Document ID: SEC-2012-0266-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2012-02-15T05:00Z

[Federal Register Volume 77, Number 31 (Wednesday, February 15, 2012)]
[Notices]
[Pages 8934-8936]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-3536]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66367; File No. SR-Phlx-2012-15]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Amending the 
Rebates and Fees for Adding and Removing Liquidity in Select Symbols

February 9, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\, and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on January 30, 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.
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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 Rebates and Fees for Adding and 
Removing Liquidity in Select Symbols in Section I, Part A of the 
Exchange's Fee Schedule.
    While changes to the Fee Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative on February 1, 2012.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqtrader.com/micro.aspx?id=PHLXfilings, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend Section I of 
the Fee Schedule, entitled ``Rebates and Fees for Adding and Removing 
Liquidity in Select Symbols,'' at Part A, entitled ``Single contra-side 
orders,'' to amend the Customer Fee for Removing Liquidity to increase 
the fee in order to recoup additional costs associated with paying 
rebates to attract additional order flow.
    Currently, Section I of the Fee Schedule, which applies to certain 
select symbols,\3\ is comprised of a Part A, Single contra-side order 
fees, and a Part B, Complex Order fees.\4\ There are currently several 
categories of market participants: Customers, Directed Participants,\5\ 
Specialists,\6\ Registered Options Traders,\7\ SQTs,\8\ RSQTs,\9\ 
Broker-Dealers, Firms and Professionals.\10\ Currently, the Exchange 
assesses the following Single contra-side Fees for Removing Liquidity:
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    \3\ Select Symbols are defined as options overlying the 
following symbols: AA, AAPL, ABX, AMD, AMR, AMZN, AXP, BAC, C, CAT, 
CIEN, CSCO, DELL, DIA, EBAY, EK, F, FAS, FAZ, FXI, GDX, GE, GLD, 
GLW, GS, HAL, IBM, INTC, IWM, JPM, LVS, MGM, MSFT, MU, NEM, NOK, 
NVDA, ORCL, PFE, PG, POT, QCOM, QQQ, RIG, RIMM, RMBS, SBUX, SDS, 
SIRI, SLV, SLW, SNDK, SPY, T, TBT, TZA, UAL, UNG, USO, UUP, V, VALE, 
VXX, VZ, WYNN, X, XLF, XOM, XOP and YHOO (``Select Symbols''). These 
symbols are Multiply-Listed.
    \4\ The Rebates and Fees for Adding and Removing Liquidity in 
Select Symbols apply only to electronic orders.
    \5\ A Directed Participant is a Specialist, SQT, or RSQT that 
executes a Customer order that is directed to them by an Order Flow 
Provider and is executed electronically on PHLX XL II.
    \6\ A Specialist is an Exchange member who is registered as an 
options specialist pursuant to Rule 1020(a).
    \7\ A Registered Options Trader (``ROT'') includes a Streaming 
Quote Trader (``SQT''), a Remote Streaming Quote Trader (``RSQT'') 
and a Non-SQT ROT, which by definition is neither a SQT or a RSQT. 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. See 
Exchange Rule 1014(b)(i) and (ii).
    \8\ 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.
    \9\ An 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.
    \10\ The Exchange defines a ``professional'' as 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) 
(hereinafter ``Professional'').

[[Page 8935]]

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                                                                                              Specialist,
                                                               Customer        Directed       ROT, SQT and       Firm         Broker-      Professional
                                                                             participant          RSQT                        dealer
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Fee for Removing Liquidity.................................        $0.31            $0.35            $0.37         $0.45         $0.45            $0.45
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    The Exchange proposes to increase the Customer Fee for Removing 
Liquidity for Single contra-side orders from $0.31 per contract to 
$0.39 per contract. The Exchange is not proposing to amend any other 
rebates or fees in Section I.
    While changes to the Fee Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative on February 1, 2012.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee 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.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that its proposal to increase the Single 
contra-side Customer Fee for Removing Liquidity is reasonable because 
the Customer would pay a lower fee as compared to all other market 
participants except market makers,\13\ which includes Directed 
Participants. Market makers have obligations to the market, which do 
not apply to Firms, Professionals and Broker-Dealers.\14\ Also, 
Directed Participants have higher quoting obligations as compared to 
other market makers.\15\ In addition, the Exchange is filing this 
proposal to recoup costs associated with paying Customers higher 
rebates to attract order flow to the Exchange.\16\ Customers will 
continue to receive the highest Rebate for Adding Liquidity, which 
rebate incentivizes Broker-Dealers to route Customer orders to the 
Exchange, which in turn should increase liquidity and benefit all 
market participants. Also, the fee is within the range of fees assessed 
by NYSE Arca, Inc. (``NYSE Arca'') \17\ and NASDAQ Stock Market 
LLC.\18\
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    \13\ A ``market maker'' includes Specialists (see Rule 1020) and 
ROTs (Rule 1014(b)(i) and (ii), which includes SQTs (see Rule 
1014(b)(ii)(A)) and RSQTs (see Rule 1014(b)(ii)(B)). Directed 
Participants are also market makers. See note 5.
    \14\ See Exchange Rule 1014 titled ``Obligations and 
Restrictions Applicable to Specialists and Registered Options 
Traders.''
    \15\ See Exchange Rule 1014 titled ``Obligations and 
Restrictions Applicable to Specialists and Registered Options 
Traders.''
    \16\ The Exchange recently increased the Rebate for Adding 
Liquidity for Professionals. See Securities Exchange Act Release No. 
65940 (December 12, 2011), 76 FR 78322 (December 16, 2011) (SR-Phlx-
2011-162).
    \17\ See NYSE Arca's Fee Schedule. A customer executing an 
electronic order is assessed a $0.45 per contract fee to remove 
liquidity in Penny Pilot Issues.
    \18\ See NASDAQ Stock Market LLC's Rules at Chapter XV, Section 
2. A NASDAQ Options Market (``NOM'') Participant is assessed a $0.45 
per contract fee for removing liquidity electronically in Penny 
Pilot Options and non-Penny Pilot Options.
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    The Exchange believes it is equitable and not unfairly 
discriminatory to increase the Customer Fee for Removing Liquidity 
because, as mentioned, compared to other participants, except market 
makers,\19\ Customers would pay the lowest Fee for Removing Liquidity 
and Customers would also receive the highest Rebate for Adding 
Liquidity as compared to other market participants.\20\ In addition, as 
previously mentioned, the Exchange is filing this proposal to recoup 
costs associated with paying Customers higher rebates to attract order 
flow to the Exchange.
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    \19\ See note 13.
    \20\ The Exchange recently decreased the Professional Rebate for 
Adding Liquidity for Single contra-side orders to $0.23 per 
contract. The rule change was filed as immediately effective with an 
operative date of January 3, 2012. See SR-Phlx-2011-184.
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    The Exchange operates in a highly competitive market in which 
market participants can readily direct order flow to competing venues 
if they deem fee levels at a particular venue to be excessive. The 
Exchange believes that the fees it charges and rebates it pays for 
options overlying the various Select Symbols remain competitive with 
fees and rebates charged/paid by other venues and therefore 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.\21\ 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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    \21\ 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 email to rule-comments@sec.gov. Please include 
File No. SR-Phlx-2012-15 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File No. SR-Phlx-2012-15. 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/

[[Page 8936]]

rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for Web site 
viewing and printing in the Commission's Public Reference Room, 100 F 
Street NE., Washington, DC 20549, on official business days between the 
hours of 10 a.m. and 3 p.m. Copies of such filing also will be 
available for inspection and copying at the principal office of the 
Exchange. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File No. SR-Phlx-
2012-15 and should be submitted on or before March 7, 2012.
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    \22\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-3536 Filed 2-14-12; 8:45 am]
BILLING CODE 8011-01-P