Document ID: SEC-2013-1020-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2013-06-05T04:00Z

[Federal Register Volume 78, Number 108 (Wednesday, June 5, 2013)]
[Notices]
[Pages 33873-33876]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-13275]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69672; File No. SR-Phlx-2013-58]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Permit Fees and Other Floor Fees

May 30, 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 May 21, 2013 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
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Permit Fee and certain Options 
Trading Floor Fees, including a technical amendment to the Pricing 
Schedule.
    While changes to the Pricing Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated the proposed 
amendment to be operative on June 3, 2013.
    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, on the Commission's Web site at http://www.sec.gov, 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 the proposed rule change is to increase the Permit 
Fee in Section VI, entitled ``Membership Fees'' at Part A entitled 
``Permit and Registration Fees'' of the Pricing Schedule to recoup 
costs associated with the administration of the Exchange's members. The 
Exchange also proposes to amend Section VII entitled ``Other Member 
Fees'' at Part A entitled ``Options Trading Floor Fees'' of the Pricing 
Schedule to eliminate the Trading/Administrative Booths Fee and the 
Specialist Post Fee and increase the Floor Facility Fees. The Exchange 
believes that the increases are necessary to keep pace with escalating 
technology costs, costs of certain floor-related charges due to a rise 
in occupancy expenses and rising overhead costs associated with 
maintaining the trading floor.
    The Exchange also proposes to make a technical amendment to the 
Pricing Schedule to eliminate certain unnecessary text in Chapter VI, 
Part A.
Permit Fee
    The Exchange assesses two different Permit Fees based on whether a 
member or member organization is transacting business on the Exchange. 
The Exchange assesses members and member organizations that are 
transacting business on the Exchange a Permit Fee of $2,100 per month. 
A member or member organization will be assessed the $2,100 monthly 
Permit Fee if that member or member organization: (1) Transacts its 
option orders in its assigned Phlx house account in a particular month; 
or (2) is a clearing member of The Options Clearing Corporation or a 
Floor Broker; or (3) for those member organizations which are under 
common ownership, transacts at least one options trade in a Phlx house 
account that is assigned to one of the member organizations under 
common ownership.\3\ The Exchange assesses members and member 
organizations that are not transacting business on the Exchange a 
Permit Fee of $7,500 per month. A member or member organization is 
assessed the $7,500 Permit Fee for not transacting business on the 
Exchange if that member is either: (i) not a PSX Only Participant; \4\ 
or (ii) not engaged in an options business at Phlx in a particular 
month. In addition, a member or member organization that sponsors an 
options participant \5\ would pay an additional Permit Fee for each 
sponsored options participant.
---------------------------------------------------------------------------

    \3\ Common ownership means 75% common ownership or control.
    \4\ Applicants that apply for membership solely to participate 
in the NASDAQ OMX PSX equities market are not assessed a Permit Fee, 
Application Fee, Initiation Fee, or Account Fee. See Securities 
Exchange Act Release No. 61863 (April 7, 2010), 75 FR 20021 (April 
16, 2010) (SR-Phlx-2010-54).
    \5\ See Exchange Rule 1094 titled Sponsored Participants. A 
Sponsored Participant may obtain authorized access to the Exchange 
only if such access is authorized in advance by one or more 
Sponsoring Member Organizations. Sponsored Participants must enter 
into and maintain participant agreements with one or more Sponsoring 
Member Organizations establishing a proper relationship(s) and 
account(s) through which the Sponsored Participant may trade on the 
Exchange.
---------------------------------------------------------------------------

    The Exchange is proposing to increase the $2,100 Permit Fee for 
members transacting business on the Exchange to $2,150 per month. The 
Exchange is seeking to recoup costs incurred from the membership 
administration function. The Exchange is not amending the Permit Fee 
for members who are not transacting business on the Exchange. The 
Exchange proposes to make corresponding amendments to Section VI, Part 
A where the permit fee is referenced.
Other Member Fees
    The Exchange proposes to eliminate the Trading/Administrative 
Booths fee of $300 per month fee paid by floor brokers and clearing 
firms \6\ and the Specialist Post Fee of $3,000 per month paid by 
Specialist units. The Trading/Administrative Booth space is physical 
space on the Exchange's trading floor, which space typically is used by 
floor brokers. The Specialist Post is physical space on the Exchange's 
trading floor which is used by Specialist units. The Exchange proposes 
to amend the Floor Facility fee to cover the costs of operating the 
trading floor.
---------------------------------------------------------------------------

    \6\ Today, any floor participant may elect to obtain a booth on 
the Exchange's trading floor.
---------------------------------------------------------------------------

    The Exchange proposes to increase the Floor Facility fee from $300 
to $330 per month. Today, the Floor Facility fee is applicable to 
Registered Options

[[Page 33874]]

Traders,\7\ individual Specialists \8\ and SQTs.\9\ The Floor Facility 
fee was intended to fairly allocate costs attendant to providing 
members with services necessary to the conduct of business on the floor 
of the Exchange. The Exchange proposes to assess the proposed increased 
Floor Facility fee to Clerks,\10\ excluding Inactive Nominees,\11\ and 
Floor Brokers in addition to ROTs (including SQTs) and individual 
Specialists. The Exchange proposes to increase this fee to offset the 
increased costs of operating a trading floor facility and the 
elimination of the Trading/Administrative Booths fee and the Specialist 
Post fee.
---------------------------------------------------------------------------

    \7\ A Registered Options Trader (``ROT'') includes a Streaming 
Quote Trader (``SQT''), a Remote Streaming Quote Trader (``RSQT'') 
and a Non-SQT, which by definition is neither a SQT or a RSQT. An 
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. See 
Exchange Rule 1014(b)(i) and (ii).
    \8\ A Specialist is an Exchange member who is registered as an 
options specialist pursuant to Rule 1020(a). Each individual 
Specialist is assessed this fee and the Specialist unit is assessed 
the Specialist Post Fee of $3,000 per month. In the instance that an 
individual Specialist is also an SQT, that member will only pay a 
$300 Floor Facility Fee per month; that Specialist would not be 
assessed the fee for each capacity. See Securities Exchange Act 
Release No. 66086 (January 3, 2012), 77 FR 1111 (January 9, 2012).
    \9\ An 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. If a ROT or SQT also determined to acquire a Trading/
Administrative Booth, they would also be assessed that fee as well.
    \10\ Pursuant to Exchange Rule 1090, the term ``Clerk'' means 
any registered on-floor person employed by or associated with a 
member or member organization who is not a member and is not 
eligible to effect transactions on the Options Floor as a 
Specialist, ROT, or Floor Broker. For purposes of this Rule, an 
Inactive Nominee shall be deemed a Clerk. See Rule 1090.
    \11\ Pursuant to Exchange Rule 925, a member organization may 
designate an individual as an ``Inactive Nominee.'' To be eligible 
to be an inactive nominee an individual must be approved as eligible 
to hold a permit in accordance with the Exchange's By-Laws and 
Rules. An inactive nominee has no rights and privileges of a permit 
holder until the inactive nominee becomes an effective permit holder 
and all applicable Exchange fees are paid. See Exchange Rule 925. 
The Inactive Nominee would be assessed the fee for the 6 months 
during which the Inactive Nominee maintains its status with the 
Exchange.
---------------------------------------------------------------------------

Technical Amendment
    The Exchange proposes to amend certain unnecessary language in 
Chapter VI, Section A that was recently added to the Pricing Schedule 
to provide a temporary waiver of the Application and Initiation Fees 
for current Remote Streaming Quote Trader Organizations.\12\ The 
Exchange implemented the waiver for the time period from April 24, 2013 
to May 13, 2013.\13\ At this time, the Exchange proposes to remove this 
text from the Pricing Schedule as it is unnecessary.
---------------------------------------------------------------------------

    \12\ See Securities Exchange Act Release No. 69500 (May 2, 
2013), 78 FR 26841 (May 8, 2013).
    \13\ Id.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal to amend its Pricing 
Schedule is consistent with Section 6(b) of the Act \14\ in general, 
and furthers the objectives of Section 6(b)(4) of the Act \15\ in 
particular, in that it provides for an equitable allocation of 
reasonable fees and other charges among Exchange members and other 
persons using its facilities.
---------------------------------------------------------------------------

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

Permit Fee
    The Exchange believes that the proposed increase to the Permit Fee 
for members transacting business on the Exchange is reasonable because 
the Exchange is seeking to recoup costs related to membership 
administration. The proposed fee is in the range of similar fees at 
other exchanges and less than other fees.\16\ In addition, the Exchange 
believes that the Permit Fee is equitable and not unfairly 
discriminatory, because unlike other exchanges, Phlx's Permit Fees are 
the same for every options permit holder that is conducting business at 
the Exchange. The Exchange also believes that the increased fee is 
equitable and not unfairly discriminatory because the Permit Fee for 
not transacting business on the Exchange remains substantially higher 
as is the case today.
---------------------------------------------------------------------------

    \16\ See the Chicago Board Options Exchange, Incorporated's Fees 
Schedule. Per month a Market Maker Trading Permit is $5,500, a SPX 
Tier Appointment is $3,000, a VIX Tier Appointment if $2,000, a 
Floor Broker Trading Permit is $9,000, an Electronic Access Permit 
is $1,600 and there is no access fee for a CBSX Trading Permit. See 
also the International Securities Exchange LLC's Schedule of Fees. 
Per month an Electronic Access Member is assessed $500.00 for 
membership and a market maker is assessed from $2,000 to $4,000 per 
membership depending on the type of market maker. See also C2 
Options Exchange, Incorporated's Fees Schedule. Per month, a market-
maker is assessed a $5,000 permit fee, an Electronic Access Permit 
is assessed a $1,000 permit fee and a SPXM Tier appointment is 
assessed a $4,000 fee after March 31, 2013. See also NYSE Arca, 
Inc.'s Fee Schedule. Per month, a Floor Broker, Office and Clearing 
Firm are assessed a $1,000 per month fee for the first Options 
Trading Permit (``OTP'') and $250 thereafter, and a market maker is 
assessed a $4,000 per month fee for one to four OTPs and $1,000 
thereafter.
---------------------------------------------------------------------------

Other Member Fees
    The Exchange believes that it is reasonable to eliminate the 
Trading/Administrative Booths fee and Specialist Post fee because the 
Exchange believes those fees no longer adequately cover the costs of 
operating the trading floor. In addition, the Exchange is seeking to 
encourage members and member organization to utilize and expand use of 
the space available on its trading floor. The Exchange believes that it 
is equitable and not unfairly discriminatory to eliminate the Trading/
Administrative Booths fee and Specialist Post fee because no market 
participant would be assessed these fees.
    The Exchange believes that increasing the Floor Facility fee is 
reasonable because the fee offsets the increased costs of operating a 
trading floor facility. The increases are necessary to keep pace with 
technology costs, costs of certain floor-related charges due to a rise 
in occupancy expenses and rising overhead costs associated with 
maintaining the trading floor. Further, the proposed modifications to 
the Floor Facility fee, coupled with the elimination of the Trading/
Administrative Booths fee and the Specialist Post fee better recoups 
the costs of operating a trading floor.
    The Exchange believes that increasing the Floor Facility Fee is 
equitable and not unfairly discriminatory because the fee will be 
applied uniformly to all members and their respective staff, who 
operate routinely from the floor of the Exchange. The Exchange believes 
this fee is indicative of the costs attributable to these categories of 
floor participants and therefore the fee is being equitable assessed 
and is not unfairly discriminatory.
    The Exchange believes that it is equitable and not unfairly 
discriminatory to assess Clerks the Floor Facility Fee in addition to 
the other market participants as discussed above. Clerks are registered 
on-floor personnel that utilize the Exchange's services and are 
responsible for the rise in technology and other overheard costs. 
Inactive Nominees are considered a Clerk, but also pay additional fees 
associated with being an Inactive Nominee \17\ and do not routinely 
utilize

[[Page 33875]]

the floor in the manner as other Clerks supporting member's day-to-day 
operations. The Exchange today assesses floor brokers the Trading/
Administrative Booths fee, this fee of $300 per month is being 
eliminated and instead floor brokers would pay the $330 per month 
proposed Floor Facility fee. While this results in an increased cost of 
$300 per month for Floor Brokers, the Exchange believes that the fee is 
equitable and not unfairly discriminatory because as mentioned above, 
floor brokers utilize the facilities of the Exchange as do Clerks, 
individuals Specialists and ROTs. In addition, the Exchange anticipates 
that most floor brokers will experience an overall reduction in costs 
due to the elimination of the Trading/Administrative Booths fee. The 
Exchange's proposal to distribute the cost to each of these market 
participants applies the fee to the recipients who consume the services 
offered at the Exchange to conduct trading on the floor. The 
elimination of the Specialist Post fee will result in the elimination 
of a $3,000 per month charge for Specialist units. The individual 
Specialists are assessed the Floor Facility fee today and would 
experience the increase of $30 per month.
---------------------------------------------------------------------------

    \17\ Inactive Nominees are assessed an Inactive Nominee Fee of 
$600 for 6 months of eligibility. The member organization is 
assessed $100 per month for the applicable six month period unless 
the member organization provides proper notice of its intent to 
terminate an inactive nominee prior to the first day of the next 
billing month. An inactive nominee's status expires after six months 
unless it has been reaffirmed in writing by the member organization 
or is sooner terminated. A member organization is assessed the 
Inactive Nominee Fee every time the status is reaffirmed. An 
inactive nominee is also assessed Application and Initiation Fees 
when such person applies to be an inactive nominee. Such fees are 
reassessed if there is a lapse in their inactive nominee status. 
However, an inactive nominee would not be assessed Application and 
Initiation Fees if such inactive nominee applied for membership 
without any lapse in that individual's association with a particular 
member organization. An Inactive Nominee is also assessed the 
Trading Floor Personnel Registration Fee.
---------------------------------------------------------------------------

Technical Amendment
    The Exchange's proposal to remove text in Chapter VI, Section A 
related to a waiver of the Application and Initiation Fees for current 
RSQTOs for the time period from April 24, 2013 to May 13, 2013 is 
reasonable, equitable and not unfairly discriminatory because the rule 
text is unnecessary and inapplicable to any market participant at this 
time.

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 is proposing to increase the Permit Fees which are 
applicable to members and member organizations transacting business on 
the Exchange. The increase is attributable to a rise in costs at the 
Exchange and is assessed to those members and member organizations that 
are currently transacting business on Phlx. The increase narrows the 
gap between permit holders transacting business on the Exchange and 
those members that are not transacting business on the Exchange. This 
fee does not impose an undue burden on competition.
    The Exchange's proposal to eliminate the Trading/Administrative 
Booths Fee because those booths no longer exist does not impose an 
undue burden on competition because the Exchange would not assess this 
fee to any market participant. Increasing the Floor Facility Fees and 
allocating that fee to Clerks and Floor Brokers does not create an 
undue burden on competition because the Exchange is allocating its 
costs among those market participants that benefit from the Exchange's 
services. The Exchange is also eliminating the Trading/Administrative 
Booths Fee that is borne today by floor brokers and clearing firms.
    The Exchange operates in a highly competitive market, comprised of 
eleven exchanges, in which market participants can easily and readily 
direct order flow to competing venues if they deem fee levels at a 
particular venue to be excessive. Accordingly, the fees that are 
assessed by the Exchange described in the above proposal are influenced 
by these robust market forces and therefore must remain competitive 
with fees charged 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.

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.\18\ 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.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

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 rule-comments@sec.gov. Please include 
File No. SR-Phlx-2013-58 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-2013-58. 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 
10:00 a.m. and 3:00 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-2013-58 and should be 
submitted on or before June 26, 2013.

[[Page 33876]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-13275 Filed 6-4-13; 8:45 am]
BILLING CODE 8011-01-P