliminates a central hub and addresses 

trade-through compliance through the 

use of intermarket sweep orders. The 

New Plan incorporates certain concepts 

of Regulation NMS 7 which, among 

other things, addresses trade-throughs 

in the equity market. The Participants 

further note that the New Plan also 

requires its participants to conduct 

surveillance of their markets to ascertain 

the effectiveness of these policies and 

procedures.8 Finally, the New Plan 

contains provisions requiring its 

participants to establish, maintain and 

enforce written rules addressing locked 

and crossed markets.9 The Participants 

believe that the New Plan will fully 

accomplish the same goals of the 

Linkage Plan, including imposing limits 

on trade-throughs. 

III. Discussion 

After careful consideration, the 

Commission finds that the proposed 

Amendments to the Linkage Plan are 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder.10 Specifically, the 

Commission finds that the Amendments 

are consistent with Section 11A of the 

Act 11 and Rule 608 of Regulation NMS 

thereunder 12 in that they are necessary 

or appropriate in the public interest, for 

the protection of investors and the 

maintenance of fair and orderly markets, 

to remove impediments to, and perfect 

the mechanisms of, a national market 

system. 

The Commission believes that the 

New Plan accomplishes, by alternate 

means, the goals of the Linkage Plan, 

including the goal of limiting tradethroughs of prices on other exchanges 

trading the same options classes. The 

Commission notes that it has approved 

the rule filings implementing the New 

Plan submitted by each of the 

Participants (‘‘Exchange Linkage Rules’’) 

and has found such rules consistent 

with the requirements of the Act and the 

New Plan.13

The Commission notes that the 

withdrawal of each Participant will be 

effective with this approval of the 

Amendments. In addition, the 

Commission notes that each of the 

Exchange Linkage Rules will become 

effective upon this approval of the 

Amendments. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 11A of the Act 14 and Rule 608 

thereunder,15 that the proposed 

Amendments to the Linkage Plan are 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–21214 Filed 9–2–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60584; File No. SR–ISE– 

2009–35] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Order Granting Approval of 

Proposed Rule Change Relating to 

Qualified Contingent Cross Orders 

August 28, 2009. 

I. Introduction 

On June 15, 2009, the International 

Securities Exchange, LLC (‘‘Exchange’’ 

or ‘‘ISE’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’), 

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

Securities Exchange Act of 1934 

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

proposed rule change to provide for 

Qualified Contingent Cross Orders. The 

proposed rule change was published for 

comment in the Federal Register on 

June 26, 2009.3 The Commission 

received two comment letters in 

response to the proposed rule change 4

and a comment response letter from the 

Exchange.5 This order grants approval 

of the proposed rule change. 

II. Description of the Proposal 

The Exchange is currently a 

participant in the Plan for the Purpose 

of Creating and Operating an 

Intermarket Option Linkage (‘‘Current 

Plan’’).6 Subject to certain conditions, 

the Current Plan provides for a limited 

trade-through 7 exemption for ‘‘block 

trades’’ which are trades that, among 

other things, consist of 500 or more 

contracts with a premium value of at 

least $150,000.8 The Commission 

recently approved the Order Protection 

and Locked/Crossed Market Plan (‘‘New 

Plan’’),9 which will replace the Current 

Plan. Unlike the Current Plan, however, 

the New Plan does not provide an 

exemption for block trades. The 

Exchange believes that the loss of the 

block trade exemption will adversely 

affect the ability of its members to effect 

large trades that are tied to stock, and is 

proposing a new order type, the 

Qualified Contingent Cross Order,10

which the Exchange proposes to 

implement contemporaneously with its 

New Linkage Rules. 

The proposed Qualified Contingent 

Cross Order would permit an ISE 

member to cross the options leg of a 

Qualified Contingent Trade (‘‘QCT’’) 11


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executed as agent or principal, that satisfy the six 

elements in the Commission’s order exempting 

QCTs from the requirements of Rule 611(a) of 

Regulation NMS under the Act (‘‘Regulation 

NMS’’), which requires trading centers to establish, 

maintain, and enforce written policies and 

procedures that are reasonably designed to prevent 

trade-throughs. See Securities Exchange Act Release 

No. 57620 (April 4, 2008) 73 FR 19271 (April 9, 

2008) (‘‘QCT Release’’). See also Securities 

Exchange Act Release No. 54389 (August 31, 2006), 

71 FR 52829 (September 7, 2006). 

12Qualified Contingent Cross Orders will be 

automatically canceled if they cannot be executed. 

Proposed ISE Rule 721(b)(1). 

13These requirements are substantively identical 

to those in the QCT Release, supra note 11. 

14 15 U.S.C. 78f(b). In approving this proposed 

rule change, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

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

16 15 U.S.C. 78k–1(a)(1)(C). 

17See supra note 11. 

18See QCT Release, supra note 11 at 19273. 

19Both the Current Plan and New Plan include 

a Trade-Through exception for ‘‘complex trades,’’ 

including stock-option orders represented as a 

package on options exchanges. See Section 

8(c)(iii)(G) of the Current Plan and Section 5(b)(viii) 

of the New Plan. 20See CBOE Letter, supra note 4. 21 i.e., the complex trade exception. See supra 

note 19. 

22See ISE Letter, supra note 5. 

on ISE immediately upon entry if the 

order is: (i) For at least 500 contracts; (ii) 

part of a QCT; and (iii) executed at a 

price at or between the national best bid 

or offer (‘‘NBBO’’).12 Proposed 

Supplementary Material .01 to ISE Rule 

715 defines a QCT as a transaction 

composed of two or more orders, 

executed as agent or principal, where: 

(i) At least one component is in an NMS 

stock; (ii) all components are effected 

with a product or price contingency that 

either has been agreed to by all the 

respective counterparties or arranged for 

by a broker-dealer as principal or agent; 

(iii) the execution of one component is 

contingent upon the execution of all 

other components at or near the same 

time; (iv) the specific relationship 

between the component orders (e.g., the 

spread between the prices of the 

component orders) is determined by the 

time the contingent order is placed; (v) 

the component orders bear a derivative 

relationship to one another, represent 

different classes of shares of the same 

issuer, or involve the securities of 

participants in mergers or with 

intentions to merge that have been 

announced or cancelled; and (vi) the 

transaction is fully hedged (without 

regard to any prior existing position) as 

a result of other components of the 

contingent trade.13

The Exchange represents that it will 

adopt policies and procedures to ensure 

that its members use the Qualified 

Contingent Cross Order properly, 

including requiring them to properly 

mark such orders and instituting 

surveillance procedures to identify that 

the member executed the stock leg of 

the transaction at or near the same time 

as the options leg. 

III. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange and, in particular, 

with Section 6(b) of the Act.14

Specifically, the Commission finds that 

the proposal is consistent with Section 

6(b)(5) of the Act,15 which requires, 

among other things, that the rules of a 

national securities exchange be 

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 addition, the 

Commission finds that the proposed 

rule change is consistent with Section 

11A(a)(1)(C) of the Act,16 in which 

Congress found that it is in the public 

interest and appropriate for the 

protection of investors and the 

maintenance of fair and orderly markets 

to assure, among other things, the 

economically efficient execution of 

securities transactions. 

In 2006, the Commission provided an 

exemption from Rule 611(a) of 

Regulation NMS for each NMS stock 

component of contingent trades that 

satisfied the six requirements for 

‘‘qualified contingent trades’’ (‘‘NMS 

QCT Exemption’’).17 Pursuant to the 

Commission’s exemption, tradethroughs caused by the execution of 

orders involving one or more NMS 

stocks that are components of a QCT are 

permitted. The Commission stated that 

QCT transactions that meet the specified 

requirements could be useful trading 

tools for investors and other market 

participants, and could be of benefit to 

the market as a whole, contributing to 

the efficient functioning of the securities 

markets and the price discovery 

process.18

As a result of the loss of the TradeThrough exemption for block trades that 

is available under the Current Plan, but 

not available under the New Plan, the 

Exchange has proposed the Qualified 

Contingent Cross Order, which it 

believes is necessary to facilitate the 

execution of large-sized stock-option 

orders. In particular, the Exchange 

stated that this proposed Qualified 

Contingent Cross Order is needed when 

the components of a stock-option are 

executed in separate markets, rather 

than as a package on options 

exchanges.19 The Exchange’s proposal 

would provide for a new order type, the 

Qualified Contingent Cross Order, that 

would permit a cross of the options leg 

of a stock-option order that, among 

other things, met each of the six 

requirements of the NMS QCT 

Exemption. 

In its comment letter,20 CBOE asserted 

that the ISE proposal is misleading and 

has no relevance to the Trade-Through 

requirements of the New Plan because 

the proposed Qualified Contingent 

Cross Order would not violate the 

NBBO and therefore would not be in 

conflict with the New Plan. CBOE 

further questioned ISE’s concern over 

losing the Trade-Through exemption for 

block trades. In particular, CBOE noted 

that, as with the Current Plan, the New 

Plan contains a Trade-Through 

exception for stock-option orders that 

are represented at a net price,21 and that 

this exception does not even require a 

500-contract size minimum. In addition, 

CBOE noted that the NMS QCT 

Exemption, which CBOE believes only 

applies ‘‘to stock-option trades 

negotiated and represented as a 

package,’’ is also available to ISE 

members. Given these available 

alternatives, CBOE opined that it fails to 

follow ISE’s statement that the proposal 

would ‘‘provide customers with the 

flexibility needed to achieve their 

investment objectives.’’ 

ISE responded to CBOE’s comments 

by affirming the close relationship 

between its proposal and the 

implementation of the New Plan 

because the New Plan does not contain 

the block trade exemption of the Current 

Plan. ISE stated the absence of a block 

trade exemption would make it very 

difficult for the options component of 

stock-option transactions to be executed 

without allowing such orders to be 

executed at a price that matches the 

NBBO. In particular, the Exchange 

explained that, for stock-option orders 

negotiated on a ‘‘net price’’ basis where 

such price reflects the total price of both 

the stock and options legs, ‘‘the actual 

execution price of each component is 

not as material to the parties as is the 

net price of the transaction.’’ 22 For a 

stock-option order in which the stock 

leg meets the requirements of the NMS 

QCT Exemption, ISE noted that the 

stock leg can be executed at any price 

which in turn permits flexibility in the 

pricing of the options component as 

well, including allowing the options leg 


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23See SIG Letter, supra note 4. 

24Letter to Nancy M. Morris, Secretary, 

Commission, from Andrew Madoff, SIA Trading 

Committee, SIA, dated June 21, 2006 (‘‘SIA QCT 

Letter’’). 

25SIG also asserted that SIA only requested tradethrough relief for one component order of a 

contingent trade (at least where there are only two 

legs involved). The Commission notes that the NMS 

QCT Exemption provides an exemption from Rule 

611(a) for any, and not just one, Trade-Through that 

results from an execution of an order involving one 

or more NMS stocks that are components of a 

qualified contingent trade. See QCT Release, supra 

note 11. 

26See CBOE Letter, supra note 4. 

27See QCT Release supra note 11. 

to be priced between the Exchange’s 

BBO. However, ISE noted that when its 

quotation spread was at the minimum 

increment, the options component 

would not be able to trade at a price 

between the ISE BBO. ISE also believed 

that its proposed Qualified Contingent 

Cross Order is more limited than the 

block trade exemption available under 

the Current Plan because trades would 

not be permitted to Trade-Through other 

markets, and would be limited to orders 

that meet the requirements of the NMS 

QCT Exemption. 

In addition, the Exchange disputed 

CBOE’s assertion that the NMS QCT 

Exemption applied only to ‘‘stockoption trades negotiated and 

represented as a package,’’ noting that 

the NMS QCT Exemption contained no 

such limitation. Instead, the Exchange 

stated that stock-option orders, 

including those exempted from Rule 

611(a) of Regulation NMS as qualified 

contingent trades under the NMS QCT 

Exemption, are regularly effected in the 

options markets ‘‘without ever 

representing the legs together as one 

trade on an options exchange.’’ The 

Commission agrees with the Exchange 

that the application of the NMS QCT 

Exemption to stock-option trades is not 

limited to those negotiated and 

represented as a package. So long as a 

transaction meets the six specified 

elements of the NMS QCT Exemption, 

the exemption is available for use by a 

trading center. 

In its comment letter,23 SIG stated 

that, if ISE’s proposal were to be 

approved such that options legs of 

stock-option orders could be effected as 

clean option crosses without auction or 

exposure and ahead of other orders on 

ISE’s book, the net result would be that 

customers would have little assurance 

that their stock-option orders are 

effected competitively or receive best 

execution prices. SIG, noting that ISE’s 

proposal is modeled off of the NMS 

QCT Exemption, sought to provide 

context for which the Regulation NMS 

exemption was originally sought by the 

Securities Industry Association (‘‘SIA’’) 

(n/k/a SIFMA).24 SIG stated that SIA’s 

exemption request presumed that the 

stock-option net price would be subject 

to competition (i.e., through the options 

markets) even if the stock leg were not, 

though it acknowledges that the 

Qualified Contingent Trade exemption 

provided by the Commission under 

Regulation NMS does not require 

exposure of such orders as a net trade. 

If it was envisioned that stock-option 

orders could be effected pursuant to 

ISE’s proposal, ‘‘with the stock leg at a 

trade-through price and the option leg at 

a book-priority price that was never 

exposed or auctioned,’’ SIG believed 

that ‘‘the conclusion would probably 

have been that there would be 

insufficient price discovery to merit an 

exemption for the stock leg.’’ As such, 

SIG believed that ISE’s proposal would 

strip away the price protections afforded 

by the options markets for stock-option 

orders and would result in their 

executions at non-competitive prices.25

As discussed above, the application of 

the NMS QCT Exemption to stockoption trades is not limited to those 

negotiated and represented as a package. 

In response to SIG, ISE also noted that 

the SIA’s exemption request was 

focused solely on the need for tradethrough relief for the NMS stock 

components of QCTs. In addition, ISE 

pointed out that, at the time the 

Commission granted the NMS QCT 

Exemption, every option leg of a stockoption transaction of 500 contracts or 

more was also exempt from tradethrough liability based on the 

application of the Current Plan’s block 

trade exemption. Accordingly, although 

an option leg of a stock-option QCT 

would not have had an exception from 

exchange priority rules, block-sized 

transactions would have been permitted 

to trade-through the NBBO. ISE’s 

Qualified Contingent Cross Order, by 

contrast, would provide intermarket 

price protection by trading at a price no 

worse than the NBBO, but would be 

excepted from intramarket priority 

rules. 

CBOE also argued against the 

proposal because it believed that the 

Qualified Contingent Cross Order would 

be the first time that an options market 

would be permitted to cross orders 

‘‘without exposure to market 

participants and ahead of resting public 

customer orders,’’ which CBOE argued 

would be ‘‘a significant departure from 

the established practice of auction and 

exposure in the options industry.’’ 

CBOE believed that the Exchange’s 

proposal would disadvantage resting 

public customer orders, including largesized public customer orders, and 

would be harmful to options market 

structure.26

In response to this argument, ISE 

stated that customer orders on its book 

would not be disadvantaged because 

they would not be bidding and offering 

for the contingent trade that is being 

executed. ISE disputed CBOE’s view of 

the execution of Qualified Contingent 

Cross Orders as ‘‘trading ahead’’ of 

customers on its book, and disagreed 

with what it believed CBOE implied, 

that an exchange must either maintain 

customer priority in all circumstances 

or adopt a market structure that does not 

provide customer priority in any 

circumstance, noting that CBOE’s own 

rules permit the execution of one leg of 

a complex order at the same price as 

public customers on its book when 

another leg is executed at an improved 

price. 

The Commission agrees with CBOE 

that the Exchange’s proposal would 

represent a change in certain long-held 

principles in the options markets 

because it would permit the execution 

of a cross order without requiring 

exposure or customer priority. The 

Commission continues to believe that 

exposure and customer priority play an 

important role in ensuring competition 

and price discovery in the options 

markets. At the same time, as discussed 

above, the Commission also continues 

to believe that qualified contingent 

trades that satisfy the requirements of 

the NMS QCT Exemption can benefit 

the market as a whole and contribute to 

the efficient functioning of the securities 

markets and the price discovery 

process.27 The Commission believes 

that the Exchange’s proposal to establish 

a limited exception to priority and 

exposure principles is consistent with 

the Act because it is limited solely to 

the options legs of stock-option orders 

that: (1) Satisfy the requirements of the 

NMS QCT Exemption; (2) are for a size 

of at least 500 contracts; and (3) are 

executed at or better than the NBBO. 

In its comment letter, CBOE also 

stated that, while there might be a time 

and place to discuss special handling 

treatment for extremely large option 

orders, such standards should ‘‘be 

considered in a transparent and 

measured manner with input from all 

industry participants (as opposed to via 

a rule filing pretending to adopt some 

linkage-related functionality).’’ In this 

regard, the Commission notes that the 

proposal was published for public 

comment as required under Section 


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45666 Federal Register / Vol. 74, No. 170 / Thursday, September 3, 2009 / Notices 

28 15 U.S.C. 78s(b). 

29See QCT Release, supra note 11 and 

accompanying text. 

30The Commission notes that an original singlesided customer order would not otherwise 

constitute a multi-component, fully hedged trade 

for purposes of ISE’s proposed Qualified Contingent 

Cross Order solely by virtue of being hedged by the 

member representing the order. In such a case, the 

Commission does not believe that the execution of 

the options leg would qualify for the proposed 

Qualified Contingent Cross Order. 

31 15 U.S.C. 78s(b)(2). 

32 17 CFR 200.30–3(a)(12). 

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

2FBMS is designed to enable floor brokers and/ 

or their employees to enter, route, and report 

transactions stemming from options orders received 

on the Exchange. FBMS also is designed to establish 

an electronic audit trail for options orders 

represented and executed by floor brokers on the 

Exchange. See Exchange Rule 1080, commentary 

.06. 

3For purposes of calculating the 100,000 and 

40,000 thresholds, customer-to-customer 

transactions, customer-to-non-customer 

transactions, and non-customer-to-non-customer 

transactions would be included. 

19(b) of the Act 28 and the rules 

thereunder, and that the Commission 

has received and considered the 

comments of those industry participants 

that sought to provide input regarding 

the proposal, including CBOE, a 

competitor of the Exchange, as well as 

SIG, a large participant in the options 

market. 

The Commission believes that the 

Exchange’s proposed new Qualified 

Contingent Cross Order is consistent 

with the Act, and will allow Exchange 

members to retain the flexibility needed 

to utilize the Commission’s NMS QCT 

Exemption for qualified stock-option 

transactions that are not presented as a 

package on an options exchange, but 

instead where the options and stock 

components are executed in separate 

markets. As noted above, the 

Commission believes that contingent 

trades that meet the requirements of the 

NMS QCT Exemption may be useful 

trading tools for investors and other 

market participants, and may be of 

benefit to the market as a whole, 

contributing to the efficient functioning 

of the securities markets and the price 

discovery process.29 The Commission 

believes that, given the NMS QCT 

Exemption, the Exchange’s proposal is 

consistent with the Act in that it seeks 

to address the execution of stock-option 

orders whose legs are executed 

separately rather than as a package 

while limiting such orders to QCTs with 

a size of at least 500 contracts that are 

executed at or between the NBBO.30

In approving the proposed rule 

change, the Commission notes the 

Exchange’s representation that it will 

adopt policies and procedures to ensure 

that its members use the proposed order 

type properly, including requiring 

members to mark all Qualified 

Contingent Cross Orders as such. In 

addition, ISE has represented that it will 

implement surveillance procedures to 

identify that the member executed the 

stock leg of the stock-option transaction 

at or near the same time as the options 

leg. The Commission emphasizes that 

these are important measures that 

should help ensure that the proposed 

order type is employed properly. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,31 that the 

proposed rule changes (SR–ISE–2009– 

35) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.32

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–21223 Filed 9–2–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60578; File No. SR–Phlx– 

2009–72] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by NASDAQ 

OMX PHLX, Inc. Relating to the Option 

Floor Broker Subsidy and Other 

Clarifying Changes to the Fee 

Schedule 

August 27, 2009. 

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

Securities Exchange Act of 1934,1 notice 

is hereby given that on August 25, 2009, 

NASDAQ OMX PHLX, Inc. (‘‘Phlx’’ or 

the ‘‘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 Phlx. The Commission 

is publishing this notice to solicit 

comments on the proposed rule change 

from interested parties. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend the 

calculation for the Options Floor Broker 

Subsidy with respect to waiver of 

transaction fees for firm facilitation 

transactions. 

Additionally, the Exchange proposes 

to make other clarifying changes to the 

fee schedule. 

While changes to the Exchange’s fee 

schedule pursuant to this proposal are 

effective upon filing, the Exchange has 

designated this proposal to be effective 

for trades settling on or after September 

1, 2009. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http:// 

nasdaqomxphlx.cchwallstreet.com/ 

NASDAQOMXPHLX/Filings/, 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, 

Phlx 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 Phlx 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 attract additional order flow 

to the Exchange. The Exchange proposes 

to modify the Options Floor Broker 

Subsidy calculation. The Exchange 

currently pays an Options Floor Broker 

Subsidy to member organizations with 

Exchange registered floor brokers for 

eligible contracts that are entered into 

the Exchange’s Options Floor Broker 

Management System (‘‘FBMS’’).2 To 

qualify for the per contract subsidy, a 

member organization with Exchange 

registered floor brokers must have: (1) 

More than an average of 100,000 

executed contracts per day in the 

applicable month; and (2) at least 40,000 

executed contracts or more per day for 

at least eight trading days during that 

same month.3 Only the floor broker 

volume from orders entered into FBMS 

and subsequently executed on the 

Exchange would be counted. The 

100,000 contract and 40,000 contract 

thresholds, as described above, would 

be calculated per member organization 

floor brokerage unit. In the event that 

two or more member organizations with 

Exchange registered floor brokers each 

entered one side of a transaction into 

FBMS, then the executed contracts 

would be divided among each 


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