Document ID: SEC-2011-1540-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2011-10-11T04:00Z

[Federal Register Volume 76, Number 196 (Tuesday, October 11, 2011)]
[Notices]
[Pages 62872-62873]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-26134]

[[Page 62872]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65478; File No. SR-Phlx-2011-130]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
the SQT Fees

October 4, 2011.
    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 September 27, 2011, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Streaming Quote Trader \3\ 
(``SQT'') Fees.
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    \3\ 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.
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    While changes to the Fee Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative on October 3, 2011.
    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, 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 amend the SQT Fees in 
Section VI of the Exchange's Fee Schedule, entitled ``Access Service, 
Cancellation, Membership, Regulatory and Other Fees.'' The Exchange 
proposes to simplify the SQT Fees by amending certain text, without 
changing the fees, for ease of reference. Additionally, the Exchange 
proposes to amend the calculation of the SQT Fees to incentivize 
trading in equity options, excluding currencies and indexes. The 
Exchange believes that the proposed SQT Fees will continue to 
incentivize SQTs to remain on the Exchange's options floor and thereby 
provide liquidity for floor-brokered orders traded in-crowd.
    Currently, a member organization is assessed per month an SQT Fee 
based on the total number of options in which all SQTs in the same 
member organization are assigned. A member organization is assessed an 
SQT Fee based on the aggregate amount of equity options and index 
options traded by the SQTs in that member organization. The highest 
applicable SQT Fee is assessed based on the highest SQT category level 
in which the SQT was qualified at any time during a particular calendar 
month.\4\ For example, if an SQT was eligible to trade at any time in a 
given calendar month as a Category I SQT, and sometime during that same 
calendar month became qualified and eligible to trade as a Category II 
SQT, the SQT member organization would be assessed the fee applicable 
to a Category II SQT, regardless of when such SQT became eligible to 
trade at the Category II level, and regardless if, during that same 
calendar month, the SQT resumed eligibility as a Category I SQT.\5\
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    \4\ See Exchange Rules 1014(b) and 507 for qualifications 
relating to assignments.
    \5\ For example, if a member organization's SQT is eligible to 
trade up to 200 equity and index options issues at any time in a 
given month, and is thus qualified as a Category I SQT, and sometime 
during that month becomes eligible to trade up to 400 equity and 
index options issues during that same month, and is thus qualified 
as a Category II SQT, the member organization employing that SQT 
would be assessed the fee applicable to a Category II SQT, 
regardless of when, during that month, the SQT became eligible to 
trade at the Category II level.
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    The Exchange proposes to amend the verbiage of the current SQT Fees 
to simplify the fees as follows:

------------------------------------------------------------------------
     Number of option class
          assignments                            SQT fees
------------------------------------------------------------------------
Up to 200 classes..............  $0.00 per calendar month.
Up to 400 classes..............  $2,200 per calendar month.
Up to 600 classes..............  $3,200 per calendar month.
Up to 800 classes..............  $4,200 per calendar month.
Up to 1000 classes.............  $5,200 per calendar month.
Up to 1200 classes.............  $6,200 per calendar month.
All equity issues..............  $7,500 per calendar month.
------------------------------------------------------------------------

    The Exchange is proposing to remove the references to ``SQT is 
Eligible to trade:'' and ``equity and index options issues'' and 
instead use the term ``classes.'' The Exchange proposes to amend the 
calculation of the SQT Fees as well. In calculating the SQT Fees, the 
Exchange will calculate the number of option class assignments for 
equity options including exchange-traded funds (``ETFs''), exchange-
traded notes (``ETNs'') \6\ and HOLDRS \7\. The Exchange will not 
include and therefore not assess a fee for currencies or indexes in 
calculating the number of option class assignments. The Exchange 
proposes to amend the Fee Schedule to

[[Page 62873]]

note the method of calculation as follows:
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    \6\ ETNs are also known as ``Index-Linked Securities,'' which 
are designed for investors who desire to participate in a specific 
market segment by providing exposure to one or more identifiable 
underlying securities, commodities, currencies, derivative 
instruments or market indexes of the foregoing. Index-Linked 
Securities are the non-convertible debt of an issuer that have a 
term of at least one (1) year but not greater than thirty (30) 
years. Despite the fact that Index-Linked Securities are linked to 
an underlying index, each trade as a single, exchange-listed 
security. Accordingly, rules pertaining to the listing and trading 
of standard equity options apply to Index-Linked Securities.
    \7\ HOLDRS are Holding Company Depository Receipts.

    ``In calculating the number of option class assignments, equity 
options including ETFs, ETNs and HOLDRS will be counted. Currencies 
and indexes will not be counted in the number of option class 
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assignments.''

    While changes to the Fee Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative on October 3, 2011.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \8\ in general, and furthers 
the objectives of Section 6(b)(4) of the Act \9\ in particular, in that 
it is an equitable allocation of reasonable fees and other charges 
among Exchange members and other persons using its facilities.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed amendments to the SQT Fees 
are reasonable because the fees remain the same, except the verbiage is 
simplified. The Exchange believes that the fees continue to be 
reasonable because SQT Fees are lower than RSQT Fees. This is because 
SQTs have more out-of-pocket costs associated with their streaming 
quote systems as compared to RSQTs. For example, SQTs generally have to 
purchase additional software programs and hardware from outside vendor 
to support their streaming quote systems, in addition to incurring 
additional costs associated with market data to enable them to price 
options within their particular options pricing model. Furthermore, the 
Exchange believes that excluding currencies and indexes from the basis 
of the calculation of the SQT Fees is reasonable because the Exchange 
is seeking to incentivize SQTs to transact equity options including 
ETFs, ETNs and HOLDRs.\10\
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    \10\ The Exchange is excluding currencies and indexes.
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    The Exchange believes that the proposed calculation of the SQT Fees 
is equitable and not unfairly discriminatory because the calculation 
will be uniformly applied to all SQTs. The exclusion of the currencies 
and indexes from the calculation of option class assignments to 
determine the amount of SQT Fees will apply equally to all SQTs.

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.\11\ 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.
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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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 e-mail to rule-comments@sec.gov. Please include 
File No. SR-Phlx-2011-130 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-2011-130. This 
file number should be included on the subject line if e-mail 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-
2011-130 and should be submitted on or before November 1, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-26134 Filed 10-7-11; 8:45 am]
BILLING CODE 8011-01-P