Document ID: SEC-2009-0369-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; ProposedRule Change: NASDAQ OMX PHLX, Inc.
Posted Date: 2009-03-19T04:00Z

[Federal Register: March 19, 2009 (Volume 74, Number 52)]
[Notices]               
[Page 11793-11794]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19mr09-123]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59566; File No. SR-Phlx-2009-18]

 
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Fee Caps on Equity Option Transaction Charges on Dividend, Merger and 
Short Stock Interest Strategies

March 12, 2009.
    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 24, 2009, 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 make permanent the pilot program for the 
$1,000 and $25,000 fee caps on equity option transaction charges on 
dividend,\3\ merger,\4\ and short stock interest \5\ strategies 
(``Pilot'') \6\. This Pilot previously included $1,000 and $25,000 fee 
caps on transaction and comparison charges on dividend, merger and 
short stock interest strategies as well as a license fee of $0.05 per 
contract side imposed on dividend and short stock interest strategies. 
The comparison charges as well as a license fee of $0.05 per contract 
side were subsequently eliminated.\7\ Other than requesting to make the 
Pilot permanent, no other changes to the Exchange's current dividend, 
merger and short stock interest strategy program are being proposed at 
this time.
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    \3\ For purposes of this proposal, the Exchange defines a 
``dividend strategy'' as transactions done to achieve a dividend 
arbitrage involving the purchase, sale and exercise of in-the-money 
options of the same class, executed prior to the date on which the 
underlying stock goes ex-dividend. See e.g., Securities Exchange Act 
Release No. 54174 (July 19, 2006), 71 FR 42156 (July 25, 2006) (SR-
Phlx-2006-40).
    \4\ For purposes of this proposal, the Exchange defines a 
``merger strategy'' as transactions done to achieve a merger 
arbitrage involving the purchase, sale and exercise of options of 
the same class and expiration date, executed prior to the date on 
which shareholders of record are required to elect their respective 
form of consideration, i.e., cash or stock. Id.
    \5\ For purposes of this proposal, the Exchange defines a 
``short stock interest strategy'' as transactions done to achieve a 
short stock interest arbitrage involving the purchase, sale and 
exercise of in-the-money options of the same class. Id.
    \6\ The current fee caps are in effect as a pilot program that 
is scheduled to expire on March 1, 2009. See Securities Exchange Act 
Release No. 57420 (March 3, 2008), 73 FR 12790 (March 10, 2008) (SR-
Phlx-2008-16).
    \7\ See Securities Exchange Act Release Nos. 59243 (January 13, 
2009), 74 FR 4272, (January 23, 2009) (SR-Phlx-2008-86) (eliminating 
the comparison charge); 58772 (October 10, 2008), 73 FR 63037 
(October 22, 2008) (SR-Phlx-2008-72) (eliminating reference to the $ 
0.05 per contract side license fee for dividend strategies and short 
stock interest strategies).
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nasdaqtrader.com/micro.aspx?id=PHLXRulefilings, 
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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Currently, the Exchange imposes a fee cap on equity option 
transaction charges on dividend, merger and short stock interest 
strategies executed on the same trading day in the same options class. 
Specifically, Registered Options Trader (``ROT'') and specialist net 
equity option

[[Page 11794]]

transaction charges are capped at $1,000 for dividend, merger and short 
stock interest strategies executed on the same trading day in the same 
options class.\8\ In addition, there is a $25,000 per member 
organization fee cap on equity option transaction charges incurred in 
one month for dividend, merger and short stock interest strategies 
combined. The purpose of making the Pilot permanent for the fee caps on 
equity option transaction charges on dividend, merger and short stock 
interest strategies is to continue to attract additional liquidity to 
the Exchange and to remain competitive with other options exchanges in 
connection with these types of options strategies.
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    \8\ Id.
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    The Exchange's Pilot also included fee caps on comparison charges 
on dividend, merger and short stock interest strategies, however the 
comparison charges were eliminated by a previous rule filing.\9\ 
Additionally, the Pilot also included a license fee of $0.05 per 
contract side imposed on dividend and short stock interest strategies, 
which was also eliminated by a previous rule filing.\10\
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    \9\ See footnote 7.
    \10\ See footnote 7.
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2. Statutory Basis
    The Exchange believes that its proposal to amend its schedule of 
fees 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. The Exchange believes that 
its proposal to make the Pilot permanent is beneficial to its members 
by providing additional trading opportunities at an efficient cost.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
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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 \13\ and paragraph (f)(2) of Rule 19b-4 \14\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission may summarily abrogate 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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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 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:

Electronic Ccomments

     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-2009-18 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-2009-18. 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 inspection 
and copying 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 will also be available for 
inspection and copying at the principal office of the self-regulatory 
organization. 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-2009-18 and should be submitted on or before April 9, 2009.
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    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-5930 Filed 3-18-09; 8:45 am]

BILLING CODE 8011-01-P