Document ID: SEC-2010-1236-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMXPHLX, Inc.
Posted Date: 2010-08-13T04:00Z

[Federal Register: August 13, 2010 (Volume 75, Number 156)]
[Notices]               
[Page 49544-49546]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13au10-122]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62661; File No. SR-Phlx-2010-110]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX, Inc. Relating 
to Billing Policies

August 6, 2010.
    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 August 4, 2010, NASDAQ OMX PHLX, Inc. (``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 its Fee Schedule to: (i) Require 
members and member organizations to identify accounts to properly 
identify joint back-office (``JBO'') participant transactions; (ii) 
specify certain policies to dispute billing invoices; and (iii) amend 
the index to rearrange the order of fees on the Fee Schedule.
    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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to memorialize current 
practices for the Exchange to clearly identify orders that are not 
subject to the Firm Related Equity Option Cap in order to ensure that 
members and member organizations are being properly billed the Exchange 
fees and also to modify the time requirements to dispute Exchange dues 
and fees to reduce the Exchange's operational costs. The Exchange 
proposes to memorialize an existing process that requires members and 
member organizations to identify certain trades which are not subject 
to the Firm Related Equity Option Cap and to set concrete timelines to 
dispute any assessed Exchange dues and fees.
    Currently, the Firms are subject to a maximum fee of $75,000 also 
known as the Firm Related Equity Option Cap. Firm equity option 
transaction charges, in the aggregate, for one billing month cannot 
exceed the Firm Related Equity

[[Page 49545]]

Option Cap per member organization, except for orders of JBO 
Participants.\3\ Therefore, Exchange accounts used for JBO Participant 
orders are not subject to the Firm Related Equity Option Cap. The 
Exchange proposes to memorialize the current practice of requiring 
members and member organizations to notify the Exchange in writing \4\ 
and indicate which accounts are used to segregate orders of JBO 
participants from other Firm orders. The Exchange believes that 
memorializing the policy within the Fee Schedule will eliminate any 
confusion as to which orders are JBO Participant orders and not subject 
to the Firm Related Equity Option Cap. Further the Exchange proposes to 
create a new billing practice with respect to JBO transactions. The 
Exchange proposes to indicate on the Fee Schedule that the Exchange 
will not make any adjustments to billing invoices where JBO 
transactions are commingled with other Firm orders in Exchange 
accounts, which are designated by the member organization as not 
subject to the Firm Related Equity Option Cap. The Exchange believes 
that this practice would not create an undue burden on its members and/
or member organizations and would ensure a more efficient billing 
process.
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    \3\ A JBO participant is a Member, Member Organization or non-
member organization that maintains a JBO arrangement with a clearing 
broker-dealer (``JBO Broker'') subject to the requirements of 
Regulation T Section 220.7 of the Federal Reserve System. See also 
Exchange Rule 703. JBO participant orders are not subject to the 
Firm Related Equity Option Cap because the Exchange is unable to 
differentiate orders of a JBO participant from orders of its JBO 
Broker and therefore is unable to aggregate the JBO participant's 
orders. JBO participant orders may employ the F-account type and 
qualify for the Firm charge, but are not eligible for the Monthly 
Firm Cap.
    \4\ The Exchange will issue an Options Regulatory Alert to 
specify the proper Exchange contacts to notify the Exchange.
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    The Exchange also proposes to establish a billing practice to 
prevent members and member organizations from disputing billing 
invoices after sixty (60) days. The Exchange proposes to state on its 
Fee Schedule that all billing disputes must be submitted to the 
Exchange in writing \5\ and must be accompanied by supporting 
documentation. All disputes must be submitted no later than sixty (60) 
days after receipt of an Exchange invoice. The Exchange proposes to 
exclude the following types of fee disputes: NASDAQ OMX PSX Fees, 
Proprietary Data Feed Fees and Co-Location Services Fees.\6\ The 
Exchange is excluding these types of fees because these fees are billed 
separately to Exchange members and Exchange members do not have the 
same type of notice as all other fees on the Fee Schedule, as they do 
not receive reports for certain fees. The Exchange believes that 
members and member organizations should be aware of any billing errors 
within two months of receiving an invoice.\7\ The Exchange further 
believes that this practice will conserve Exchange resources which are 
expended when untimely billing disputes require staff to research 
applicable fees and order information beyond two months after the 
transaction occurred.
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    \5\ The Exchange invoice specifies the Exchange contact persons 
with whom to dispute the invoice.
    \6\ These fees are not included in the reports described in 
footnote 7.
    \7\ The Exchange provides members and member organizations the 
ability to sign-up to receive certain daily reports (i.e. daily 
traded against report, daily cancel fees, etc. * * *), which 
provides the members and member organizations with trade data to 
determine fees prior to receiving a billing invoice. In addition, 
members and member organizations have access to myphlx.com, a 
password protected Web site, which provides members an electronic 
copy of current and historical invoices, as well as the supporting 
details for assessed charges. Members will have the ability to 
retrieve trade information from this Web site on a T +1 basis no 
later than September 30, 2010 This new enhancement will provide 
members and member organizations the ability to see information 
about their trades and billing information prior to receiving the 
final month-end invoice.
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    Finally, the Exchange proposes to rearrange its Fee Schedule to 
relocate the Routing Fees and PSX Fees in the Fee Schedule to eliminate 
sequential numbering discrepancies in the Index which arose when the 
Fee Schedule was reformatted.
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. The Exchange believes that the proposal to 
memorialize the current practice concerning JBO accounts is reasonable 
to ensure that the Firm Related Equity Option Cap is properly applied 
in billing members and member organizations. The Exchange believes that 
the proposal is equitable because the process of notifying the Exchange 
of accounts used for JBO orders is currently being employed and would 
therefore not create an undue burden.
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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 amendment to billing 
practices, the proposal to not adjust commingled JBO orders, is 
reasonable because members and member organizations are currently 
required to properly account for these type of orders. The proposal is 
equitable because this practice will apply to all members and member 
organizations transacting JBO business.
    Additionally, the Exchange believes the requirement that all 
billing disputes must be submitted within 60 days from receipt of the 
invoice, with the exception of certain fees, is reasonable because the 
Exchange provides ample tools to properly and swiftly monitor and 
account for various charges incurred in a given month. Also, the 
proposal is equitable because it equally applies to all members and 
member organizations. The Exchange's administrative costs would also be 
lowered as a result of this policy. Finally the Exchange believes that 
the proposal to rearrange the Fee Schedule is both reasonable and 
equitable because it clarifies the Fee Schedule.

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 \10\ and subparagraph (f) of Rule 19b-4 \11\ 
thereunder. 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.
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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 17 CFR 240.19b-4(f)(2).
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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:

[[Page 49546]]

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-2010-110 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-2010-110. 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-2010-110 and should be 
submitted on or before September 3, 2010.

    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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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-19971 Filed 8-12-10; 8:45 am]
BILLING CODE 8010-01-P