Document ID: SEC-2013-0500-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2013-03-14T04:00Z

[Federal Register Volume 78, Number 50 (Thursday, March 14, 2013)]
[Notices]
[Pages 16344-16345]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-05881]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69076; File No. SR-Phlx-2013-19]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change to the Fee 
Schedule Governing Order Routing for the NASDAQ OMX PSX Facility

March 8, 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 February 27, 2013, NASDAQ OMX PHLX LLC (``PHLX'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change as described in Items I and II 
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

    PHLX proposes to change the fee schedule governing order routing 
for the NASDAQ OMX PSX facility (``PSX''). The text of the proposed 
rule change is available at http://nasdaqomxphlx.cchwallstreet.com/nasdaqomxphlx/phlx/, at PHLX's principal office, 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
    PHLX is amending its fee schedule governing order routing to 
establish fees for routing orders using its two new order routing 
strategies, XDRK and XCST.\3\ All of the changes pertain to securities 
priced at $1 or more per share.
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    \3\ XDRK orders, pursuant to Rule 3315(a)(1)(A)(viii), check the 
System for available shares and simultaneously route to certain 
destinations on the System routing table that are not posting 
Protected Quotations within the meaning of Regulation NMS (i.e. 
``dark venues'' or ``dark pools''). XCST orders, pursuant to Rule 
3315(a)(1)(A)(ix), check the System for available shares and 
simultaneously route to select dark venues and to certain low cost 
exchanges. See Securities Exchange Act Release No. 68838 (February 
6, 2013), 78 FR 9977 (February 12, 2013) (SR-Phlx-2013-08).
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    With respect to XDRK and XCST orders that access liquidity in the 
PSX System, members will be charged $0.0028 per share. With respect to 
XDRK and XCST orders that provide liquidity in the PSX System, under 
the existing fee schedule, XDRK and XCST orders will be treated no 
differently than other orders and member organizations will receive a 
credit of $0.0028 or $0.0026 per share executed, depending upon the 
specifics of the order. With respect to XCST orders that execute on 
NASDAQ OMX BX, member organizations will receive a credit of $0.0014 
per share executed. With respect to XDRK and XCST orders that execute 
on a venue other than PSX or NASDAQ OMX BX, there will be no charge or 
credit.
2. Statutory Basis
    PHLX believes that the proposed rule change is consistent with the 
provisions of Section 6 of the Act,\4\ in general, and with Sections 
6(b)(4) and 6(b)(5) of the Act,\5\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees and other charges 
among members and issuers and other persons using any facility or 
system which PHLX operates or controls, and is not designed to permit 
unfair discrimination between customers, issuers, brokers, or dealers.
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(4) and (5).
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    The proposed pricing for XDRK and XCST orders executed on PSX is 
reasonable because it is the same as the

[[Page 16345]]

current pricing for other routed order types executing on PSX. The 
proposed pricing for XCST orders executed on NASDAQ OMX BX is 
reasonable because it is the same as the current pricing for other 
routed order types, namely PSTG, PSCN, PTFY and PCRT orders, executed 
on BX. For XDRK and XCST orders that execute on a venue other than PSX 
and BX, there will be no charge or credit, which PHLX believes is 
reasonable because, by definition, these routing strategies only route 
to low cost venues. Moreover, the Exchange is seeking to create more 
interest in PSX and in PSX participants sending routable orders to it, 
and is therefore willing to forego recouping its costs in order to 
attract liquidity.
    The proposed pricing for XDRK and XCST orders is consistent with an 
equitable allocation of fees because such pricing shall apply equally 
to all PSX participants. Finally, the changes are not unfairly 
discriminatory because they solely apply to members that opt to route 
XDRK and XCST orders. Moreover, the lower cost of these routing 
strategies as compared with other existing routing strategies is not 
unfairly discriminatory because it is consistent with the lower costs 
associated with routing to the venues that are accessed by the new 
strategies.
    Finally, PHLX notes that it operates in a highly competitive market 
in which market participants can readily favor competing venues if they 
deem fee levels at a particular venue to be excessive. In such an 
environment, PHLX must continually adjust its fees to remain 
competitive with other exchanges and with alternative trading systems 
that have been exempted from compliance with the statutory standards 
applicable to exchanges. PHLX believes that the proposed rule change 
reflects this competitive environment because it is designed to ensure 
that the charges for use of the PSX routing facility to route reflect 
changes in the cost of such routing.

B. Self-Regulatory Organization's Statement on Burden on Competition

    PHLX does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended. Because the market 
for order routing is extremely competitive, members may readily opt to 
disfavor PHLX's routing services if they believe that alternatives 
offer them better value. Moreover, by introducing new routing options 
and charging fees that PHLX believes to be reasonable, PHLX believes 
that it is increasing its competitiveness vis-[agrave]-vis other 
trading venues. For this reason and the reasons discussed in connection 
with the statutory basis for the proposed rule change, PHLX does not 
believe that the proposed changes will impair the ability of members or 
competing order execution venues to maintain their competitive standing 
in the financial markets. PHLX also does not believe that the proposal 
raises issues of competition among its own market participants, because 
the proposal applies fee and credits equally to all participants.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \6\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \7\ thereunder, because it establishes a due, fee, or other charge 
imposed by Phlx.
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such 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 under 
Section 19(b)(2)(B) \8\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \8\ 15 U.S.C. 78s(b)(2)(B).
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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 Number SR-Phlx-2013-19 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-2013-19. 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 20549-1090, 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-2013-19, and should be submitted on or before April 4, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-05881 Filed 3-13-13; 8:45 am]
BILLING CODE 8011-01-P