23528 Federal Register / Vol. 77, No. 76 / Thursday, April 19, 2012 / Notices 

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

2 17 CFR 240.19b–4 . 

3Section II of the Pricing Schedule includes 

options overlying equities, ETFs, ETNs, indexes and 

HOLDRs which are Multiply Listed. 

4The term ‘‘Professional’’ means any person or 

entity that (i) is not a broker or dealer in securities, 

and (ii) places more than 390 orders in listed 

options per day on average during a calendar month 

for its own beneficial account(s). See Rule 

1000(b)(14). 

5The 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. 

6Non-Penny Pilot refers to options classes not in 

the Penny Pilot. 

7The costs are associated with network 

infrastructure, database and latency enhancements 

and regulatory systems. 

8Currently, the Exchange pays a rebate of $0.07 

per contract to members that execute an 

electronically-delivered Customer order and 

transact an average daily volume of 50,000 

Customer contracts or greater in a given month. 

9 15 U.S.C. 78f(b). 

10 15 U.S.C. 78f(b)(4). 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66805; File No. SR–Phlx2012–46] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Equity Option Fees 

April 13, 2012. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that, on April 2, 

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 Options Transaction Charges in 

Section II 3 of the Exchange’s Pricing 

Schedule entitled ‘‘Equity Options 

Fees’’ and also offer a rebate on certain 

Customer orders. 

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 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend 

Section II of the Exchange’s Pricing 

Schedule to: (1) Increase the 

Professional 4 Options Transaction 

Charges for both Penny Pilot options 5

and non-Penny Pilot options 6; and (ii) 

amend the non-Penny Pilot BrokerDealer electronic Options Transaction 

Charge in order to recoup costs 

associated with supporting a larger 

number of options classes, option series 

and overall transaction volume each of 

which has become larger in the past few 

years.7 The Exchange also believes that 

increasing the Broker-Dealer electronic 

Options Transaction Charge in nonPenny Pilot options will allow the 

Exchange to compete more effectively 

by subsidizing Customer rebates. In 

addition, the Exchange proposes to offer 

an additional rebate on certain 

Customer orders to attract additional 

Customer order flow. 

Specifically, the Exchange proposes to 

increase the Professional Options 

Transaction Charges for both Penny 

Pilot options and non-Penny Pilot 

options from $.20 per contract to $.25 

per contract. The Exchange also 

proposes increasing the Broker-Dealer 

Options Transaction Charge in nonPenny Pilot options from $.50 per 

contract to $.60 per contract. 

The Exchange also proposes to amend 

Section II of the Pricing Schedule to 

further incentivize members to transact 

Customer orders by offering an 

increased rebate of $0.03 per contract on 

all electronically-delivered Customer 

orders that: (i) Qualified for the current 

$0.07 Customer rebate; 8 and (ii) added 

liquidity in a non-Penny Pilot option. 

The Exchange also proposes to modify 

the current language in the Pricing 

Schedule pertaining to the $0.07 

Customer order rebate to make clear that 

the additional $0.03 Customer rebate 

must first qualify for the $0.07 rebate to 

be eligible for the additional rebate. The 

Exchange also proposes to amend 

certain existing text related to the 

current $0.07 per contract rebate to 

further clarify the text. 

2. Statutory Basis 

The Exchange believes that its 

proposal to amend its Pricing Schedule 

is consistent with Section 6(b) of the 

Act 9 in general, and furthers the 

objectives of Section 6(b)(4) of the Act 10

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’s proposal to increase 

the Professional Options Transaction 

Charges in both Penny Pilot and nonPenny Pilot options as well as increase 

the non-Penny Pilot Broker-Dealer 

electronic Options Transaction Charge 

is reasonable because of the greater costs 

incurred by the Exchange associated 

with supporting a larger number of 

options classes, option series and 

overall transaction volume. The 

Exchange believes increasing the 

Professional Options Transaction 

Charges in both Penny Pilot and nonPenny Pilot options from $.20 per 

contract to $.25 per contract is 

reasonable because the $.05 per contract 

increase would allow the Exchange to 

recoup the aforementioned costs while 

also continuing to assess a Professional 

a rate that is equal to or lower than a 

Broker-Dealer and Firm. Also, the 

increased Professional fees are 

comparable with fees at other options 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 76 / Thursday, April 19, 2012 / Notices 23529 

11See SR–CBOE–2012–032, a rule change 

recently filed by The Chicago Board Options 

Exchange, Incorporated (‘‘CBOE’’) to increase both 

the voluntary professional and professional 

transaction fees for equity options and index, ETF, 

ETN and HOLDRs options, excluding OEX, XEO, 

SPXW and Volatility Indexes, from $0.20 to $0.25 

per contract. See also NYSE AMEX LLC’s Fee 

Schedule, which assesses professional customers a 

$0.25 per contract fee for manual executions and a 

$0.23 per contract fee for electronic executions. 

12Broker-Dealers are assessed a Penny Pilot 

Options Transaction Charge of $.45 per contract for 

electronic orders and a Penny Pilot Options 

Transaction Charge of $.25 for non-electronic 

orders. Broker-Dealers would be assessed a 

proposed non-Penny Pilot Options Transaction 

Charge of $.60 for electronic orders and are 

currently assessed a non-Penny Pilot Options 

Transaction Charge of $.25 for non-electronic 

orders. 

13Firms are assessed a Penny Pilot Options 

Transaction Charge of $.25 per contract for 

electronic orders and a Penny Pilot Options 

Transaction Charge of $.25 for non-electronic 

orders. Firms are assessed a non-Penny Pilot 

Options Transaction Charge of $.40 for electronic 

orders and a non-Penny Pilot Options Transaction 

Charge of $.25 for non-electronic orders. 

14A ‘‘Market Maker’’ includes Specialists (see 

Rule 1020) and Registered Options Traders 

(‘‘ROTs’’) (Rule 1014(b)(i) and (ii), which includes 

Streaming Quote Traders (‘‘SQTs’’) (see Rule 

1014(b)(ii)(A)) and Remote Streaming Quote 

Traders (‘‘RSQTs’’) (see Rule 1014(b)(ii)(B)). 

Directed Participants are also Market Makers. 

15Market Makers are assessed a Penny Pilot 

Options Transaction Charge of $.22 per contract for 

electronic orders and a Penny Pilot Options 

Transaction Charge of $.25 for non-electronic 

orders. Market Makers are assessed a non-Penny 

Pilot Options Transaction Charge of $.23 for 

electronic orders and a non-Penny Pilot Options 

Transaction Charge of $.25 for non-electronic 

orders. 

16See Exchange Rule 1014 entitled ‘‘Obligations 

and Restrictions Applicable to Specialists and 

Registered Options Traders.’’ 

17By increasing the Professional Options 

Transaction Charges in both Penny Pilot and nonPenny Pilot options to $.25 per contract would 

cause the rates assessed Professionals to be uniform 

to the rates assessed Broker-Dealers for nonelectronic transactions in Penny Pilot options and 

non-electronic transactions in non-Penny Pilot 

options as well as rates assessed Firms for 

electronic and non-electronic transactions in Penny 

Pilot options and non-electronic transactions in 

non-Penny Pilot options. 

18By increasing the Professional Options 

Transaction Charges in both Penny Pilot and nonPenny Pilot options to $.25 per contract would 

cause the rates assessed Professionals to be lower 

than the rates assessed Broker-Dealers for electronic 

transactions in Penny Pilot options and electronic 

transactions in non-Penny Pilot options (assuming 

the proposed new rate of $.60 per contract) and the 

rate assessed Firms for electronic transactions in 

non-Penny Pilot options. 

19See note 16. 

20Payment for Order Flow Fees are $.25 per 

contract for options that are trading in the Penny 

Pilot Program and $.70 per contract for other equity 

options. See Section II of the Pricing Schedule. 

21Payment for Order Flow Fees are assessed on 

transactions resulting from Customer orders and are 

available to be disbursed by the Exchange according 

to the instructions of the Specialist units/Specialists 

or Directed ROTs to order flow providers who are 

members or member organizations, who submit, as 

agent, customer orders to the Exchange or nonmembers or non-member organizations who submit, 

as agent, Customer orders to the Exchange through 

a member or member organization who is acting as 

agent for those Customer orders. Specialists and 

Directed ROTs who participate in the Exchange’s 

payment for order flow program are assessed a 

Payment for Order Flow Fee, in addition to ROTs. 

Therefore, the Payment for Order Flow Fee is 

assessed, in effect, on equity option transactions 

between a Customer and an ROT, a Customer and 

a Directed ROT, or a Customer and a Specialist. A 

ROT is defined in Exchange Rule 1014(b) as a 

regular member of the Exchange located on the 

trading floor who has received permission from the 

Exchange to trade in options for his own account. 

A ROT includes a SQT, a RSQT and a Non-SQT, 

which by definition is neither a SQT or a RSQT. 

See Exchange Rule 1014(b)(i) and (ii). 

22 In terms of effective rates, a Market Maker 

transacting a Penny Pilot option contra a Customer 

would effectively pay on average $.0586 per 

contract and a Market Maker transacting a nonPenny Pilot option contra a Customer would 

effectively pay on average $0.684 per contract. 

These effective rates apply to the fees contained in 

Section II of the Pricing Schedule. Section I of the 

Pricing Schedule entitled ‘‘Rebates and Fees for 

Adding and Removing Liquidity in Select Symbols’’ 

only applies to the Select Symbols listed in Section 

I. 

23Section II of the Pricing Schedule contains 

electronic vs. non-electronic Options Transaction 

Charges only for Market Makers, Broker-Dealers and 

Firms. 

exchanges.11 The Exchange believes 

increasing the Broker-Dealer electronic 

non-Penny Options Transactions Charge 

from $.50 per contract to $.60 per 

contract is reasonable because the $.10 

per contract increase would allow the 

Exchange to recoup the aforementioned 

costs while also subsidizing increased 

rebates for certain electronicallydelivered Customer orders. An 

increased Broker-Dealer electronic nonPenny Pilot Options Transaction Charge 

allows the Exchange to compete more 

effectively by subsidizing rebates 

offered on electronically-delivered 

Customer orders, such as the rebate 

proposed herein. 

The Exchange’s proposal to increase 

the Professional Options Transaction 

Charges in both Penny Pilot and nonPenny Pilot options is equitable and not 

unfairly discriminatory because 

Professionals would continue to be 

assessed the same or lower fees as 

compared to Broker-Dealers 12 and 

Firms.13 Market Makers 14 would be 

assessed the same or lower fees as 

compared to Professionals,15 because 

Market Makers have burdensome 

quoting obligations 16 to the market 

which do not apply to Professionals, 

Customers, Firms and Broker-Dealers. 

Customers are not assessed Options 

Transactions Charges in either Penny 

Pilot or non-Penny Pilot options 

because Customer order flow brings 

liquidity to the market, which in turn 

benefits all market participants. BrokerDealers and Firms today pay higher fees 

as compared to a Professional. The 

increased Professional Options 

Transaction Charges in both Penny Pilot 

and non-Penny Pilot options would in 

some cases equalize the fees paid by 

Professionals, Broker-Dealer and 

Firms 17 and make them uniform and in 

other cases the Broker-Dealer and Firms 

would continue to pay higher fees as is 

the case today.18

The Exchange’s proposal to increase 

the non-Penny Pilot Broker Dealer 

electronic Options Transaction Charge 

is equitable and not unfairly 

discriminatory because, currently, 

Broker-Dealers are assessed higher fees 

as compared to Customers, 

Professionals, Market Makers and Firms. 

Customers are not assessed Options 

Transaction Charges because Customer 

order flow brings liquidity to the 

market, which, in turn, benefits all 

market participants. Market Makers are 

assessed lower Options Transaction 

Charges as compared to other market 

participants, except Customers, because 

they have burdensome quoting 

obligations 19 to the market which do 

not apply to Customers, Professionals, 

Firms and Broker-Dealers. In addition, 

Market Makers are subject to Payment 

for Order Flow Fees 20 whereas 

Professionals, Firms and Broker-Dealers 

are not subject to such fees.21 For 

example, a Market Maker electronically 

transacting a Penny Pilot option contra 

a Customer order would pay $.47 per 

contract and a Market Maker 

electronically transacting a non-Penny 

Pilot option contra a Customer order 

would pay $.92 [sic] per contract.22

With respect to Professionals, they have 

access to more information and 

technological advantages as compared 

to Customers and Professionals do not 

bear the obligations of Market Makers. 

Also, Professionals engage in trading 

activity similar to that conducted by 

Market Makers. For example, 

Professionals continue to join bids and 

offers on the Exchange and thus 

compete for incoming order flow. For 

these reasons, the Exchange believes 

that Professionals may be priced higher 

than a Customer and may be priced 

equal to or higher than a Market Maker. 

Professionals are currently assessed a 

$.20 per contract Options Transaction 

Charge in non-Penny Pilot options, 

which the Exchange is proposing to 

increase to $.25 per contract, as 

compared to a Broker-Dealer that is 

currently assessed an electronic Options 

Transaction Charge of $.50 per contract 

for non-Penny Pilot options.23 The 

Exchange believes that increasing the 

Broker-Dealer electronic non-Penny 

Pilot Options Transaction Charge to $.60 

mstockstill on DSK4VPTVN1PROD with NOTICES

23530 Federal Register / Vol. 77, No. 76 / Thursday, April 19, 2012 / Notices 

24CBOE currently assesses a professional an 

equity options fee of $.20 [sic] per contract and a 

Broker-Dealer electronic order an equity options fee 

of $.45 per contract. See CBOE’s Fees Schedule. 

25CBOE currently assesses a Clearing Trading 

Permit Holder Proprietary an equity options fee of 

$.20 per contract and a Broker-Dealer electronic 

order an equity options fee of $.45 per contract. See 

CBOE’s Fees Schedule. Similarly, the International 

Securities Exchange, LLC (‘‘ISE’’) assesses a Firm 

Proprietary execution fee of $.20 per contract/side 

and a Non-ISE Market Maker a fee of $.45 per 

contract side. 

26Currently, a Firm transacting an electronic 

Penny Pilot options order pays $.25 per contract 

while a Broker-Dealer transacting an electronic 

Penny Pilot options order pays $.45 per contract. 

27NOM 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.’’ 

28See 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. 

29See Sections II and IV(A) of the Exchange’s 

Pricing 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 contra-side quotes and unrelated 

orders on the PHLX book that arrived after the PIXL 

auction was initiated. 30 15 U.S.C. 78s(b)(3)(A)(ii). 

per contract for options does not 

misalign the current rate differentials 

between a Broker-Dealer and a 

Professional because the differential is 

only increasing by $.05 per contract and 

is comparable to differentials at other 

options exchanges.24 Firms are 

currently assessed different Options 

Transaction Charges as compared to 

Broker-Dealers. Firms are assessed an 

electronic Options Transaction Charge 

of $.40 per contract in non-Penny Pilot 

options as compared to the current 

Broker-Dealer electronic Options 

Transaction Charge of $.50 per contract 

in non-Penny Pilot options. The 

proposed rate differential as between a 

Firm and Broker-Dealer of $.20 per 

contract, as proposed herein, is lower 

than differentials at other options 

exchanges for such market 

participants.25 The proposed rate 

differential as between a Firm and 

Broker-Dealer of $.20 per contract in 

electronic non-Penny Pilot options 

would be equivalent to the current rate 

differential between a Firm and BrokerDealer of $.20 per contract in electronic 

Penny Pilot options.26 In addition, the 

Exchange believes that it is equitable 

and not unfairly discriminatory to 

increase the Broker-Dealer electronic 

non-Penny Pilot Options Transaction 

Charge to $.60 per contract to subsidize 

Customer rebates because attracting 

Customer order flow to the Exchange 

will benefit all market participants. 

The Exchange believes that offering 

an increased rebate of $0.03 per contract 

on all Customer orders that qualified for 

the current $0.07 Customer order rebate 

and also add liquidity in a non-Penny 

Pilot option is reasonable because the 

Exchange is seeking to further 

incentivize market participants to 

transact a greater number of Customer 

orders in non-Penny Pilot options, 

which order flow should benefit all 

market participants because of the 

increased liquidity such orders bring to 

the market. 

The Exchange believes that offering 

an increased rebate of $0.03 per contract 

on all Customer orders that qualified for 

the current $0.07 Customer order rebate 

and also add liquidity in a non-Penny 

Pilot option is equitable and not 

unfairly discriminatory because all 

market participants are eligible to 

receive the additional rebate once they 

meet the volume threshold for Customer 

Orders. All market participants would 

be uniformly paid the additional $0.03 

per contract rebate on qualifying 

Customer orders as long as those orders 

add liquidity in a non-Penny Pilot 

option. The Exchange believes that 

requiring members to transact an 

average daily volume of 50,000 

Customer contracts or greater in a given 

month to obtain the rebate is reasonable, 

equitable and not unfairly 

discriminatory because the volume 

threshold should incentivize members 

to bring greater liquidity to the 

Exchange, thereby benefitting all market 

participants. 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.27 Similar to this proposal, the 

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 multiplylisted option classes (excluding 

qualified contingent cross trades).28 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,29 and the Exchange pays 

the rebate uniformly to its members. 

The Exchange operates in a highly 

competitive market, comprised of nine 

exchanges, in which market participants 

can easily and readily direct order flow 

to competing venues if they deem fee 

and rebate levels at a particular venue 

to be excessive. Accordingly, the fees 

that are assessed and the rebates paid by 

the Exchange must remain competitive 

with fees charged and rebates paid by 

other venues and therefore must 

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.30 At any time 

within 60 days of the filing of the 

proposed rule change, the Commission 

summarily may temporarily suspend 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. If the Commission 

takes such action, the Commission shall 

institute proceedings to determine 

whether the proposed rule should be 

approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rulecomments@sec.gov. Please include File 

Number SR–Phlx–2012–46 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–Phlx–2012–46. This file 

number should be included on the 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 76 / Thursday, April 19, 2012 / Notices 23531 

31 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 58828 

(October 21, 2008), 73 FR 63749 (October 27, 2008) 

(SR–CBOE–2008–107). 

4See Securities Exchange Act Release No. 60854 

(October 21, 2009) 74 FR 55613 (October 28, 2009) 

(SR–ISE–2009–84). 

5A Streaming Quote Trader (‘‘SQT’’) is defined in 

Exchange Rule 1014(b)(ii)(A) as an ROT who has 

received permission from the Exchange to generate 

and submit option quotations electronically in 

options to which such SQT is assigned. 

6A Remote Streaming Quote Trader (‘‘RSQT’’) is 

defined Exchange Rule in 1014(b)(ii)(B) as an ROT 

that is a member or member organization with no 

physical trading floor presence who has received 

permission from the Exchange to generate and 

submit option quotations electronically in options 

to which such RSQT has been assigned. An RSQT 

may only submit such quotations electronically 

from off the floor of the Exchange. 

7See ISE Rule 804, CBOE Rules 6.2B, 8.7, 8.14, 

8.15A, NYSEArca Rule 6.37B and NOM Rulebook 

Chapter VII, Section 6(a). 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

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

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. All comments received will 

be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–Phlx– 

2012–46 and should be submitted on or 

before May 10, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.31

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–9406 Filed 4–18–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66806; File No. SR–Phlx– 

2012–49] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Amend Rule 

1014 

April 13, 2012. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that, on April 4, 

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 (b)(ii)(D)(3) of Rule 1014, 

Obligations and Restrictions Applicable 

to Specialists and Registered Options 

Traders, a rule pertaining to the 

minimum size requirement for 

quotations. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://www.nasdaqtrader.com/ 

micro.aspx?id=PHLXRulefilings, at the 

principal office of the Exchange, and at 

the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, 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 

This proposed rule change is based on 

filings previously submitted by the 

Chicago Board Options Exchange 

(‘‘CBOE’’) 3 and the International 

Securities Exchange (‘‘ISE’’) 4 that were 

effective on filing. 

The purpose of the proposed rule 

change is to amend Section (b)(ii)(D)(3) 

of Rule 1014, Obligations and 

Restrictions Applicable to Specialists 

and Registered Options Traders, in 

order to change a minimum quoting size 

requirement. Rule 1014(b)(ii)(D) sets 

forth certain market making obligations 

that apply to Streaming Quote Traders 

(‘‘SQTs’’), 5 Remote Streaming Quote 

Traders (‘‘RSQTs’’) 6 and specialists. For 

example, Rule 1014(b)(ii)(D)(1) provides 

that, in addition to other obligations and 

with certain exceptions, an SQT and an 

RSQT shall be responsible to quote twosided markets in not less than 60% of 

the series in which such SQT or RSQT 

is assigned. Likewise, Rule 

1014(b)(ii)(D)(2) provides that a 

specialist must quote two-sided markets 

in the lesser of 99% of the series or 

100% of the series minus one call-put 

pair in each option in which such 

specialist is assigned. 

Currently Rule 1014(b)(ii)(D)(3) 

provides that SQTs, RSQTs and the 

specialist assigned in an option shall 

submit electronic quotations for such 

option with a size of not less than 10 

contracts. The Exchange proposes to 

eliminate the 10 contract minimum size 

and to provide instead that the 

minimum number of contracts shall be 

specified by the Exchange for each 

option. The proposed change would 

allow the Exchange to set a minimum 

quotation size requirement for quotes on 

a class by class basis, provided the 

minimum set by the Exchange is at least 

one contract. Phlx would not impose a 

minimum quotation size requirement 

greater than 10 contracts. 

The Exchange believes it should have 

the flexibility to change the minimum 

size requirement on a class by class 

basis depending on market conditions 

and the trading and liquidity in a 

particular option class and its 

underlying security. Phlx notes that the 

minimum quotation size requirement 

for market makers on ISE, CBOE, NYSE 

Arca, Inc. (‘‘NYSE Arca’’) and the 

Nasdaq Options Market (‘‘NOM’’) is 

only one contract.7 As a result, Phlx 

believes the proposed rule change is 

based on and similar to the rules of 

other options exchanges. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

mstockstill on DSK4VPTVN1PROD with NOTICES