Federal Register / Vol. 77, No. 54 / Tuesday, March 20, 2012 / Notices 16283 

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

2 17 CFR 240.19b–4. 

22(c) of the Act by a securities 

association registered under section 15A 

of the Exchange Act or by the 

Commission; and (iv) the acquired 

company has a policy that prohibits it 

from acquiring securities of registered 

open-end investment companies or 

registered unit investment trusts in 

reliance on section 12(d)(1)(F) or (G) of 

the Act. 

3. Rule 12d1–2 under the Act permits 

a registered open-end investment 

company or a registered unit investment 

trust that relies on section 12(d)(1)(G) of 

the Act to acquire, in addition to 

securities issued by another registered 

investment company in the same group 

of investment companies, government 

securities, and short-term paper: (1) 

Securities issued by an investment 

company that is not in the same group 

of investment companies, when the 

acquisition is in reliance on section 

12(d)(1)(A) or 12(d)(1)(F) of the Act; (2) 

securities (other than securities issued 

by an investment company); and (3) 

securities issued by a money market 

fund, when the investment is in reliance 

on rule 12d1–1 under the Act. For the 

purposes of rule 12d1–2, ‘‘securities’’ 

means any security as defined in section 

2(a)(36) of the Act. 

4. Section 6(c) of the Act provides that 

the Commission may exempt any 

person, security, or transaction from any 

provision of the Act, or from any rule 

under the Act, if such exemption is 

necessary or appropriate in the public 

interest and consistent with the 

protection of investors and the purposes 

fairly intended by the policies and 

provisions of the Act. 

5. Applicants state that the Funds of 

Funds will comply with rule 12d1–2 

under the Act, but for the fact that the 

Funds of Funds may invest a portion of 

their assets in Other Investments. 

Applicants request an order under 

section 6(c) of the Act for an exemption 

from rule 12d1–2(a) to allow the Funds 

of Funds to invest in Other Investments 

while investing in Underlying Funds. 

Applicants assert that permitting the 

Funds of Funds to invest in Other 

Investments as described in the 

application would not raise any of the 

concerns that the requirements of 

section 12(d)(1) were designed to 

address. 

Applicants’ Condition: 

Applicants agree that any order 

granting the requested relief will be 

subject to the following condition: 

Applicants will comply with all 

provisions of rule 12d1–2 under the Act, 

except for paragraph (a)(2) to the extent 

that it restricts any Fund of Funds from 

investing in Other Investments as 

described in the application. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–6612 Filed 3–19–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting 

Notice is hereby given, pursuant to 

the provisions of the Government in the 

Sunshine Act, Public Law 94–409, that 

the Securities and Exchange 

Commission will hold a Closed Meeting 

on Thursday, March 22, 2012 at 1 p.m. 

Commissioners, Counsel to the 

Commissioners, the Secretary to the 

Commission, and recording secretaries 

will attend the Closed Meeting. Certain 

staff members who have an interest in 

the matters also may be present. 

The General Counsel of the 

Commission, or his designee, has 

certified that, in his opinion, one or 

more of the exemptions set forth in 5 

U.S.C. 552b(c)(3), (5), (7), 9(B) and (10) 

and 17 CFR 200.402(a)(3), (5), (7), 9(ii) 

and (10), permit consideration of the 

scheduled matters at the Closed 

Meeting. 

Commissioner Gallagher, as duty 

officer, voted to consider the items 

listed for the Closed Meeting in a closed 

session. 

The subject matter of the Closed 

Meeting scheduled for Thursday, March 

22, 2012 will be: 

Institution and settlement of injunctive 

actions; 

Institution and settlement of 

administrative proceedings; and 

Other matters relating to enforcement 

proceedings. 

At times, changes in Commission 

priorities require alterations in the 

scheduling of meeting items. 

For further information and to 

ascertain what, if any, matters have been 

added, deleted or postponed, please 

contact: The Office of the Secretary at 

(202) 551–5400. 

Dated: March 15, 2012. 

Lynn Powalski, 

Deputy Secretary. 

[FR Doc. 2012–6766 Filed 3–16–12; 11:15 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66584; File No. SR–Phlx– 

2012–26] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Equity Options Fees 

March 13, 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 

29, 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 

Section II of the Exchange’s Fee 

Schedule entitled ‘‘Equity Options 

Fees.’’ 

While changes to the Fee Schedule 

pursuant to this proposal are effective 

upon filing, the Exchange has 

designated these changes to be operative 

on March 1, 2012. 

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. 


srobinson on DSK4SPTVN1PROD with NOTICES
16284 Federal Register / Vol. 77, No. 54 / Tuesday, March 20, 2012 / Notices 

3Section II of the Fee Schedule includes options 

overlying equities, ETFs, ETNs, indexes and 

HOLDRs which are Multiply Listed. 

4Non-Penny refers to options classes not in the 

Penny Pilot. The Penny Pilot was established in 

January 2007; and in October 2009, it was expanded 

and extended through June 30, 2012. See Securities 

Exchange Act Release Nos. 55153 (January 23, 

2007), 72 FR 4553 (January 31, 2007) (SR–Phlx– 

2006–74) (notice of filing and approval order 

establishing Penny Pilot); 60873 (October 23, 2009), 

74 FR 56675 (November 2, 2009) (SR–Phlx–2009– 

91) (notice of filing and immediate effectiveness 

expanding and extending Penny Pilot); 60966 

(November 9, 2009), 74 FR 59331 (November 17, 

2009) (SR–Phlx–2009–94) (notice of filing and 

immediate effectiveness adding seventy-five classes 

to Penny Pilot); 61454 (February 1, 2010), 75 FR 

6233 (February 8, 2010) (SR–Phlx–2010–12) (notice 

of filing and immediate effectiveness adding 

seventy-five classes to Penny Pilot); 62028 (May 4, 

2010), 75 FR 25890 (May 10, 2010) (SR–Phlx–2010– 

65) (notice of filing and immediate effectiveness 

adding seventy-five classes to Penny Pilot); 62616 

(July 30, 2010), 75 FR 47664 (August 6, 2010) (SR– 

Phlx–2010–103) (notice of filing and immediate 

effectiveness adding seventy-five classes to Penny 

Pilot); 63395 (November 30, 2010), 75 FR 76062 

(December 7, 2010) (SR–Phlx–2010–167) (notice of 

filing and immediate effectiveness extending the 

Penny Pilot); and 65976 (December 15, 2011), 76 FR 

79247 (December 21, 2011) (SR–Phlx–2011–172) 

(notice of filing and immediate effectiveness 

extending the Penny Pilot). See also Exchange Rule 

1034. 

5The term ‘‘Market Maker’’ is utilized herein to 

describe fees and rebates applicable to Specialists, 

Registered Options Traders, Streaming Quote 

Traders and Remote Streaming Quote Traders. 

6A transaction resulting from an order that was 

electronically delivered utilizes Phlx XL II. See 

Exchange Rules 1014 and 1080. Electronically 

delivered orders do not include orders delivered 

through the Floor Broker Management System. A 

transaction resulting from an order that is nonelectronically-delivered is represented on the 

trading floor by a floor broker. See Exchange Rule 

1063. All orders will be either electronically or nonelectronically delivered. 

7A Complex Order is any order involving the 

simultaneous purchase and/or sale of two or more 

different options series in the same underlying 

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

relative prices of the individual components, for the 

same account, for the purpose of executing a 

particular investment strategy. Furthermore, a 

Complex Order can also be a stock-option order, 

which is an order to buy or sell a stated number 

of units of an underlying stock or ETF coupled with 

the purchase or sale of options contract(s). See 

Exchange Rule 1080, Commentary .08(a)(i). 

8A member may electronically submit for 

execution an order it represents as agent on behalf 

of a public customer, broker-dealer, or any other 

entity (‘‘PIXL Order’’) against principal interest or 

against any other order (except as provided in Rule 

1080(n)(i)(E)) it represents as agent (‘‘Initiating 

Order’’) provided it submits the PIXL order for 

electronic execution into the PIXL Auction 

(‘‘Auction’’) pursuant to Rule 1080. See Exchange 

Rule 1080(n). 

9A QCC Order is comprised of an order to buy 

or sell at least 1,000 contracts that is identified as 

being part of a qualified contingent trade, as that 

term is defined in Rule 1080(o)(3), coupled with a 

contra-side order to buy or sell an equal number of 

contracts. The QCC Order must be executed at a 

price at or between the National Best Bid and Offer 

and be rejected if a Customer order is resting on the 

Exchange book at the same price. A QCC Order 

shall only be submitted electronically from off the 

floor to the PHLX XL II System. See Rule 1080(o). 

See also Securities Exchange Act Release No. 64249 

(April 7, 2011), 76 FR 20773 (April 13, 2011) (SR– 

Phlx–2011–47) (a rule change to establish a QCC 

Order to facilitate the execution of stock/option 

Qualified Contingent Trades (‘‘QCTs’’) that satisfy 

the requirements of the trade through exemption in 

connection with Rule 611(d) of Regulation NMS). 

Floor QCC Orders are not electronically submitted. 

A Floor QCC Order must: (i) be for at least 1,000 

contracts, (ii) meet the six requirements of Rule 

1080(o)(3) which are modeled on the QCT 

Exemption, (iii) be executed at a price at or between 

the National Best Bid and Offer (‘‘NBBO’’); and (iv) 

be rejected if a Customer order is resting on the 

Exchange book at the same price. In order to satisfy 

the 1,000-contract requirement, a Floor QCC Order 

must be for 1,000 contracts and could not be, for 

example, two 500-contract orders or two 500- 

contract legs. See Rule 1064(e). See also Securities 

Exchange Act Release No. 64688 (June 16, 2011), 76 

FR 36606 (June 22, 2011) (SR–Phlx–2011–56). 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend 

Section II 3 of the Exchange’s Fee 

Schedule to: (i) Amend non-Penny 

Pilot 4 option transaction fees for 

electronically-delivered Broker-Dealer 

and Firm orders; (ii) amend rebates paid 

for electronically-delivered Customer 

orders; and (iii) increase Market Maker 5

and Firm fees on certain electronicallydelivered Customer transactions, in 

order to attract additional order flow to 

the Exchange and subsidize the cost of 

offering rebates to increase market 

participation through increased 

liquidity. 

The Exchange currently does not 

distinguish between non-electronically 

and electronically-delivered 6 Firm 

transactions in Section II of the Fee 

Schedule. The Exchange, however, 

currently does categorize its Market 

Maker and Broker-Dealer fees by nonelectronically and electronicallydelivered orders. At this time, the 

Exchange proposes to create separate 

fees for non-electronically versus 

electronically-delivered Firm orders in 

further recognition of the distinction 

between the floor order entry model and 

the electronic model and also in 

response to competition along the same 

lines. The Exchange currently assesses 

the following fees for Firms in Section 

II of the Fee Schedule: 

Firm 

Options Transaction Charge (Penny 

Pilot) .............................................. .25 

Options Transaction Charge (nonPenny Pilot) ................................... .25 

Options Surcharge in RUT, MNX 

and NDX ....................................... .15 

Options Surcharge in BKX ............... .10 

FLEX Options ................................... .10 

Cabinet Options ................................ .10 

The Exchange proposes to assess the 

same fees for non-electronically and 

electronically-delivered Firm orders 

with the exception of the options 

transaction charge for a non-Penny Pilot 

which is electronically-delivered. The 

Exchange proposes to amend the current 

$.25 per contract transaction Firm fee 

for a non-Penny Pilot, electronicallydelivered options order to $.40 per 

contract. Section II of the Fee Schedule 

would be amended to reflect the Firm 

transaction charges as follows: 

% Firm 

Electronic Nonelectronic 

Options Transaction Charge 

(Penny Pilot) .25 .25 

Options Transaction Charge 

(non-Penny 

Pilot) .............. .40 .25 

Options Surcharge in 

RUT, MNX 

and NDX ....... .15 .15 

Options Surcharge in BKX .10 .10 

FLEX Options ... .10 .10 

Cabinet Options .10 .10 

The Exchange also proposes to 

increase the current Broker-Dealer 

electronically-delivered, non-Penny 

Pilot options transaction fee from $0.45 

per contract to $.50 per contract. The 

Exchange believes that increasing both 

the Firm and Broker-Dealer transaction 

charges for electronically-delivered, 

non-Penny Pilot Options will allow the 

Exchange to compete more effectively 

by subsidizing rebates offered on 

electronically-delivered Customer 

orders. 

The Exchange also proposes to amend 

the current rebate applicable to 

Customer Complex Orders 7 that are 

electronically-delivered. The Exchange 

currently pays a rebate of $0.05 per 

contract for Customer Complex Orders 

that are electronically-delivered. The 

Exchange proposes to increase this 

rebate to $0.07 per contract and apply 

the rebate to all Customer orders (simple 

and Complex Orders) that are 

electronically-delivered provided the 

member has an average daily volume of 

50,000 contracts or greater in a given 

month. PIXL Orders 8 and QCC Orders 9

would be ineligible for the rebate and 

excluded from the calculation of the 

50,000 contracts. The Exchange believes 

that this rebate will encourage members 

to transact a greater number of orders 

and attract Customer order flow. 

Finally, the Exchange proposes to 

amend the current fees which are 


srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 54 / Tuesday, March 20, 2012 / Notices 16285 

10Market Makers are currently subject to a 

Monthly Market Maker Cap of $550,000. The 

trading activity of separate Market Maker member 

organizations is aggregated in calculating the 

Monthly Market Maker Cap if there is at least 75% 

common ownership between the member 

organizations. 

11Firms are subject to a maximum fee of $75,000 

(‘‘Monthly Firm Fee Cap’’). Firm equity option 

transaction fees and QCC Transaction Fees in the 

aggregate, for one billing month, may not exceed the 

Monthly Firm Fee Cap per member organization 

when such members are trading in their own 

proprietary account. All dividend, merger, short 

stock interest and reversal and conversion strategy 

executions are excluded from the Monthly Firm Fee 

Cap. The Firm equity options transaction fees are 

waived for members executing facilitation orders 

pursuant to Exchange Rule 1064 when such 

members are trading in their own proprietary 

account. QCC Transaction Fees are included in the 

calculation of the Monthly Firm Fee Cap. 

12QCC Orders are assessed a $0.07 Service Fee 

today, which applies to every contract side of the 

QCC Order and Floor QCC Order once a Firm or 

Market Maker has reached the Monthly Firm Fee 

Cap or Monthly Market Maker Cap, respectively. 

13 15 U.S.C. 78f(b). 

14 15 U.S.C. 78f(b)(4). 

15See NYSE Arca’s Fee Schedule. 

16Section I of the Fee Schedule, entitled ‘‘Rebates 

and Fees for Adding and Removing Liquidity in 

Select Symbols,’’ applies to Select Symbols which 

are electronically traded. These Select Symbols are 

defined in Section I and are Multiply Listed, similar 

to the options in Section II of the Fee Schedule. 

17See Section I of the Exchange’s Fee Schedule. 

18Market Makers are assessed a fee of $0.23 per 

contract for electronically-delivered, non-Penny 

Pilot Options. 

19See Exchange Rule 1014 titled ‘‘Obligations 

and Restrictions Applicable to Specialists and 

Registered Options Traders.’’ 

20Today the rebate of $0.05 per contract is paid 

for a Customer Complex Order that is 

electronically-delivered. 

21NOM currently has a tiered rebate with certain 

volume criteria for Customer orders in Penny Pilot 

Options. See Chapter XV, Section 2 entitled 

‘‘NASDAQ Options Market—Fees.’’ 

assessed on Market Makers and Firms 

that are on the contra-side of an 

electronically-delivered and executed 

Customer Complex Order. Currently, the 

Exchange assesses Market Makers that 

(i) are on the contra-side of an 

electronically-delivered and executed 

Customer Complex Order; and (ii) have 

reached the Monthly Market Maker 

Cap,10 a $0.05 per contract fee. The 

Exchange is proposing to increase the 

fee assessed to Market Makers from 

$0.05 to $0.07 per contract and assess 

the fee on orders that (i) are on the 

contra-side of an electronicallydelivered and executed Customer order; 

and (ii) have reached the Monthly 

Market Maker Cap, excluding PIXL 

Orders. The increased fee would 

therefore apply to all Customer orders 

(both simple and Complex Orders). The 

Exchange is proposing the same 

amendment to the Monthly Firm Fee 

Cap.11 Currently, the Exchange assesses 

Firms that (i) are on the contra-side of 

an electronically-delivered and 

executed Customer Complex Order; and 

(ii) have reached the Monthly Firm Fee 

Cap, a $0.05 per contract fee. The 

Exchange likewise proposes to assess 

Firms that (i) are on the contra-side of 

an electronically-delivered and 

executed Customer order (both simple 

and Complex Orders); and (ii) have 

reached the Monthly Firm Fee Cap, an 

increased fee of $0.07 per contract, 

excluding PIXL Orders.12 The Exchange 

believes that these increased fees 

assessed on Market Makers and Firms 

will allow the Exchange to continue to 

subsidize the rebates it offers to attract 

greater liquidity and Customer order 

flow to the Exchange. 

2. Statutory Basis 

The Exchange believes that its 

proposal to amend its Fee Schedule is 

consistent with Section 6(b) of the Act 13

in general, and furthers the objectives of 

Section 6(b)(4) of the Act 14 in 

particular, in that it is an equitable 

allocation of reasonable fees and other 

charges among Exchange members and 

other persons using its facilities. The 

Exchange also believes that it is an 

equitable allocation of reasonable 

rebates among Exchange members and 

other persons using its facilities. 

The Exchange believes that its 

proposal to amend both the Firm and 

Broker-Dealer transaction charges for 

electronically-delivered, non-Penny 

Pilot Options is reasonable because 

these fees are within the range of fees 

assessed by other Exchanges. NYSE 

Arca, Inc. (‘‘NYSE Arca’’) assesses Firms 

and Broker-Dealers a $0.50 per contract 

fee for electronic orders.15 The 

Exchange also proposes to assess Firms 

and Broker-Dealers these transaction 

fees in order to subsidize the rebates the 

Exchange pays members to incentivize 

liquidity. 

The Exchange believes that its 

proposal to assess Firms and BrokerDealers increased transaction fees for 

electronically-delivered, non-Penny 

Pilot Options is equitable and not 

unfairly discriminatory because the fees 

proposed for Firms and Broker-Dealers 

are within the range of fees assessed by 

the Exchange in Section I of the Fee 

Schedule.16 Firms and Broker Dealers 

are assessed a $0.45 per contract Fee for 

Removing Liquidity when transacting a 

Single contra-side order in a Select 

Symbol.17 In addition, these fees would 

be assessed uniformly to all Firms and 

Broker-Dealers. The Exchange also 

believes that it is equitable and not 

unfairly discriminatory to assess Market 

Makers transacting electronicallydelivered, non-Penny Pilot Options a 

lower fee 18 as compared to Firms and 

Broker-Dealers because Market Makers 

have burdensome quoting obligations 19

to the market which do not apply to 

Firms and Broker-Dealers. Customers 

are not assessed a fee for transacting 

non-Penny Pilot Options. The Exchange 

believes that not assessing Customers a 

fee for electronically-delivered, nonPenny Pilot Options benefits all market 

participants, because of the increased 

liquidity such Customer order flow 

brings to the Exchange. Also, 

Professionals continue to be assessed a 

higher fee as compared to Customers in 

non-Penny Pilot Options. This fee is the 

same rate ($0.20 per contract) as the 

Professional fee for Penny Pilot Options. 

The Exchange believes that its 

proposal to increase the current rebate 

paid for Customer Complex Orders from 

$0.05 to $0.07 per contract is reasonable 

because the Exchange is also expanding 

the rebate to apply to all Customer 

orders (both simple and Complex 

Orders), which are electronicallydelivered.20 The Exchange’s proposal 

also limits the rebate to a member who 

has an average daily volume of 50,000 

contracts or greater in a given month. 

The Exchange believes that this 

proposed rebate is reasonable because it 

seeks to incentivize members to transact 

a greater number of Customer orders, 

which in turn benefits all market 

participants because of the increased 

liquidity such orders bring to the 

market. Similar to current fees on the 

NASDAQ Options Market LLC 

(‘‘NOM’’), the Exchange is proposing to 

offer a rebate based on a certain volume 

criteria.21 In particular, the Exchange 

believes the 50,000 contracts volume 

threshold is reasonable because the 

requirement to transact an average daily 

volume of at least 50,000 contracts or 

greater in a given month, should 

incentivize members to transact a 

greater number of orders on the 

Exchange to obtain the benefit of the 

rebate. The Exchange believes that the 

volume threshold should incentivize 

members to increase liquidity at the 

Exchange, thereby benefitting all market 

participants. Similar to this proposal, 

the Chicago Board Options Exchange 

Incorporated (‘‘CBOE’’) offers a volume 

incentive program. CBOE credits each 

Trading Permit Holder (‘‘TPH’’) a 

certain per contract amount based on 

the volume of customer contracts the 

TPH executes electronically at CBOE in 

multiply-listed option classes 

(excluding qualified contingent cross 


srobinson on DSK4SPTVN1PROD with NOTICES
16286 Federal Register / Vol. 77, No. 54 / Tuesday, March 20, 2012 / Notices 

22See CBOE’s Fees Schedule. CBOE offers a per 

contract credit ranging from $.00 to $.20 per 

contract based on a certain volume threshold which 

ranges from 0 to 375,001 plus customer contracts 

per day. 23See Sections II and IV(A) of the Exchange’s Fee 

Schedule. A PIXL Order will receive the rebate for 

adding liquidity when executed against contra-side 

order(s) that respond to the PIXL auction broadcast 

message as well as when executed against contraside quotes and unrelated orders on the PHLX book 

that arrived after the PIXL auction was initiated. 

A rebate of $0.07 per contract is paid for all 

qualifying executed QCC Orders up to 1,000,000 

contracts in a month, as defined in Exchange Rule 

1080(o) and Floor QCC Orders, as defined in 

1064(e), except where the transaction is either: (i) 

Customer-to-Customer; or (ii) a dividend, merger or 

short stock interest strategy and executions subject 

to the Reversal and Conversion Cap (as defined in 

Section II). If a member exceeds 1,000,000 contracts 

in a month of qualifying executed QCC Orders, a 

$0.10 rebate will be paid on all qualifying executed 

QCC Orders, as defined in Exchange Rule 1080(o), 

and Floor QCC Orders, as defined in 1064(e), in that 

month. 

24See Section IV (A) of the Exchange’s Fee 

Schedule. 

25See Section II of the Exchange’s Fee Schedule. 26 15 U.S.C. 78s(b)(3)(A)(ii). 

trades).22 The Exchange’s proposal to 

exclude PIXL and QCC Orders from the 

rebate and volume threshold calculation 

is reasonable, equitable and not unfairly 

discriminatory because PIXL and QCC 

Orders have the opportunity to receive 

rebates today,23 and the Exchange is 

paying the rebate uniformly to its 

members. 

The Exchange believes that its 

proposal to offer a rebate of $0.07 per 

contract for Customer orders that are 

electronically-delivered, provided a 

member has an average daily volume of 

50,000 contracts or greater in a given 

month, is equitable and not unfairly 

discriminatory because the Exchange is 

seeking to further incentivize members 

to send additional Customer order flow 

to the Exchange. Once the volume 

threshold is met, the Exchange would 

pay a $0.07 per contract rebate, on all 

applicable Customer orders, uniformly 

to members. The Exchange believes that 

by expanding the rebate to apply to all 

Customer orders, and not just Complex 

Orders, and also offering a higher rebate, 

provides members with an added 

incentive to successfully take advantage 

of the rebate by executing a greater 

number of orders at the Exchange to the 

benefit of all participants. In addition, 

the Exchange believes that its proposal 

to require members to transact an 

average daily volume of 50,000 

contracts or greater in a given month to 

obtain the rebate is equitable and not 

unfairly discriminatory because the 

volume threshold should incentivize 

members to bring greater liquidity to the 

Exchange, thereby benefitting all market 

participants. 

The Exchange believes that the 

proposed Firm and Market Maker fees of 

$0.07 per contract, when a Firm or 

Market Maker is on the contra-side of an 

electronically-delivered and executed 

Customer order and has reached the 

respective Monthly Firm Fee Cap or 

Monthly Market Maker Cap, are 

reasonable because the fees would 

continue to defray the cost of paying 

Customer rebates, which are offered in 

certain circumstances. Specifically, the 

Exchange’s proposal to increase the fees 

applicable to Firms and Market Makers 

from $0.05 to $0.07 per contract and 

expand the applicable orders to all 

Customer orders, and not just Complex 

Orders, is reasonable because the 

Exchange desires to subsidize its 

proposal to increase the rebate on 

Customer orders from $0.05 to $0.07 per 

contract and apply the rebate to all 

Customer orders, provided a volume 

threshold is met. The Exchange believes 

that it is reasonable, equitable and not 

unfairly discriminatory to exclude PIXL 

Orders because those orders have their 

own fees and rebates and the Exchange 

does not believe that additional rebates 

are required with respect to PIXL 

Orders.24 In addition, QCC Orders today 

pay a Service Fee of $0.07 per side in 

certain circumstances.25 Also, the 

Exchange would uniformly assess the 

proposed fees on its members. 

The Exchange believes that its 

proposal to assess increased fees of 

$0.07 per contract on Market Makers 

and Firms that have reached the 

respective cap and are on the contraside of a Customer order is equitable 

and not unfairly discriminatory because 

the fees would only be assessed once 

the applicable cap is reached and would 

uniformly apply to all Market Makers 

and Firms that have reached the 

respective cap. Both Market Makers and 

Firms benefit from the liquidity which 

the proposed $0.07 per contract rebate 

on Customer orders brings to the 

Exchange, which rebate the proposed 

fees subsidize. In addition, the proposed 

fees would apply only in certain 

circumstances where the Market Maker 

or Firm is not otherwise subject to 

transaction fees (because the applicable 

cap has been reached) and specifically 

on the contra-side of a Customer order, 

which is electronically-delivered. 

The Exchange operates in a highly 

competitive market in which market 

participants can readily direct order 

flow to competing venues if they deem 

fee levels at a particular venue to be 

excessive. The Exchange believes that 

the fees it charges and rebates it pays 

must remain competitive with fees and 

rebates charged/paid by other venues 

and therefore continue to be reasonable 

and equitably allocated to those 

members that opt to direct orders to the 

Exchange rather than competing venues. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act.26 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 

No. SR–Phlx–2012–26 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 No. 

SR–Phlx–2012–26. This file number 

should be included on the subject line 

if email is used. To help the 

Commission process and review your 


srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 54 / Tuesday, March 20, 2012 / Notices 16287 

27 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Exchange Act Release No. 53522 (March 20, 

2006), 71 FR 14975 (March 24, 2006) (SR–ISE– 

2006–09). 

4 Id. 

5See Exchange Act Release No. 64269 (April 8, 

2011), 76 FR 20752 (April 13, 2011) (SR–ISE–2011– 

21). 

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 No. SR–Phlx–2012– 

26 and should be submitted on or before 

April 10, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.27

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–6582 Filed 3–19–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66590; File No. SR–ISE– 

2012–12] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change Relating to API Fees 

March 14, 2012. 

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

Securities Exchange Act of 1934 (the 

‘‘Exchange Act’’) 1 and Rule 19b–4 

thereunder,2 notice is hereby given that 

on February 29, 2012, the International 

Securities Exchange, LLC (the 

‘‘Exchange’’ or the ‘‘ISE’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. 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 ISE is proposing to amend its API 

or login fees. The text of the proposed 

rule change is available on the 

Exchange’s Web site (http:// 

www.ise.com), 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 

self-regulatory organization 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 self-regulatory organization 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 ISE is proposing to amend its 

Schedule of Fees regarding the 

Exchange’s API or login fees. ISE 

currently charges its Members a fee for 

each login that a Member uses for 

quoting or order entry, with a lesser 

charge for logins used for the limited 

purpose of ‘‘listening’’ to broadcast 

messages.3 The Exchange currently has 

the following categories of authorized 

logins: (1) Quoting, order entry and 

listening (allowing the user to enter 

quotes, orders, and perform all other 

miscellaneous functions, such as setting 

parameters and pulling quotes); (2) 

order entry and listening (allowing the 

user to enter orders and perform all 

other miscellaneous functions, such as 

setting parameters and pulling quotes 

(but not quoting)); and (3) listening 

(allowing the user only to query the 

system and to respond to broadcast 

messages).4 The Exchange notes that 

quoting, order entry and listening are 

functionalities available only to 

Exchange Market Makers, i.e., Primary 

Market Makers and Competitive Market 

Makers, while only order entry and 

listening are functionalities available to 

non-Market Makers, i.e., Electronic 

Access Members. 

ISE Market Makers currently receive 

an allocation of 1.8 million quotes per 

day per user.5 If a Market Maker submits 

more quotes than those allocated, i.e., 

1.8 million quotes per day per user as 

measured on average in a single month, 

the Market Maker is charged for 

additional users depending upon the 

number of quotes submitted. Each 

month, the total number of quotes 

submitted by a Market Maker is divided 

by the number of trading days, resulting 

in the average quotes per day entered by 

that Market Maker. This number is then 

divided by 1.8 million and rounded up 

to the nearest whole number, resulting 

in an implied number of users based on 

quotes. Market Makers are charged on a 

monthly basis for the greater of a) the 

greatest number of users that logged into 

the system, or b) the number of implied 

users based on quotes. 

ISE currently charges Market Makers 

a standardized fee of $1,000 per month 

for each quoting session of up to 1.8 

million quotes per day, on average for 

a month, including for any incremental 

usage. For example, a Market Maker 

with 10 logins currently pays $10,000 in 

fees as long as it quotes on average 18 

million quotes or less per day. If that 

Market Maker instead sends an average 

of 20 million quotes per day during a 

month, its fees would total $12,000 for 

a total of 12 sessions, with the extra 2 

million quotes per day counting towards 

two additional sessions. 

The Exchange now proposes to lower 

the quote allowance for each login 

session from 1.8 million quotes per day 

to 1.5 million quotes per day, including 

the quote allowance for each 

incremental login. The Exchange is not 

proposing any changes to the fee 

charged for each login session. The fee 

for each login session will remain at 

$1,000 per month. With this proposed 

rule change, ISE expects to raise 

revenue to offset the lower quoting 

volume at the Exchange. 

The Exchange has designated this 

proposal to be operative on March 1, 

2012. 

2. Statutory Basis 

The Exchange believes that its 

proposal to amend its Schedule of Fees 

is consistent with Section 6(b) of the 


srobinson on DSK4SPTVN1PROD with NOTICES