Federal Register / Vol. 77, No. 50 / Wednesday, March 14, 2012 / Notices 15163 

38 15 U.S.C. 78q–1(b)(3)(A). 

39 15 U.S.C. 78q–1. 

40 In approving the proposed rule change, the 

Commission considered the proposal’s impact on 

efficiency, competition, and capital formation. 15 

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

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

2 17 CFR 240.19b–4. 

3For a detailed description of the Investor 

Support Program as originally implemented, see 

Securities Exchange Act Release No. 63270 

(November 8, 2010), 75 FR 69489 (November 12, 

2010) (NASDAQ–2010–141) (notice of filing and 

immediate effectiveness) (the ‘‘ISP Filing’’). See also 

Securities Exchange Act Release Nos. 63414 

(December 2, 2010), 75 FR 76505 (December 8, 

2010) (NASDAQ–2010–153) (notice of filing and 

immediate effectiveness); 63628 (January 3, 2011), 

76 FR 1201 (January 7, 2011) (NASDAQ–2010–154) 

(notice of filing and immediate effectiveness); 

63891 (February 11, 2011), 76 FR 9384 (February 

17, 2011) (NASDAQ–2011–022) (notice of filing and 

immediate effectiveness); 64050 (March 8, 2011), 76 

FR 13694 (March 14, 2011) (SR–NASDAQ–2011– 

034); 65717 (November 9, 2011), 76 FR 70784 

(November 15, 2011) (SR–NASDAQ–2011–150) 

(notice of filing and immediate effectiveness). 

4The Commission has recently expressed its 

concern that a significant percentage of the orders 

of individual investors are executed at over the 

counter (‘‘OTC’’) markets, that is, at off-exchange 

markets; and that a significant percentage of the 

orders of institutional investors are executed in 

dark pools. Securities Exchange Act Release No. 

61358 (January 14, 2010), 75 FR 3594 (January 21, 

2010) (Concept Release on Equity Market Structure, 

‘‘Concept Release’’). In the Concept Release, the 

Commission has recognized the strong policy 

preference under the Act in favor of price 

transparency and displayed markets. The 

Commission published the Concept Release to 

invite public comment on a wide range of market 

structure issues, including high frequency trading 

and un-displayed, or ‘‘dark,’’ liquidity. See also 

Mary L. Schapiro, Strengthening Our Equity Market 

Structure (Speech at the Economic Club of New 

York, Sept. 7, 2010) (‘‘Schapiro Speech,’’ available 

on the Commission Web site) (comments of 

Commission Chairman on what she viewed as a 

troubling trend of reduced participation in the 

equity markets by individual investors, and that 

nearly 30 percent of volume in U.S.-listed equities 

is executed in venues that do not display their 

liquidity or make it generally available to the 

public). 

17A(b)(3)(A) of the Exchange Act,38

facilitate the prompt and accurate 

clearance and settlement of securities 

transactions and the safeguarding of 

securities and funds under FICC’s 

custody or control or for which FICC is 

responsible. 

V. Conclusion 

On the basis of the foregoing, the 

Commission finds that the amended 

proposed rule change is consistent with 

the requirements of the Exchange Act 

and in particular Section 17A of the 

Exchange Act and the rules and 

regulations thereunder.39

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Exchange Act, 

that the proposed rule change (File No. 

SR–FICC–2008–01) be, and hereby is, 

approved.40

By the Commission. 

Dated: March 9, 2012. 

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–6187 Filed 3–13–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66544; File No. SR– 

NASDAQ–2012–032] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Modify 

NASDAQ’s Investor Support Program 

March 8, 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 February 

27, 2012, The NASDAQ Stock Market 

LLC (‘‘NASDAQ’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by NASDAQ. 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 

NASDAQ proposes to modify the 

Investor Support Program (the ‘‘ISP’’) 

under Rule 7014 to introduce an 

additional method for members to earn 

an enhanced rebate under the ISP. 

NASDAQ will implement the proposed 

change on March 1, 2012. The text of 

the proposed rule change is available at 

http://nasdaq.cchwallstreet.com/, at 

NASDAQ’s principal office, 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, 

NASDAQ 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. 

NASDAQ 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 

NASDAQ is proposing to modify the 

Investor Support Program (the ‘‘ISP’’) 

under Rule 7014 to introduce an 

additional method for members to earn 

an enhanced rebate under the ISP. The 

ISP enables NASDAQ members to earn 

a monthly fee credit for providing 

additional liquidity to NASDAQ and 

increasing the NASDAQ-traded volume 

of what are generally considered to be 

retail and institutional investor orders 

in exchange-traded securities (‘‘targeted 

liquidity’’).3 The goal of the ISP is to 

incentivize members to provide such 

targeted liquidity to the NASDAQ 

Market Center.4 The Exchange noted in 

the ISP Filing that maintaining and 

increasing the proportion of orders in 

exchange-listed securities executed on a 

registered exchange (rather than relying 

on any of the available off-exchange 

execution methods) would help raise 

investors’ confidence in the fairness of 

their transactions and would benefit all 

investors by deepening NASDAQ’s 

liquidity pool, supporting the quality of 

price discovery, promoting market 

transparency and improving investor 

protection. 

Without modifying any existing 

aspects of the ISP, the Exchange now 

proposes to provide an additional 

method for members to qualify for an 

ISP rebate that includes a new criterion 

focused on liquidity provision through 

Public Customer Orders in the NASDAQ 

Options Market. The change recognizes 

the extent to which members that 

represent retail and/or institutional 

investors are active in trading both cash 

equities and options on behalf of such 

customers. In fact, to an increasing 

extent the customers that such members 

represent simultaneously trade different 

asset classes within a single investment 

strategy. NASDAQ also notes that cash 

equities and options markets are linked, 

with liquidity and trading patterns on 

one market affecting those on the other. 

Accordingly, pricing incentives that 

encourage market participant activity in 

both markets recognize that activity in 

the options markets also supports price 

discovery and liquidity provision in the 

NASDAQ Market Center. The NASDAQ 

Market Center fee schedule for order 

execution and routing in Rule 7018 

already recognizes the convergence 

between cash equities and options 

trading through liquidity provider 

rebate tiers available to members active 

in both the NASDAQ Market Center and 

the NASDAQ Options Market. 

Participants in the ISP are required to 

designate specific NASDAQ order entry 


srobinson on DSK4SPTVN1PROD with NOTICES
15164 Federal Register / Vol. 77, No. 50 / Wednesday, March 14, 2012 / Notices 

5 ‘‘Participation Ratio’’ is defined as follows: 

‘‘[F]or a given member in a given month, the ratio 

of (A) the number of shares of liquidity provided 

in orders entered by the member through any of its 

Nasdaq ports and executed in the Nasdaq Market 

Center during such month to (B) the Consolidated 

Volume.’’ ‘‘Consolidated Volume’’ is defined as 

follows: ‘‘[F]or a given member in a given month, 

the consolidated volume of shares of System 

Securities in executed orders reported to all 

consolidated transaction reporting plans by all 

exchanges and trade reporting facilities during such 

month.’’ ‘‘System Securities’’ means all securities 

listed on NASDAQ and all securities subject to the 

Consolidated Tape Association Plan and the 

Consolidated Quotation Plan. 

6 ‘‘Baseline Participation Ratio’’ is defined as 

follows: ‘‘[W]ith respect to a member, the lower of 

such member’s Participation Ratio for the month of 

August 2010 or the month of August 2011, provided 

that in calculating such Participation Ratios, the 

numerator shall be increased by the amount (if any) 

of the member’s Indirect Order Flow for such 

month, and provided further that if the result is 

zero for either month, the Baseline Participation 

Ratio shall be deemed to be 0.485% (when rounded 

to three decimal places).’’ 

7These terms have the meanings assigned to them 

in Rule 4751. MIOC and SIOC orders are forms of 

‘‘immediate or cancel’’ orders and therefore cannot 

be liquidity-providing orders. 

8 15 U.S.C. 78f. 

9 15 U.S.C. 78f(b)(4) and (5). 

ports for use under the ISP and to meet 

specified criteria focused on market 

participation, liquidity provision, and 

high rates of order execution. For 

members qualifying for the new ISP tier, 

NASDAQ will pay a credit of $0.0003 

per share with respect to shares of 

displayed liquidity executed at a price 

of $1 or more and entered through ISPdesignated ports, and $0.0001 per share 

with respect to all other shares of 

displayed liquidity executed at a price 

of $1 or more. The specific criteria for 

the proposed new ISP tier are as 

follows: 

(1) The member’s Participation Ratio 5

for the month exceeds its Baseline 

Participation Ratio 6 by at least 0.30%. 

In general terms, the Baseline 

Participation Ratio is the ratio of shares 

of liquidity provided by the member in 

NASDAQ for the month of August 2010 

or August 2011 (whichever is lower) to 

the total consolidated volume for that 

month. To the extent that a member’s 

participation in NASDAQ equals or 

exceeds its Baseline Participation Ratio 

(i.e., to the extent that the member at 

least matches its participation in 

NASDAQ during the lower of August 

2010 or August 2011), the member may 

be eligible for the program. Exceeding 

the Baseline Participation Ratio by 

specified amounts may qualify the 

member for higher credits under the 

ISP. The requirement reflects the 

expectation that a member participating 

in the program must maintain or 

increase its participation in NASDAQ as 

compared with an historical baseline. 

All of the ISP’s existing tiers have a 

criterion focused on the member’s 

Participation Ratio. 

(2) The member’s ‘‘ISP Execution 

Ratio’’ for the month must be less than 

10. The ISP Execution Ratio is defined 

as ‘‘the ratio of (A) the total number of 

liquidity-providing orders entered by a 

member through its ISP-designated 

ports during the specified time period to 

(B) the number of liquidity-providing 

orders entered by such member through 

its ISP-designated ports and executed 

(in full or partially) in the Nasdaq 

Market Center during such time period; 

provided that: (i) No order shall be 

counted as executed more than once; 

and (ii) no Pegged Orders, odd-lot 

orders, or MIOC or SIOC orders shall be 

included in the tabulation.’’ 7 Thus, the 

definition requires a ratio between the 

total number of orders that post to the 

NASDAQ book and the number of such 

orders that actually execute that is low, 

a characteristic that NASDAQ believes 

to be reflective of retail and institutional 

order flow. All of the ISP’s existing tiers 

have a criterion focused on the 

member’s ISP Execution Ratio. 

(3) The shares of liquidity provided 

through ISP-designated ports during the 

month are equal to or greater than 0.2% 

of Consolidated Volume during the 

month, reflecting the ISP goals of 

encouraging higher levels of liquidity 

provision. All of the ISP’s existing tiers 

have a criterion focused on the liquidity 

provided through ISP-designated ports 

as a percentage of Consolidated Volume. 

(4) At least 80% of the liquidity 

provided by the member during the 

month is provided through ISPdesignated ports. This requirement is 

designed to mitigate ‘‘gaming’’ of the 

program by firms that do not generally 

represent retail or institutional order 

flow but that nevertheless are able to 

channel a portion of their orders that 

they intend to execute through ISPdesignated ports and thereby receive a 

credit with respect to those orders. All 

of the ISP’s existing tiers have a 

criterion requiring the member to 

provide a specified percentage of 

liquidity through ISP-designated ports. 

In addition to these criteria, which are 

similar or identical to criteria for 

existing ISP tiers, members seeking to 

qualify for the new tier would also be 

required to satisfy the following criteria: 

(5) The member has an average daily 

volume during the month of 100,000 or 

more contracts of liquidity provided 

through one or more of its Nasdaq 

Option Market market participant 

identifiers (‘‘MPIDs’’), provided that 

such liquidity is provided through 

Public Customer Orders, as defined in 

Chapter I, Section 1 of the Nasdaq 

Options Market Rules. That rule defines 

Public Customer Order as an order for 

the account of a person that is not a 

broker or a dealer. Thus, in keeping 

with the goal of the ISP to encourage 

participation by retail and institutional 

investors and the members that 

represent them in exchange markets, the 

new criterion focused on options would 

require a specified level of liquidity 

provision through orders that are 

directly identified under Nasdaq 

Options Market rules as having 

characteristics consistent with this goal. 

(6) The member’s ratio between shares 

of liquidity provided through ISPdesignated ports and total shares 

accessed, provided, or routed through 

ISP-designated ports during the month 

is at least 0.80. This additional criterion 

reflects a goal of ensuring that the 

qualifying member is using its ISPdesignated ports substantially for 

liquidity provision, in keeping with the 

ISP’s overall goal of drawing liquidityproviding orders to exchange markets. A 

similar criterion is applicable to 

NASDAQ’s Extended Hours Investor 

Program (the ‘‘EHIP’’), which is also 

provided for under Rule 7014. 

2. Statutory Basis 

NASDAQ believes that the proposed 

rule change is consistent with the 

provisions of Section 6 of the Act,8 in 

general, and with Sections 6(b)(4) and 

6(b)(5) of the Act,9 in particular, in that 

it provides for the equitable allocation 

of reasonable dues, fees and other 

charges among members and issuers and 

other persons using any facility or 

system which NASDAQ operates or 

controls, and is not designed to permit 

unfair discrimination between 

customers, issuers, brokers, or dealers. 

The ISP encourages members to add 

targeted liquidity that is executed in the 

NASDAQ Market Center. The primary 

objective in making the enhancements 

to the ISP reflected in the proposed rule 

change is to add an even greater amount 

of targeted liquidity to the NASDAQ 

Market Center and also the NASDAQ 

Options Market by adding an additional 

method by which members may qualify 

for the ISP, but without eliminating or 

modifying any of the existing methods. 

The rule change proposal, like the 

original ISP, is not designed to permit 

unfair discrimination, but rather is 

intended to promote submission of 

liquidity—providing orders to 

NASDAQ, which benefits all NASDAQ 

members and all investors. The change 

recognizes the extent to which members 

that represent retail and/or institutional 

investors are active in trading both cash 


srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 50 / Wednesday, March 14, 2012 / Notices 15165 

10 15 U.S.C. 78s(b)(3)(A)(ii). 

11 17 CFR 240.19b–4(f)(2). 

equities and options on behalf of such 

customers. In fact, to an increasing 

extent the customers that such members 

represent simultaneously trade different 

asset classes within a single strategy. 

NASDAQ also notes that cash equities 

and options markets are linked, with 

liquidity and trading patterns on one 

market affecting those on the other. 

Accordingly, pricing incentives that 

encourage market participant activity in 

both markets recognize that activity in 

the options markets also supports price 

discovery and liquidity provision in the 

NASDAQ Market Center. Thus, the new 

tier, like existing tiers, is designed to 

benefit all market participants by 

encouraging submission of liquidity— 

providing orders to the NASDAQ 

Market Center, and further broadens this 

incentive by encouraging the 

submission of liquidity—providing 

options contracts to the NASDAQ 

Options Market. 

Likewise, the proposal, like the ISP, is 

consistent with the Act’s requirement 

for the equitable allocation of reasonable 

dues, fees, and other charges. Members 

who choose to significantly increase the 

volume of liquidity—providing orders 

that they submit to the NASDAQ Market 

Center and the NASDAQ Options 

Market in order to qualify for the new 

tier, or existing tiers, would be 

benefitting all investors, and therefore 

providing credits to them, as 

contemplated by the ISP, is equitable. 

Moreover, NASDAQ believes that the 

level of the credit available through the 

new tier—$0.0003 per share for 

displayed liquidity provided through 

ISP-designated ports and $0.0001 per 

share for other displayed liquidity—is 

reasonable, in that it is comparable to 

the added rebates of $0.0001, $0.0003, 

or $0.0004 per share executed already 

provided under other ISP tiers, and does 

not reflect a disproportionate increase 

above the rebates provided to all 

members with respect to provision of 

displayed liquidity under Rule 7018, 

which range from $0.0020 to $0.00295 

per share executed. NASDAQ further 

notes that by adding an additional tier 

to the ISP without altering any of the 

existing tiers, NASDAQ is effectively 

reducing fees for members qualifying for 

the new tier without making any 

offsetting fee increases. 

Finally, NASDAQ notes that it 

operates in a highly competitive market 

in which market participants can 

readily favor competing venues if they 

deem fee levels at a particular venue to 

be excessive, or rebate opportunities 

available at other venues to be more 

favorable. In such an environment, 

NASDAQ must continually adjust its 

fees to remain competitive with other 

exchanges and with alternative trading 

systems that have been exempted from 

compliance with the statutory standards 

applicable to exchanges. NASDAQ 

believes that the proposed rule change 

reflects this competitive environment 

because the changes to the ISP are 

designed to increase the credits 

provided to members that enhance 

NASDAQ’s market quality through 

liquidity provision. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

NASDAQ does not believe that the 

proposed rule change will result in any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act, as amended. 

Because the market for order execution 

is extremely competitive, members may 

readily opt to disfavor NASDAQ’s 

execution services if they believe that 

alternatives offer them better value. For 

this reason and the reasons discussed in 

connection with the statutory basis for 

the proposed rule change, NASDAQ 

does not believe that the proposed 

changes will impair the ability of 

members or competing order execution 

venues to maintain their competitive 

standing in the financial markets. In 

fact, because it institutes a reduction in 

fees, NASDAQ believes that the 

proposed rule change will enhance the 

degree of competition between 

NASDAQ and other trading venues. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act 10 and 

subparagraph (f)(2) of Rule 19b–4 

thereunder.11 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–NASDAQ–2012–032 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–NASDAQ–2012–032. 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– 

NASDAQ–2012–032 and should be 

submitted on or before April 4, 2012. 


srobinson on DSK4SPTVN1PROD with NOTICES
15166 Federal Register / Vol. 77, No. 50 / Wednesday, March 14, 2012 / Notices 

12 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The changes apply to executions priced at $1 or 

more. Fees and rebates applicable to executions of 

securities priced below $1 remain unchanged. 

4Minimum life orders are orders that may not be 

cancelled for a period of 100 milliseconds following 

entry. 

5 15 U.S.C. 78f. 

6 15 U.S.C. 78f(b)(4) and (5). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–6186 Filed 3–13–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66543; File No. SR–Phlx– 

2012–25] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Modify Fees 

Applicable to the Trading of NMS 

Stocks Through NASDAQ OMX PSX 

March 8, 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 February 

27, 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 modify the 

fees applicable to trading on the 

NASDAQ OMX PSX system (‘‘PSX’’). 

The text of the proposed rule change is 

available on the Exchange’s Web site at 

http://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 the 

Statutory Basis for, the Proposed Rule 

Change 

Phlx is amending its fee and credit 

schedule for transaction executions on 

PSX. Specifically, Phlx is introducing 

reduced fees for accessing liquidity in 

securities listed on the New York Stock 

Exchange (‘‘Tape A Securities’’), along 

with correspondingly reduced rebates 

for liquidity provision in Tape A 

Securities.3 Currently, PSX charges 

$0.0027 per share executed to members 

accessing liquidity in any security 

traded by the Exchange. Under the 

proposed rule change, the fee will be 

reduced to $0.0019 per share executed 

for Tape A Securities. However, to keep 

the Exchange’s rebates for liquidity 

provision in line with the reduced fee 

to access liquidity, the Exchange will 

also make reductions in the rebates for 

Tape A Securities. Currently, the 

liquidity provider rebate is $0.0026 per 

share executed with respect to orders 

with an original displayed size of 2,000 

or more shares, and is also $0.0026 with 

respect to liquidity provided by 

minimum life orders.4 Under the 

proposed rule change, this rebate will be 

reduced to $0.0018 per share executed 

for Tape A Securities. The rebate for 

orders with an original displayed size of 

less than 2,000 shares is currently 

$0.0024 per share executed, and will be 

reduced to $0.0016 per share executed 

for Tape A Securities. The rebate for 

non-displayed orders is currently 

$0.0010 per share executed, and will be 

reduced to $0.0005 per share executed 

for Tape A Securities. 

The change is designed to encourage 

greater use of PSX for the purpose of 

trading Tape A Securities. Specifically, 

although PSX has market participants 

that post liquidity in Tape A Securities 

with regularity, Phlx believes that the 

extent to which market participants 

direct liquidity-seeking orders to PSX 

may be limited by its current fees. 

Accordingly, Phlx believes that a 

reduction in the fee to access liquidity 

will encourage more market participants 

to seek available liquidity at PSX. 

Moreover, Phlx further believes that any 

disincentive to post liquidity caused by 

a reduction in the rebates for Tape A 

Securities will be offset by a heightened 

expectation of prompt execution created 

by the reduced fee for liquidityaccessing orders. 

2. Statutory Basis 

Phlx believes that the proposed rule 

change is consistent with the provisions 

of Section 6 of the Act,5 in general, and 

with Sections 6(b)(4) and (5) of the Act,6

in particular, in that it provides for the 

equitable allocation of reasonable dues, 

fees and other charges among members 

and issuers and other persons using any 

facility or system which Phlx operates 

or controls, and is not designed to 

permit unfair discrimination between 

customers, issuers, brokers or dealers. 

All similarly situated members are 

subject to the same fee structure, and 

access to Phlx is offered on fair and nondiscriminatory terms. 

The proposed new fee and rebate 

structure for members that use Phlx to 

trade Tape A Securities is reasonable 

because it will result in a reduction of 

fees for members that access liquidity, 

which in turn will benefit members that 

post liquidity by providing greater 

certainty of execution for their posted 

orders. Phlx believes that this increased 

certainty of execution will continue to 

encourage members to post liquidity at 

PSX, notwithstanding the associated 

reduction in liquidity provider rebates. 

Moreover, because the fee charged to 

access liquidity funds the payment of a 

rebate to liquidity providers, Phlx does 

not believe that it would be reasonable 

to require an exchange that opts to 

reduce access fees to maintain preexisting higher rebates. 

Moreover, the proposed change is 

consistent with an equitable allocation 

of fees because it is designed to promote 

a more active market for Tape A 

Securities on PSX, thereby benefitting 

all members that seek to trade such 

securities through the Exchange. 

Specifically, the change is equitable to 

members that seek to access liquidity 

because it will reduce the fees that they 

pay, and equitable to members that 

provide liquidity because it will 

increase the likelihood of posted orders 

executing. Similarly, to the extent that 

the proposed change is successful in 

encouraging greater use of PSX for 

trading Tape A Securities, it will 

enhance market quality for all market 

participants. Finally, Phlx believes that 

the change is not unfairly 

discriminatory because the price 

reduction offered is available to all 

members that access liquidity in Tape A 

Securities. Similar pricing incentives 

that focus on securities listed on 

particular listing venues are not 


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