Federal Register / Vol. 77, No. 31 / Wednesday, February 15, 2012 / Notices 8931 

22 17 CFR 240.19b–4(f)(6)(iii). 

23For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

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

24 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 3See FINRA Rule 4360 ‘‘Fidelity Bonds.’’ 

important to its maintenance of a fair 

and orderly market and is noncontroversial, the Exchange requested 

that the Commission waive the 30-day 

pre-operative waiting period contained 

in Rule 19b–4(f)(6)(iii) under the Act.22

Waiver of this requirement will allow 

the Exchange to make the examination 

available as soon as possible to coincide 

with its availability on other exchanges. 

The Commission believes that waiver of 

the 30-day operative delay is consistent 

with the protection of investors and the 

public interest because the proposal 

makes the registration, qualification and 

continuing education requirements of 

EDGA comparable to those of the other 

exchanges and will enable EDGA to 

recognize the Series 56 exam as a valid 

qualification for proprietary traders.23

Therefore, the Commission designates 

the proposal operative upon filing. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend the 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. 

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 rulecomments@sec.gov. Please include File 

No. SR–EDGA–2012–04 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–EDGA–2012–04. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site http://www.sec.gov/ 

rules/sro.shtml. Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549 on official 

business days between the hours of 10 

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

also will be available for inspection and 

copying at the principal office of the 

Exchange. All comments received will 

be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–EDGA– 

2012–04 and should be submitted by 

March 7, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.24

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–3470 Filed 2–14–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66362; File No. SR–Phlx– 

2012–13] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Exchange Rule 705 (Fidelity Bonds) 

February 9, 2012. 

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 January 

26, 2012, 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 

substantially 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 

Exchange Rule 705, entitled ‘‘Members 

Must Carry,’’ to create new requirements 

regarding fidelity bonds and also 

rename the Rule ‘‘Fidelity Bonds.’’ 

The Exchange intends for this Rule to 

become operative on April 2, 2012. 

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, 

which are substantially set forth below 

in sections A, B, and C, 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 Exchange proposes to amend 

Exchange Rule 705, entitled ‘‘Members 

Must Carry,’’ to create new requirements 

regarding fidelity bonds and also 

rename the Rule ‘‘Fidelity Bonds,’’ in 

substantially the same form as a rule at 

the Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’).3

Currently, Exchange Rule 705 requires 

each member organization that is a 

partnership and is doing business with 

the public and each member 

organization that is a corporation to 

carry fidelity bonds covering its general 

partners and employees or covering its 

officers and employees in such form and 

in such amounts as the Exchange may 

require. The Rule does not apply to 

member organizations that are 

partnerships or corporations which are 

members of another exchange, which 

has comparable rules and regulations to 


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8932 Federal Register / Vol. 77, No. 31 / Wednesday, February 15, 2012 / Notices 

4See Securities Exchange Act Release No. 63961 

(February 24, 2011), 76 FR 11542 (March 2, 2011) 

(SR–FINRA–2010–059) (a rule change to adopt a 

rule of the National Association of Securities 

Dealers, Inc. (‘‘NASD’’) as part of the consolidation 

of the FINRA rulebook). 

5The Exchange notes that a member or member 

organization may elect, subject to availability, a 

deductible of less than 10 percent of the coverage 

purchased. 

6Such deduction would be based on net worth on 

coverage purchased by the member or member 

organization. 

which such member organizations are 

subject and with which they comply. 

The Exchange proposes to adopt 

language similar to a FINRA Rule which 

would provide members and member 

organizations with more specific 

guidelines with respect to fidelity bonds 

and better reflect current industry 

practices.4 The purpose of a fidelity 

bond is to protect a member or member 

organization against certain types of 

losses, including, but not limited to, 

those caused by the malfeasance of its 

officers and employees, and the effect of 

such losses on the member or member 

organization’s capital. 

The new proposed text would require 

each member and member organization 

that is required to join the Securities 

Investor Protection Corporation 

(‘‘SIPC’’) to maintain blanket fidelity 

bond coverage with specified amounts 

of coverage based on the member or 

member organization’s net capital 

requirement, with certain exceptions. 

Proposed Rule 705 would require 

members and member organizations to 

maintain fidelity bond coverage that 

provides for per loss coverage without 

an aggregate limit of liability. Members 

or member organizations may apply for 

this level of coverage with any product 

that meets these requirements, 

including the Securities Dealer Blanket 

Bond or a properly endorsed Financial 

Institution Form 14 Bond. Most fidelity 

bonds contain a definition of the term 

‘‘loss’’ (or ‘‘single loss’’), for purposes of 

the bond, which generally includes all 

covered losses resulting from any one 

act or a series of related acts. A payment 

by an insurer for covered losses 

attributed to a ‘‘single loss’’ does not 

reduce a member or member 

organization’s coverage amount for 

losses attributed to other, separate acts. 

A fidelity bond with an aggregate limit 

of liability caps a member or member 

organization’s coverage during the bond 

period at a certain amount if a loss (or 

losses) meets this aggregate threshold. 

The Exchange believes that per loss 

coverage without an aggregate limit of 

liability provides members and member 

organizations with the most beneficial 

coverage since the bond amount cannot 

be exhausted by one or more covered 

losses, so it will be available for future 

losses during the bond period. 

Under the proposed Rule, a member 

or member organization’s fidelity bond 

must provide against loss and have 

Insuring Agreements covering at least 

the following: fidelity, on premises, in 

transit, forgery and alteration, securities 

and counterfeit currency. The Rule 

requires that coverage for all Insuring 

Agreements be equal to 100 percent of 

the member or member organization’s 

minimum required bond coverage. 

Members and member organizations 

may elect to carry additional, optional 

Insuring Agreements not required by the 

proposed Rule for an amount less than 

100 percent of the minimum required 

bond coverage. The proposed Rule 

would require that a member or member 

organization’s fidelity bond include a 

cancellation rider providing that the 

insurer will use its best efforts to 

promptly notify the Exchange in the 

event the bond is cancelled, terminated 

or ‘‘substantially modified.’’ 

The Exchange is proposing to add 

supplementary material to the proposed 

Rule text that would require members or 

member organizations that do not 

qualify for a bond with per loss coverage 

without an aggregate limit of liability to 

secure alternative coverage. Specifically, 

a member or member organization that 

does not qualify for blanket fidelity 

bond coverage as required by Rule 

705(a)(3) would be required to maintain 

substantially similar fidelity bond 

coverage in compliance with all other 

provisions of the proposed Rule, 

provided that the member or member 

organization maintains written 

correspondence from two insurance 

providers stating that the member or 

member organization does not qualify 

for the coverage required by proposed 

Rule 705(a)(3). The member or member 

organization would be required to retain 

such correspondence for the period 

specified by Rule 17a–4(b)(4) of the Act. 

Minimum Coverage 

Proposed Rule 705 would require 

each member or member organization to 

maintain, at a minimum, fidelity bond 

coverage for any person associated with 

the member or member organization, 

except directors or trustees of a member 

or member organization who are not 

performing acts within the scope of the 

usual duties of an officer or employee. 

Proposed Rule 705 would require a 

member or member organization with a 

net capital requirement that is less than 

$250,000 to maintain minimum 

coverage of the greater of 120 percent of 

the firm’s required net capital under 

Rule 15c3–1 of the Act or $100,000. 

Members or member organizations with 

a net capital requirement of at least 

$250,000 would use a table in the rule 

to determine their minimum fidelity 

bond coverage requirement. Under the 

proposed Rule, the entire amount of a 

member or member organization’s 

minimum required coverage must be 

available for covered losses and may not 

be eroded by the costs an insurer may 

incur if it chooses to defend a claim. 

Specifically, any defense costs for 

covered losses must be in addition to a 

member or member organization’s 

minimum coverage requirements. A 

member or member organization may 

include defense costs as part of its 

fidelity bond coverage, but only to the 

extent that it does not reduce a member 

or member organization’s minimum 

required coverage under the proposed 

Rule. 

Deductible 

Proposed Rule 705 would provide for 

an allowable deductible amount of up to 

25 percent of the fidelity bond coverage 

purchased by a member or member 

organization. Any deductible amount 

elected by the member or member 

organization that is greater than 10 

percent of the coverage purchased by 

the member or member organization 5

would be deducted from the member or 

member organization’s net worth in the 

calculation of its net capital for 

purposes of Rule 15c3–1 of the Act.6 If 

the member or member organization is 

a subsidiary of another Exchange 

member or member organization, this 

amount may be deducted from the 

parent’s rather than the subsidiary’s net 

worth, but only if the parent guarantees 

the subsidiary’s net capital in writing. 

Annual Review 

The proposed Rule would require a 

member or member organization 

(including a member or member 

organization that signs a multi-year 

insurance policy), annually as of the 

yearly anniversary date of the issuance 

of the fidelity bond, to review the 

adequacy of its fidelity bond coverage 

and make any required adjustments to 

its coverage, as set forth in the proposed 

Rule. Under proposed Rule 705(d), a 

member or member organization’s 

highest net capital requirement during 

the preceding 12-month period, based 

on the applicable method of computing 

net capital (dollar minimum, aggregate 

indebtedness or alternative standard), 

would be used as the basis for 

determining the member or member 

organization’s minimum required 

fidelity bond coverage for the 

succeeding 12-month period. The 

‘‘preceding 12-month period’’ includes 


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Federal Register / Vol. 77, No. 31 / Wednesday, February 15, 2012 / Notices 8933 

7See Proposed Rule 705(e). 

8 In general, the notification provisions of the 

corresponding exchange rules (i.e., cancellation 

rider and notification upon cancellation, 

termination or substantial modification of the bond) 

require notification to the respective exchange 

rather than to the Exchange or FINRA. Accordingly, 

the practical effect for a member or member 

organization that avails itself of the proposed 

exemption is that such member or member 

organization must maintain a fidelity bond subject 

to the same or greater requirements as in proposed 

Rule 705; however, such member or member 

organization would be exempt from the requirement 

that the Exchange be notified of changes to the bond 

and would alternatively comply with the 

notification provisions of the respective exchange 

or FINRA. 

9An ROT includes a Streaming Quote Trader 

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

(‘‘RSQT’’) and a Non-SQT, which by definition is 

neither a SQT or an RSQT. An ROT is defined in 

Exchange Rule 1014(b) as a regular member 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). An 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. An RSQT is defined 

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. 

10A Specialist is an Exchange member who is 

registered as an options specialist pursuant to Rule 

1020(a). 

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

12 15 U.S.C. 78f(b)(5). 

13 15 U.S.C. 78s(b)(3)(A). 

14 17 CFR 240.19b–4(f)(6). In addition, Rule 

19b–4(f)(6)(iii) requires the Exchange to give the 

Commission written notice of the Exchange’s intent 

to file the proposed rule change, along with a brief 

description and text of the proposed rule change, 

at least five business days prior to the date of filing 

of the proposed rule change, or such shorter time 

as designated by the Commission. The Exchange 

has satisfied this requirement. 

the 12-month period that ends 60 days 

before the yearly anniversary date of a 

member or member organization’s 

fidelity bond. This would give a 

member or member organization time to 

determine its required fidelity bond 

coverage by the anniversary date of the 

bond. 

Rule 705 would allow a member or 

member organization that has only been 

in business for one year and elected the 

aggregate indebtedness ratio for 

calculating its net capital requirement to 

use, solely for the purpose of 

determining the adequacy of its fidelity 

bond coverage for its second year, the 15 

to 1 ratio of aggregate indebtedness to 

net capital in lieu of the 8 to 1 ratio 

(required for broker-dealers in their first 

year of business) to calculate its net 

capital requirement. Notwithstanding 

the above, such member or member 

organization would not be permitted to 

carry less minimum fidelity bond 

coverage in its second year than it 

carried in its first year. 

A member or member organization 

would be required to immediately 

advise the Exchange in writing if its 

fidelity bond is cancelled, terminated or 

substantially modified.7

Exemptions 

Proposed Rule 705 would exempt 

from the fidelity bond requirements 

members or member organizations in 

good standing with another national 

securities exchange or FINRA that 

maintain a fidelity bond subject to the 

requirements of such exchange that are 

equal to or greater than the requirements 

set forth in the proposed rule.8

Additionally, the Rule would exempt 

from the fidelity bond requirements any 

firm that acts solely as a Registered 

Options Trader (‘‘ROT’’),9 Specialist10

or Floor Broker and does not conduct 

business with the public. 

The Exchange intends for this Rule to 

become operative on April 2, 2012.2. 

Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 11 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 12

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. 

The Exchange believes that its 

proposed amendment to Exchange Rule 

705 provides specificity to the Rule. The 

proposed amendment to the Rule 

requires members and member 

organizations to continue to carry 

fidelity bonds, but also provides 

additional specificity regarding the 

amount of coverage. This Rule will 

update and clarify the requirements 

governing fidelity bonds consistent with 

industry practice. 

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 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days after the date of 

the filing, or such shorter time as the 

Commission may designate, it has 

become effective pursuant to 19(b)(3)(A) 

of the Act 13 and Rule 19b–4(f)(6) 14

thereunder. 

The Exchange intends for Rule 705 to 

become operative on April 2, 2012. This 

operative delay will allow members or 

member organizations that are not 

exempt from the Rule to comply with 

the requirements set forth under the 

Rule. 

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 email to rulecomments@sec.gov. Please include File 

Number SR–Phlx–2012–13 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. 


sroberts on DSK5SPTVN1PROD with NOTICES
8934 Federal Register / Vol. 77, No. 31 / Wednesday, February 15, 2012 / Notices 

15 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Select Symbols are defined as options overlying 

the following symbols: AA, AAPL, ABX, AMD, 

AMR, AMZN, AXP, BAC, C, CAT, CIEN, CSCO, 

DELL, DIA, EBAY, EK, F, FAS, FAZ, FXI, GDX, GE, 

GLD, GLW, GS, HAL, IBM, INTC, IWM, JPM, LVS, 

MGM, MSFT, MU, NEM, NOK, NVDA, ORCL, PFE, 

PG, POT, QCOM, QQQ, RIG, RIMM, RMBS, SBUX, 

SDS, SIRI, SLV, SLW, SNDK, SPY, T, TBT, TZA, 

UAL, UNG, USO, UUP, V, VALE, VXX, VZ, WYNN, 

X, XLF, XOM, XOP and YHOO (‘‘Select Symbols’’). 

These symbols are Multiply-Listed. 

4The Rebates and Fees for Adding and Removing 

Liquidity in Select Symbols apply only to electronic 

orders. 

5A Directed Participant is a Specialist, SQT, or 

RSQT that executes a Customer order that is 

directed to them by an Order Flow Provider and is 

executed electronically on PHLX XL II. 

6A Specialist is an Exchange member who is 

registered as an options specialist pursuant to Rule 

1020(a). 

7A 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 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). 

8An 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. 

9An RSQT is defined 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. 

10The 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’’). 

All submissions should refer to File 

Number SR–Phlx–2012–13. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 10 

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. 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–2012–13 and should 

be submitted on or before March 7, 

2012. 

For the Commission, by the Division 

of Trading and Markets, pursuant to 

delegated authority.15

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–3469 Filed 2–14–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66367; File No. SR–Phlx– 

2012–15] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Amending the 

Rebates and Fees for Adding and 

Removing Liquidity in Select Symbols 

February 9, 2012. 

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 January 

30, 2012, 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 

Rebates and Fees for Adding and 

Removing Liquidity in Select Symbols 

in Section I, Part A of the Exchange’s 

Fee Schedule. 

While changes to the Fee Schedule 

pursuant to this proposal are effective 

upon filing, the Exchange has 

designated these changes to be operative 

on February 1, 2012. 

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 the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to amend Section I of the Fee 

Schedule, entitled ‘‘Rebates and Fees for 

Adding and Removing Liquidity in 

Select Symbols,’’ at Part A, entitled 

‘‘Single contra-side orders,’’ to amend 

the Customer Fee for Removing 

Liquidity to increase the fee in order to 

recoup additional costs associated with 

paying rebates to attract additional order 

flow. 

Currently, Section I of the Fee 

Schedule, which applies to certain 

select symbols,3 is comprised of a Part 

A, Single contra-side order fees, and a 

Part B, Complex Order fees.4 There are 

currently several categories of market 

participants: Customers, Directed 

Participants,5 Specialists,6 Registered 

Options Traders,7 SQTs,8 RSQTs,9

Broker-Dealers, Firms and 

Professionals.10 Currently, the Exchange 

assesses the following Single contra-side 

Fees for Removing Liquidity: 


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