2310 Federal Register / Vol. 78, No. 7 / Thursday, January 10, 2013 / Notices 

19 15 U.S.C. 78k–1(a)(1)(C). 

20The Commission notes that CBOE states it 

believes that allowing the Exchange to cancel or 

release orders under such circumstances would 

allow the Exchange to maintain fair and orderly 

markets, and that CBOE Rule 6.14C is designed 

ensure full trade certainty for market participants 

and avoid disrupting the clearance and settlement 

process. See Notice, 77 FR at 70521. The 

Commission also notes that CBOE states that a 

decision to cancel or release orders due to a 

technical or systems issue is not equivalent to the 

Exchange declaring self-help against a routing 

destination pursuant to Rule 611 of Regulation 

NMS. See 17 CFR 242.611(b). See also Notice, 77 

FR at 70519 n.9. 

21See CBOE Rule 6.14C. 

22See CBOE Rules 6.14C(d)(i); 6.14C(e)(ii). 

23See CBOE Rule 6.14C(e)(i). 

24See CBOE Rule 6.14C(d)(ii). 

25See CBOE Rule 6.14C(e)(iii). 

26See, e.g., Securities Exchange Act Release Nos. 

67281 (June 27, 2012), 77 FR 39543 (July 3, 2012) 

(SR–NASDAQ–2012–057); 66963 (May 10, 2012), 

77 FR 28919 (May 16, 2012) (SR–NYSEArca–2012– 

22); 67010 (May 17, 2012), 77 FR 30564 (May 23, 

2012) (SR–EDGX–2012–08); and 67011 (May 17, 

2012), 77 FR 30562 (May 23, 2012) (SR–EDGA– 

2012–09). 

27 15 U.S.C. 78s(b)(2). 

28 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Section II Equity Options fees include options 

overlying equities, ETFs, ETNs and indexes which 

are Multiply Listed. 

trade, to foster cooperation and 

coordination with persons engaged in 

regulating, clearing, settling, processing 

information with respect to, and 

facilitating transactions in securities, to 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest; and are not designed to 

permit unfair discrimination between 

customers, issuers, brokers, or dealers. 

In addition, the Commission believes 

the proposed rule change is consistent 

with Section 11A(a)(1)(C) of the Act 19

in that it seeks to assure economically 

efficient execution of securities 

transactions. 

The Commission recognizes that 

technical or systems issues may occur, 

and believes that CBOE Rule 6.6A, in 

allowing CBOE to cancel or release 

orders affected by technical or systems 

issues, should provide a reasonably 

efficient means for CBOE to handle such 

orders, and appears reasonably designed 

to permit CBOE to maintain fair and 

orderly markets.20

The Commission also believes that 

allowing the Exchange to resolve error 

positions through the use of error 

accounts maintained by its routing 

brokers or the Exchange itself pursuant 

to the procedures set forth in the rule, 

and as described above, is consistent 

with the Act. The Commission notes 

that the rule establishes criteria for 

determining which positions are error 

positions to which the rule applies, and 

the procedures for the handling of such 

positions. In particular, the Commission 

notes that CBOE Rule 6.14C only 

applies to error positions that result 

from the Exchange’s routing service, and 

that such positions shall be liquidated 

by the routing broker or the Exchange, 

as applicable, as soon as practicable.21

In this regard, the Commission believes 

that the new rule appears reasonably 

designed to further just and equitable 

principles of trade and the protection of 

investors and the public interest, and to 

help prevent unfair discrimination, in 

that it should help assure the handling 

of error positions will be based on clear 

and objective criteria, and that the 

resolution of those positions will occur 

promptly through a transparent process. 

The Commission is also concerned 

about the potential for misuse of 

confidential and proprietary 

information. The Commission notes that 

CBOE or a routing broker, as applicable, 

will establish and enforce policies and 

procedures reasonably designed to (1) 

adequately restrict the flow of 

confidential and proprietary 

information associated with the 

liquidation of the error positions, and 

(2) in the case of liquidations by a 

routing broker, prevent the use of 

information associated with other orders 

subject to the routing services when 

making determinations regarding the 

liquidation of error positions.22

Furthermore, to the extent the Exchange 

uses an Exchange Error Account to 

liquidate error positions, the Exchange 

shall provide complete time and price 

discretion for the trading to liquidate 

error positions in an Exchange Error 

Account to a third-party broker-dealer 

and shall not attempt to exercise any 

influence or control over the timing or 

methods of such trading.23 The 

Commission believes that these 

requirements should help mitigate the 

Commission’s concerns. In particular, 

the Commission believes that these 

requirements should help assure that 

none of CBOE, its routing brokers, or 

any third-party broker-dealer is able to 

misuse confidential or proprietary 

information obtained in connection 

with the liquidation of error positions 

for its own benefit. The Commission 

also notes that routing brokers would be 

required to make and keep records 

associated with the liquidation of 

routing broker error positions 24 and 

CBOE would be required to make and 

keep records to document all 

determinations to treat positions as error 

positions under this Rule (whether or 

not an Exchange Error Account is used 

to liquidate such error positions), as 

well as records associated with the 

liquidation of Exchange Error Account 

error positions through a third-party 

broker-dealer.25

Finally, the Commission notes that 

the proposed procedures for canceling 

orders and the handling of error 

positions are consistent with procedures 

the Commission has approved for other 

exchanges.26

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,27 that the 

proposed rule change (SR–CBOE–2012– 

108) be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.28

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2013–00308 Filed 1–9–13; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–68582; File No. SR–Phlx– 

2012–146] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Strategy Caps 

January 4, 2013. 

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 December 

21, 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 the Substance 

of the Proposed Rule Change 

The Exchange proposes to amend rule 

text related to fee caps applicable to 

certain strategies on Multiply Listed 

Options in Section II, entitled ‘‘Equity 

Options Fees.’’ 3

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http:// 

nasdaqomxphlx.cchwallstreet.com/, at 

the principal office of the Exchange, and 

at the Commission’s Public Reference 

Room. 


wreier-aviles on DSK5TPTVN1PROD with 
Federal Register / Vol. 78, No. 7 / Thursday, January 10, 2013 / Notices 2311 

4A dividend strategy is defined as transactions 

done to achieve a dividend arbitrage involving the 

purchase, sale and exercise of in-the-money options 

of the same class, executed the first business day 

prior to the date on which the underlying stock goes 

ex-dividend. 

5A merger strategy is defined as transactions 

done to achieve a merger arbitrage involving the 

purchase, sale and exercise of options of the same 

class and expiration date, executed the first 

business day prior to the date on which 

shareholders of record are required to elect their 

respective form of consideration, i.e., cash or stock. 

6A short stock interest strategy is defined as 

transactions done to achieve a short stock interest 

arbitrage involving the purchase, sale and exercise 

of in-the-money options of the same class. 

7Reversals are established by combining a short 

stock position with a short put and a long call 

position that shares the same strike and expiration. 

8Conversions are established by combining a long 

position in the underlying stock with a long put and 

a short call position that share the same strike and 

expiration. 

9See Securities Exchange Act Release No. 68406 

(December 11, 2012), 77 FR 74715 (December 17, 

2012) (SR–Phlx–2012–138). 

10The Exchange also increased the cap for floor 

equity options transaction charges for dividend, 

merger and short stock interest strategies combined 

from the greater of $10,000 per member or $25,000 

per member organization per month to simply 

$35,000 per member organization per month 

provided that such members are trading in their 

own proprietary account. The Exchange proposed 

to apply this cap of $35,000 per member 

organization per month to reversal and conversion 

strategies as well and term the cap as the ‘‘Monthly 

Strategy Cap.’’ See Securities Exchange Act Release 

No. 68406 (December 11, 2012), 77 FR 74715 

(December 17, 2012) (SR–Phlx–2012–138). 

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

12 15 U.S.C. 78f(b)(4). 

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

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 purpose of the proposed rule 

change is to correct rule text 

inadvertently included in a recent 

proposed rule change related to fee caps 

on dividend,4 merger,5 short stock 

interest 6 and reversal 7 and conversion 8

strategies in order to clarify 

contradictory language within the rule 

text. 

The Exchange recently filed a rule 

change which applied fee caps on 

various strategies in Section II of the 

Pricing Schedule.9

Among other amendments, this rule 

change increased the cap for dividend, 

merger and short stock interest 

strategies from $1,000 to $1,250 

provided the strategy is executed on the 

same trading day in the same options 

class when such members are trading in 

their own proprietary account. Further, 

the Exchange adopted a cap for floor 

options transaction charges for reversal 

and conversion strategies of $750, 

provided the reversal and conversion 

strategy is executed on the same trading 

day in the same options class when 

such members are trading in their own 

proprietary account, similar to 

dividend, merger and short stock 

interest strategies.10

The rule text was amended to state, 

‘‘Specialist, Market Maker, Professional, 

Firm and Broker-Dealer floor option 

transaction charges in Multiply Listed 

Options will be capped at $1,250 per 

month for dividend, merger and short 

stock interest strategies executed on the 

same trading day in the same options 

class, and option transaction charges in 

Multiply Listed Options will be capped 

at $750 per month for reversal and 

conversion strategies executed on the 

same trading day in the same options 

class when such members are trading in 

their own proprietary accounts.’’ 

[emphases added] The Exchange noted 

that the strategies need to be executed 

on the same trading day. Strategy caps 

offered by the Exchange are and have 

always been on a per symbol, per day 

basis. The insertion of the text ‘‘per 

month’’ was inadvertent. The Exchange 

proposes to delete the ‘‘per month’’ text 

which is inaccurate and contradicts 

other text which states the strategies 

need to be executed on the same trading 

day. The Exchange intended the strategy 

caps of $1,250 and $750 to be per 

symbol, per day. The Exchange is 

proposing to remove the text ‘‘per 

month’’ to correct the Pricing Schedule 

at Section II and clarify the caps are for 

the same trading day as specified in the 

rule text. 

The Exchange does not believe that 

this error caused confusion because the 

Exchange issued an Options Trader 

Alert at the time the filing became 

effective to notify members of the cap. 

The alert was clear that the caps were 

per day. In addition, the Exchange has 

spoken to members and does not believe 

there is any confusion. The purpose of 

this filing is to correct the Pricing 

Schedule by removing the words ‘‘per 

month’’ to make clear the caps are per 

day. 

2. Statutory Basis 

The Exchange believes that its 

proposal to amend its Pricing Schedule 

is consistent with Section 6(b) of the 

Act 11 in general, and furthers the 

objectives of Section 6(b)(4) of the Act 12

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 amend 

the rule text relating to strategies is 

reasonable because the words ‘‘per 

month’’ and ‘‘on the same trading day’’ 

are at odds. The Exchange’s proposal to 

remove the words ‘‘per month’’ should 

clarify the application of the fee caps 

related to strategies. 

The Exchange’s proposal to amend 

the rule text relating to strategies is 

equitable and not unfairly 

discriminatory because the Exchange 

would apply the fee caps in a similar 

manner to all market participants. All 

market participants are entitled to the 

caps on a per day, per symbol basis. 

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. The 

Exchange’s proposal is to correct rule 

text which contains contradictory 

language. The Exchange believes this 

amendment would provide clarity with 

respect to the application of strategy 

caps and would benefit market 

participants. The Exchange does not 

believe that there is a misunderstanding 

among market participants that the 

strategy caps are per day. 

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.13 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, 


wreier-aviles on DSK5TPTVN1PROD with 
2312 Federal Register / Vol. 78, No. 7 / Thursday, January 10, 2013 / Notices 

14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78f(b). 

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

5See Securities Exchange Act Release Nos. 64582 

(June 2, 2011), 76 FR 33390 (June 8, 2011) (SR– 

NYSE–2011–23) and 66108 (January 5, 2012), 77 FR 

1768 (January 11, 2012) (SR–NYSE–2011–71). The 

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–2012–146 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–2012–146. 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 on official business 

days between the hours of 10:00 a.m. 

and 3:00 p.m. Copies of such filing also 

will be available for inspection and 

copying at the principal offices 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– 

2012–146, and should be submitted on 

or before January 31, 2013. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2013–00305 Filed 1–9–13; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–68580; File No. SR–NYSE– 

2012–79] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Amending Its 

Price List To Adopt a Trading License 

Fee for Calendar Year 2013 

January 4, 2013. 

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 December 

21, 2012, New York Stock Exchange 

LLC (the ‘‘Exchange’’ or ‘‘NYSE’’) filed 

with the Securities and Exchange 

Commission (‘‘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 its 

Price List to adopt a trading license fee 

for calendar year 2013. The Exchange 

proposes to make the rule change 

operative on January 1, 2013. The text 

of the proposed rule change is available 

on the Exchange’s Web site at 

www.nyse.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 those 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 parts 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 its 

Price List to adopt a trading license fee 

for calendar year 2013. 

NYSE Rule 300(b) provides that, in 

each annual offering, up to 1366 trading 

licenses for the following calendar year 

will be sold annually at a price per 

trading license to be established each 

year by the Exchange pursuant to a rule 

filing submitted to the Securities and 

Exchange Commission (‘‘Commission’’) 

and that the price per trading license 

will be published each year in the 

Exchange’s price list. The Exchange 

proposes to leave the current trading 

license fees in place for 2013: $40,000 

for the first two licenses held by a 

member organization, and $25,000 for 

each additional license. Fees will 

continue to be prorated for any portion 

of the year that a license may be 

outstanding. The proposed changes are 

not otherwise intended to address any 

other problem, and the Exchange is not 

aware of any significant problem that 

the affected market participants would 

have in complying with the proposed 

changes. 

The Exchange proposes to make the 

rule change operative on January 1, 

2013. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b) of the Act,3 in general, and 

Section 6(b)(4) of the Act,4 in particular, 

in that it is designed to provide for the 

equitable allocation of reasonable dues, 

fees, and other charges among its 

members and other persons using its 

facilities. The Exchange believes that 

the proposal constitutes an equitable 

allocation of fees, as all similarly 

situated member organizations will be 

subject to the same fee structure and 

access to the Exchange’s market is 

offered on fair and non-discriminatory 

terms. The Exchange also believes that 

the trading license fee is reasonable 

because it is the same as it has been 

since June 2011.5


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