Federal Register / Vol. 77, No. 71 / Thursday, April 12, 2012 / Notices 22037 

7 15 U.S.C. 78s(b)(3)(A)(ii). 

8 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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.7 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–2012–43 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–2012–43. 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 No. SR–Phlx–2012– 

43 and should be submitted on or before 

May 3, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.8

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–8780 Filed 4–11–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66755; File No. SR–Phlx– 

2012–42] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Routing Fees 

April 6, 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 March 28, 

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 

certain Customer Routing Fees to recoup 

costs incurred by the Exchange in 

routing to away markets and also create 

a new category of Routing Fees entitled 

‘‘Firm/Broker-Dealer/Market Maker’’ 

fees. 

While changes to the Pricing 

Schedule pursuant to this proposal are 

effective upon filing, the Exchange has 

designated the proposed amendment to 

the ISE Select Symbols Customer 

Routing Fee to be operative on April 2, 

2012. In addition, the Exchange has 

designated the new category ‘‘Firm/ 

Broker-Dealer/Market Maker’’ to be 

operative on the same date that SR– 

Phlx–2012–41 becomes operative. 

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 this filing is to recoup 

costs that the Exchange incurs for 

routing and executing certain Customer 

orders in equity and index options to 

the International Securities Exchange, 

LLC (‘‘ISE’’) and also to recoup costs 

related to a new category of Routing 

Fees entitled ‘‘Firm/Broker-Dealer/ 

Market Maker’’ fees. The Exchange’s 

Pricing Schedule at Section V, currently 

includes the following Routing Fees for 

mstockstill on DSK4VPTVN1PROD with NOTICES

22038 Federal Register / Vol. 77, No. 71 / Thursday, April 12, 2012 / Notices 

3See ISE’s Schedule of Fees for the complete list 

of symbols that are subject to these fees. 

4See ISE’s Schedule of Fees. See also Securities 

Exchange Act Release No. 66597 (March 14, 2012), 

77 FR 16295 (March 20, 2012) (SR–ISE–2012–17). 

5See Securities Exchange Act Release No. 59995 

(May 28, 2009), 74 FR 26750 (June 3, 2009) (SR– 

Phlx–2009–32). 

6See SR–Phlx–2012–41. This proposal refers to 

‘‘PHLX XL’’ as the Exchange’s automated options 

trading system. In May 2009 the Exchange 

enhanced the system and adopted corresponding 

rules referring to the system as ‘‘Phlx XL II.’’ See 

Securities Exchange Act Release No. 59995 (May 

28, 2009), 74 FR 26750 (June 3, 2009) (SR–Phlx– 

2009–32). The Exchange intends to submit a 

separate technical proposed rule change that would 

change all references to the system from ‘‘Phlx XL 

II’’ to ‘‘PHLX XL’’ for branding purposes. 

7The Exchange is therefore increasing the ISE 

Select Symbols Customer Routing Fee to $0.31 per 

contract to account for the $0.20 ISE taker fee, the 

$0.06 clearing cost and another $0.05 per contract 

associated with administrative and technical costs 

associated with operating NOS. 

8SR–Phlx–2012–41 defined the term ‘‘customer’’ 

as a person or entity that is neither a broker-dealer 

nor a direct or indirect affiliate of a broker-dealer. 

The rule filing specifically states that the term 

‘‘customer’’ includes a ‘‘professional’’ as defined in 

Exchange Rule 1000(b)(14). 

9A FIND order is currently defined as an order 

that is routable upon receipt. A FIND order received 

during open trading that is not marketable against 

the PHLX best Bid/Offer ‘‘PBBO’’ or the Away Best 

Bid/Offer (‘‘ABBO’’) will be entered into the limit 

order book at its limit price. The FIND order will 

not be eligible for routing until the next time the 

option series is subject to a new Opening Process. 

See Exchange Rule 1080(m)(iv)(B). 

10A SRCH order is an order that is routable at any 

time. A SRCH order received during open trading 

that is not marketable against the PBBO or the 

ABBO will be entered into the Phlx XLII book. Once 

on the book, the SRCH order is eligible for routing 

if it is locked or crossed by an away market. See 

Exchange Rule 1080(m)(iv)(C). 

11See SR–Phlx–2012–41. 

12Under the proposal, non-customer FIND orders 

would be treated in the same manner as customer 

FIND orders, except that non-customer FIND orders 

would not be eligible for routing during the 

Opening Process. The proposed Routing Fees would 

apply to all orders that are routed to an away 

market and would not apply to orders not eligible 

for routing. 

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

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

routing Customer and Professional 

orders to away markets: 

Exchange Customer Professional 

NYSE AMEX ............................................................................................................................................................ $0.11 $0.31 

BATS ........................................................................................................................................................................ 0.55 0.55 

BOX ......................................................................................................................................................................... 0.11 0.11 

CBOE ....................................................................................................................................................................... 0.11 0.31 

CBOE orders greater than 99 contracts in RUT, RMN, NDX, MNX, ETFs, ETNs and HOLDRs .......................... 0.29 0.31 

C2 ............................................................................................................................................................................ 0.55 0.56 

ISE ........................................................................................................................................................................... 0.11 0.29 

ISE Select Symbols* ................................................................................................................................................ 0.23 0.39 

NYSE ARCA (Penny Pilot) ...................................................................................................................................... 0.55 0.55 

NYSE ARCA (Standard) .......................................................................................................................................... 0.11 0.11 

NOM ......................................................................................................................................................................... 0.54 0.54 

NOM (NDX and MNX) ............................................................................................................................................. 0.56 0.56 

* These fees are applicable to orders routed to ISE that are subject to Rebates and Fees for Adding and Removing Liquidity in Select Symbols. See ISE’s Schedule of Fees for the complete list of symbols that are subject to these fees. 

The Exchange is proposing to amend 

the ‘‘ISE Select Symbols’’ 3 Customer 

Routing Fee from $0.23 per contract to 

$0.31 per contract. ISE recently 

amended its ‘‘taker’’ fee for regular, or 

non-complex, Priority Customer orders 

in the Select Symbols, regardless of size, 

from $0.15 per contract to $0.20 per 

contract.4 In addition to the ISE taker 

fee, the Exchange also incurs other 

routing costs which it seeks to recoup. 

In May 2009, the Exchange adopted 

Rule 1080(m)(iii)(A) to establish Nasdaq 

Options Services LLC (‘‘NOS’’), a 

member of the Exchange, as the 

Exchange’s exclusive order router.5 NOS 

is utilized by the Exchange’s fully 

automated options trading system, 

PHLX XL®,6 solely to route orders in 

options listed and open for trading on 

the PHLX XL system to destination 

markets. Each time NOS routes to away 

markets NOS is charged a $0.06 clearing 

fee and, in the case of certain exchanges, 

a transaction fee is also charged in 

certain symbols, which fees are passed 

through to the Exchange. The Exchange 

currently recoups clearing and 

transaction charges incurred by the 

Exchange as well as certain other costs 

incurred by the Exchange when routing 

to away markets, such as administrative 

and technical costs associated with 

operating NOS, membership fees at 

away markets, and technical costs 

associated with routing.7 While changes 

to the Pricing Schedule pursuant to this 

proposal are effective upon filing, the 

Exchange has designated these changes 

to be operative on April 2, 2012. 

The Exchange is also proposing to 

create a new category of Routing Fees 

entitled ‘‘Firm/Broker-Dealer/Market 

Maker’’ fees. The Exchange recently 

filed a rule change to expand the routing 

capabilities of certain options orders 

that are eligible for electronic routing to 

other market centers by PHLX XL. 

Currently, Rule 1080(m) states that 

PHLX XL will route only Customer 8

FIND 9 and SRCH 10 orders to away 

markets. The rule change seeks to add 

non-customer FIND orders as a new 

category of orders that are eligible for 

routing.11 This amendment to Exchange 

Rule 1080(m) would permit Firm, 

Broker-Dealer and Market Maker orders 

to be eligible for routing to other market 

centers when the Exchange cannot 

execute such orders at the National Best 

Bid or Offer (‘‘NBBO’’).12

Specifically, the Exchange proposes to 

amend Section V of the Pricing 

Schedule to add a new category ‘‘Firm/ 

Broker-Dealer/Market Maker’’ to 

correspond to the non-customer FIND 

orders that would be eligible for Routing 

upon the effectiveness of SR–Phlx– 

2012–41 and its proposed amendments 

to Rule 1080(m). The Exchange 

proposes to assess a fixed Routing Fee 

of $0.55 per contract applicable to all 

away markets. The Exchange has 

designated the new category ‘‘Firm/ 

Broker-Dealer/Market Maker’’ to be 

operative on the same date that SR– 

Phlx–2012–41 becomes operative. 

As with all fees, the Exchange may 

adjust these Routing Fees in response to 

competitive conditions by filing a new 

proposed rule change. 

2. Statutory Basis 

The Exchange believes that its 

proposal to amend its Pricing 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. 

The Exchange believes that the 

proposed ISE Customer Routing Fee for 

Select Symbols is reasonable because it 

seeks to recoup costs that are incurred 

by the Exchange when routing certain 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 71 / Thursday, April 12, 2012 / Notices 22039 

15The NASDAQ Options Market LLC (‘‘NOM’’) 

assesses a fixed Routing Fee to its Firms and Market 

Makers of $0.55 per contract. See Chapter V, 

Section (2) of The NASDAQ Stock Market LLC’s 

Rules. In addition, the Chicago Board Options 

Exchange Incorporated (‘‘CBOE’’) assesses noncustomer orders, including voluntary professionals 

and professionals, routing fees of $0.50 per contract 

in addition to the customary CBOE execution 

charges. See CBOE’s Fees Schedule. 

16A market participant may mark an order 

‘‘DNR’’ for do not route and therefore would not be 

subject to the fees noted herein. See Rules 1066(h) 

and 1080(m). 

17 15 U.S.C. 78s(b)(3)(A)(ii). 18 17 CFR 200.30–3(a)(12). 

Customer orders to ISE on behalf of its 

members. Each destination market’s 

transaction charge varies and there is a 

standard clearing charge for each 

transaction incurred by the Exchange 

along with other administrative and 

technical costs that are incurred by the 

Exchange. The Exchange believes that 

the proposed Routing Fee would enable 

the Exchange to recover the customer 

taker fees assessed by ISE, plus clearing 

and other administrative and technical 

fees for the execution of Customer 

orders routed to ISE. The Exchange also 

believes that the proposed Routing Fee 

is equitable and not unfairly 

discriminatory because it would be 

uniformly applied to all Customer 

orders that are routed to ISE and part of 

ISE’s Select Symbols. 

The Exchange believes that the 

proposed new category of Routing Fee 

‘‘Firm/Broker-Dealer/Market Maker’’ 

and the fixed $0.55 per contract Routing 

Fee are reasonable because other 

options exchanges charge fees for nonCustomer orders such as Firm, BrokerDealer and Market Maker orders and 

these fees are consistently higher than 

fees for Customer orders.15 The pricing 

on the various options exchanges for 

such orders varies significantly from 

exchange to exchange, with much more 

variation than for Customer orders. 

Accordingly, the Exchange is proposing 

a $0.55 per contract side Routing Fee in 

order to capture the majority of the 

transaction and clearing fees for Firm, 

Broker-Dealer and Market Maker orders, 

while making the Exchange’s Routing 

Fees easier to calculate and predict for 

members whose proprietary orders are 

routed away. In addition, fixed Routing 

Fees are easier to comprehend by the 

members whose orders are routed away. 

There is no uncertainty and it is simpler 

for members acting as agent for other 

members to pass-through fees to its 

Customer. Currently, predicting, 

calculating and charging back ‘‘passthrough’’ fees is an unduly burdensome, 

expensive and complicated task for 

Exchange members whose orders are 

routed away. The fixed Routing Fees for 

Firm, Broker-Dealer and Market Maker 

orders should ease the burden, expense 

and complexity of this task. 

Furthermore, fixed fees are easier to 

manage and maintain for the Exchange, 

ensuring accurate billing and 

accounting. The Exchange believes that 

the proposed new category of Routing 

Fee ‘‘Firm/Broker-Dealer/Market 

Maker’’ and the fixed $0.55 per contract 

Routing Fees are equitable and not 

unfairly discriminatory because the 

Exchange would assess all Firm, BrokerDealer and Market Maker orders, 

eligible for routing to any away market, 

the same fee.16

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.17 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–2012–42 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–2012–42. 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 No. SR–Phlx–2012– 

42 and should be submitted on or before 

May 3, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–8779 Filed 4–11–12; 8:45 am] 

BILLING CODE 8011–01–P 

mstockstill on DSK4VPTVN1PROD with NOTICES