Document ID: SEC-2011-0697-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2011-05-16T04:00Z

[Federal Register Volume 76, Number 94 (Monday, May 16, 2011)]
[Notices]
[Pages 28260-28262]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-11898]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64451; File No. SR-Phlx-2011-59]

Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX LLC Relating 
to Inactive Nominees

May 10, 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 May 3, 2011, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'') 
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.
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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 codify its existing procedures to 
designate an Inactive Nominee as an effective permit holder and make 
other non-substantive clarifying changes to the text of Rule 925 titled 
``Inactive Nominees.'' \3\
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    \3\ The term ``inactive nominee'' means a natural person 
associated with and designated as such by a member organization and 
who has been approved for such status and is registered as such with 
the Membership Department. An Inactive Nominee shall have no rights 
or privileges under a permit unless and until said Inactive Nominee 
becomes admitted as a member of the Exchange pursuant to the By-Laws 
and Rules of the Exchange. An Inactive Nominee merely stands ready 
to exercise rights under a permit upon notice by the member 
organization to the Membership Department on an expedited basis. See 
Exchange Rule 1(i) [sic].
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    The Exchange is also proposing to amend certain typographical 
errors in Exchange Rules 1 and 124 and By-Law Article II.
    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, at the Commission's Public Reference 
Room, and on the Commission's Web site at http://www.sec.gov.

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 codify the Exchange's 
existing procedures for designating an Inactive Nominee as an effective 
permit holder. Additionally, the Exchange is proposing to amend the 
text of Rule 925 to delete irrelevant and repetitive rule language.
    Rule 925 titled ``Inactive Nominees'' states that a member 
organization may designate an individual as an ``Inactive Nominee'' and 
shall pay for the privilege of maintaining that status.\4\ Further, to 
be eligible as an Inactive Nominee, an individual must be approved as 
eligible to hold a permit in accordance with the Exchange's By-Laws and 
Rules. Pursuant to Rule 925, an Inactive Nominee does not have any 
rights or

[[Page 28261]]

privileges of a permit holder unless and until the Inactive Nominee 
becomes an effective permit holder and all applicable Exchange fees are 
paid.\5\
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    \4\ The Exchange assesses an Inactive Nominee Fee of $500 for 
every six months and a monthly Trading Floor Personnel Registration 
Fee of $100 on Inactive Nominees. See the Exchange's Fee Schedule. 
An Inactive Nominee is also assessed the Application and Initiation 
Fees when such person applies to be an Inactive Nominee. Such fees 
are reassessed if there is a lapse in the Inactive Nominee's 
membership status. However, an Inactive Nominee would not be 
assessed the Application and Initiation Fees if such Inactive 
Nominee applied for membership without a lapse in that individual's 
association with a particular member organization. See Securities 
Exchange Act Release No. 64010 (March 2, 2011), 76 FR 12780 (March 
8, 2011) (SR-Phlx-2011-26).
    \5\ The Inactive Nominee allows a member to have additional 
flexibility in obtaining coverage on the trading floor. An Inactive 
Nominee stands ready to assume a membership upon notice by the 
member requesting that a specific permit be transferred intra-firm 
on an expedited and temporary basis. This transfer allows an 
Inactive Nominee to become an effective member of the Exchange. By 
way of example, an Inactive Nominee would be activated in the event 
of an emergency due to illness or other factors. This would allow a 
member organization to have a full staff available to conduct 
business on the Exchange trading floor.
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    The Exchange proposes to add additional language to Rule 925 to 
codify the existing practice of notifying the Membership Department 
when a member organization desires to designate an Inactive Nominee as 
an effective permit holder. The Exchange is proposing to add language 
to state that the member organization is required to notify the member 
organization of its desire to designate an Inactive Nominee as an 
effective permit holder in writing and prior to the opening of trading 
on any business day.\6\ Further, the member organization must identify 
the name of the permit holder that the Inactive Nominee will be acting 
on behalf of as well as the expected duration that such Inactive 
Nominee will remain activated. This practice of notifying the 
Membership Department of the Inactive Nominee designation exists today. 
Members were previously notified that the Exchange required notice 
prior to such a designation.\7\ The Exchange desires to codify this 
practice in its Rules.
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    \6\ This requirement is noted in the original rule change which 
established the Inactive Nominee, but the language was not carried 
over to the rule text. See Securities Exchange Act Release No. 39851 
(April 10, 1998), 63 FR 19282 (April 17, 1998) (SR-Phlx-97-35).
    \7\ See Exchange Memorandum number 1701-02.
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    Additionally, the Exchange is proposing to add a statement that an 
Inactive Nominee shall meet all membership requirements including 
examinations administered by the Exchange to clarify a requirement that 
was included in the original Inactive Nominee rule filing which was 
approved by the Commission.\8\ Finally, the Exchange is proposing 
additional non-substantive amendments to the text of Rule 925 to remove 
irrelevant and repetitive language.
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    \8\ See Securities Exchange Act Release No. 39851 (April 10, 
1998), 63 FR 19282 (April 17, 1998) (SR-Phlx-97-35) (a rule change 
which subjected Inactive Nominees to the membership application 
process, including fees, including a fee for the privilege of 
maintaining an inactive nominee status).
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    The Exchange recently filed a rule change, to among other things, 
amend several Exchange Rules.\9\ Among those Rules, the Exchange 
amended Rule 124 and inadvertently removed the word ``Options'' before 
the term ``Exchange Official.'' The Exchange is proposing to add the 
word ``Options'' in two places in Rule 124 to conform to the remainder 
of the Rule.\10\ Additionally, the Exchange inadvertently capitalized 
the word ``Rule'' in Exchange Rule 1(aa) titled ``Protected Bid, Offer 
or Quotation.'' The word ``Rule'' in that definition refers to rules of 
Regulation NMS and not the Exchange's Rules and therefore that term 
should be lowercase.
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    \9\ See Securities Exchange Act Release No. 64338 (April 25, 
2011), 76 FR 12180 (March 4, 2011) [sic] (SR-Phlx-2011-13).
    \10\ The term ``Options Exchange Official'' is defined in Rule 
1(w).
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    Finally, the Exchange proposes to correct one typographical error 
in the Exchange's By-Laws. By-Law Article II, Section 2-3, titled 
``Filling of Vacancies'' states that in the event of a board vacancy, 
specifically a Member Representative Director position, the Member 
shall elect a Person from a list of candidates prepared by the Member 
Nominating Committee to fill such vacancy.\11\ The Exchange mirrored 
the language of the NASDAQ Stock Market LLC's By-Laws in adopting this 
language. The term ``Member'' was intended to refer to the limited 
liability company Member, not an Exchange member. The Exchange desires 
to change the word ``Member'' to ``Stockholder'' in order to properly 
reflect the intent of the provision and correspond to the Exchange's 
Limited Liability Company Agreement.
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    \11\ The entire provision of Article II, Section 2-3 is as 
follows: ``[i]f a Member Representative Director position shall 
become vacant prior to the expiration of such person's term, or if 
an increase in the size of the Board results in the creation of a 
new Member Representative Director position, the Member shall elect 
a Person from a list of candidates prepared by the Member Nominating 
Committee to fill such vacancy, except that if the remaining term of 
office for the vacant Director position is less than six months, no 
replacement shall be required.''
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 2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \12\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \13\ in particular, in that it is designed to 
promote just and equitable principles of trade, 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, by codifying procedures to designate Inactive Nominees as 
effective permit holders within its Rules.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that providing member organizations 
information related to the eligibility and requirements of Inactive 
Nominees within Rule 925 further clarifies the member organization's 
obligations with respect to the designation of Inactive Nominees as 
effective permit holders.
    Finally, the Exchange believes that the proposed amendments to 
correct typographical errors would further clarify the Exchange's 
Rules.

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

    Pursuant to Section 19(b)(3)(A) of the Act \14\ and Rule 19b-
4(f)(1) \15\ thereunder, the Exchange has designated this proposal as 
one that constitutes a stated policy, practice or interpretation with 
respect to the meaning, administration, or enforcement of an existing 
rule of the SRO, and therefore has become effective.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(1).
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    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:

[[Page 28262]]

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 Number SR-Phlx-2011-59 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-2011-59. 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 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-2011-59 and should be 
submitted on or before June 6, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-11898 Filed 5-13-11; 8:45 am]
BILLING CODE 8011-01-P