Document ID: SEC-2011-1919-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2011-12-09T05:00Z

[Federal Register Volume 76, Number 237 (Friday, December 9, 2011)]
[Notices]
[Pages 77048-77050]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-31599]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65883; File No. SR-Phlx-2011-154]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change by NASDAQ 
OMX PHLX LLC Relating to Routing Fees for PSX

December 5, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

[[Page 77049]]

(``Act'') \1\, and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on November 22, 2011, 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 is filing a proposed rule change to pricing for PHLX 
members using the NASDAQ OMX PSX System. The new pricing will take 
effect immediately.
    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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to adopt fees applicable 
to the new routing services on PSX. PHLX recently adopted rules that 
allow it to route orders to other trading venues for execution.\3\ The 
different routing strategies, PSTG, PSCN, PMOP, PTFY and PCRT, are 
defined in PHLX Rule 3315. These routing strategies correlate to some 
of the routing strategies of NASDAQ, as explained below. PHLX proposes 
to amend its fee schedule to adopt fees for the execution of routed 
orders, which are the same as or less than NASDAQ's, as explained 
below.
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    \3\ Securities Exchange Act Release No. 65469 (October 3, 2011), 
76 FR 62486 (October 7, 2011) (SR-Phlx-2011-108).
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    Respecting PSTG \4\ and PSCN \5\ orders, the routing charge is 
$0.0027 per share executed at venues other than NYSE and $0.0023 per 
share executed at NYSE. Respecting NASDAQ's \6\ comparable STGY and 
SCAN orders,\7\ this charge is the same for shares executed on NYSE and 
less than what NASDAQ charges for routed executions at other venues in 
NASDAQ-listed securities, NYSE-listed securities and for securities 
listed on exchanges other than NASDAQ or NYSE ($0.0030 per share).\8\ 
The Exchange seeks to attract users to its new routing program and has 
accordingly determined to charge $0.0027 per share rather than the 
$0.0030 that NASDAQ charges for orders executed at NASDAQ and other 
venues. The Exchange currently charges $0.0027 per share for executions 
on its own market, so the Exchange believes that it is reasonable and 
equitable, as well as appropriate from a business standpoint to charge 
the same for executions on other markets in order to attract business. 
The Exchange has determined to charge the same $0.0023 per share that 
NASDAQ charges for executions on the NYSE and believes it could be 
successful attracting this business at that price.
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    \4\ See PHLX Rule 3315(a)(1)(A)(iii).
    \5\ See PHLX Rule 3315(a)(1)(A)(iv).
    \6\ Similar to the fees proposed herein, NASDAQ bases the charge 
on the type of routing strategy employed and where the order was 
executed, because routing fees are generally intended to recoup the 
cost of routing the order to another venue for execution. However, 
unlike PHLX, NASDAQ also bases its routing fees on where the 
security is listed. This is not a significant difference because the 
proposed fees include a separate charge for execution on the NYSE.
    \7\ See NASDAQ Rule 4758(a)(1)(A)(iii) and (iv).
    \8\ For NASDAQ-listed securities, there is no separate, lower 
fee for orders executed at NYSE, because NASDAQ-listed securities do 
not trade on NYSE and thus would not route there.
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    Respecting PMOP \9\ orders, the charge is $0.0025 per share 
executed at NYSE and $0.0035 per share executed at venues other than 
NYSE. This is the same as what NASDAQ charges for its comparable MOPP 
orders,\10\ which is, following the format of the NASDAQ fee schedule: 
(i) For NASDAQ-listed securities, $0.0035 per share; \11\ (ii) for 
NYSE-listed securities, $0.0035 per share executed at venues other than 
NYSE or charge of $0.0025 per share executed at NYSE; and (iii) for 
securities listed on exchanges other than NASDAQ or NYSE, $0.0035 per 
share. The Exchange has determined that this is the appropriate charge 
to attract PMOP orders.
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    \9\ See PHLX Rule 3315(a)(1)(A)(vi).
    \10\ See NASDAQ Rule 4758(a)(1)(A)(vi).
    \11\ For NASDAQ-listed securities, there is no separate, lower 
fee for orders executed at NYSE, because NASDAQ-listed securities do 
not trade on NYSE and thus would not route there.
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    Respecting PTFY \12\ orders, the routing charge is $0.0022 per 
share executed at NYSE and $0.0005 per share executed at venues other 
than NYSE, NASDAQ or BX; for orders that execute at BX, PHLX will give 
a credit of $0.0014 per share and for orders that execute at NASDAQ, 
PHLX will charge $0.0027 per share executed. This is the same as what 
NASDAQ charges for its comparable TFTY orders,\13\ which is $0.0022 per 
share executed at NYSE, $0.0005 per share executed at venues other than 
NYSE, BX or PSX, and a credit of $0.0014 for orders that execute at BX, 
except that NASDAQ has a pass through of all fees assessed and rebates 
offered by PSX for orders that execute at PSX, which is akin to PSX's 
basic charge of $0.0027 per share on PSX and lower than NASDAQ's charge 
of $0.0030. In order to attract additional business to PSX, the fee for 
executions resulting from orders routed to NASDAQ from PSX is less than 
the charge for removing liquidity directly on NASDAQ.
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    \12\ See PHLX Rule 3315(a)(1)(A)(v).
    \13\ See NASDAQ Rule 4758(a)(1)(A)(v).
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    Respecting PCRT \14\ orders, for orders that execute at BX, PHLX 
will give a credit of $0.0014 per share and charge $0.0027 for orders 
that execute at NASDAQ.\15\ This is the same or less than what NASDAQ 
charges for its comparable CART orders,\16\ which is a credit of 
$0.0014 for orders that execute at BX (the same), respecting all 
securities regardless of where they are listed. NASDAQ generally 
charges $0.0030 for removing liquidity from NASDAQ and passes through 
fees assessed and rebates offered by PSX for orders that execute at 
PSX, which today is a charge of $0.0027 per share. The proposed PHLX 
charge of $0.0027 for orders that execute at NASDAQ would be the same 
as the PSX charge to remove liquidity and less than NASDAQ's charge of 
$0.0030.
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    \14\ See PHLX Rule 3315(a)(1)(A)(vii).
    \15\ PCRT orders can only execute on BX, PSX or NASDAQ. See PHLX 
Rule 3315(a)(1)(A)(vii).
    \16\ See NASDAQ Rule 4758(a)(1)(A)(xi).
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    Respecting securities priced at less than $1 executed at a venue 
other than PHLX, PHLX proposes to adopt a charge of 0.3% of the total 
transaction cost. This is the same as what NASDAQ charges for orders 
that route and execute

[[Page 77050]]

at an away market,\17\ which the Exchange believes is reasonable.
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    \17\ See NASDAQ Rule 7018(b).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\18\ in general, and with 
Sections 6(b)(4) of the Act,\19\ 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. The new routing fees are 
reasonable because they seek to recoup the cost of the execution on the 
other venue, which is generally borne by the order router and, 
ultimately, the routing exchange.
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    \18\ 15 U.S.C. 78f.
    \19\ 15 U.S.C. 78f(b)(4).
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    The proposed fees generally mimic the routing fee structure in 
effect on NASDAQ for some time.\20\ The difference in the proposed 
routing fees as compared to NASDAQ's routing fees is that PHLX is 
proposing to charge less than NASDAQ ($0.0027 versus $0.0030 per share) 
for PSTG and PSCN orders routed to markets other than the NYSE (as 
compared to STGY and SCAN orders on NASDAQ). The Exchange believes that 
this difference is reasonable because it is the same charge that is 
applicable to orders executed on its own market. Similarly, the 
proposed $0.0027 fee for PTFY and PCRT orders executed on NASDAQ is the 
same charge that is applicable to orders executed on PSX's own market.
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    \20\ See NASDAQ Rule 7018.
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    The Exchange also believes that the proposed routing fees are 
equitable. All similarly situated members are subject to the same fee 
structure, and access to PHLX is offered on fair and non-discriminatory 
terms; specifically, the same routing fee, credit or pass through fee 
applies to any participant and does not differ based on user type 
(e.g., customer or broker-dealer).
    Furthermore, the new routing fees are reasonable and equitable in 
that the decision to send routable orders and to use PHLX as a router 
is entirely voluntarily; members can avail themselves of numerous other 
means of directing orders to other venues, including becoming members 
of those markets or using any of a number of competitive routing 
services offered by other exchanges and brokers.

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. Because the market for order 
execution and routing is extremely competitive, members may readily opt 
to disfavor PHLX's execution and routing services if they believe that 
alternatives offer them better value. 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 fees will impair the 
ability of members or competing order execution venues to maintain 
their competitive standing in the financial markets.

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-2011-154 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-2011-154. 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, 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-2011-154 and should be 
submitted on or before December 30, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-31599 Filed 12-8-11; 8:45 am]
BILLING CODE 8011-01-P