Document ID: SEC-2009-1271-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX, Inc. Relating to Standard and Poor's Depository Receipts/SPDRs ("SPY") Equity Options
Posted Date: 2009-09-08T04:00Z

[Federal Register: September 8, 2009 (Volume 74, Number 172)]
[Notices]               
[Page 46290-46291]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08se09-154]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60587; File No. SR-Phlx-2009-73]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX, Inc. Relating 
to Standard and Poor's Depository Receipts/SPDRs (``SPY'') Equity 
Options

August 28, 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 August 20, 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 assess a $.05 per contract fee for 
Standard and Poor's Depositary Receipts/SPDRs (``SPY'')\3\ equity 
options that are directed to specialists, Streaming Quote Traders 
(``SQTs'')\4\ and Remote Streaming Quote Traders (``RSQTs'')\5\ by a 
member or member organization and are executed electronically in lieu 
of the existing specialist and Registered Options Trader (on-floor) 
equity options transaction fees.
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    \3\ SPY options are based on the SPDR exchange-traded fund 
(``ETF''), which is designed to track the performance of the S&P 500 
Index.
    \4\ An SQT is an Exchange Registered Options Trader (``ROT'') 
who has received permission from the Exchange to generate and submit 
option quotations electronically through an electronic interface 
with AUTOM via an Exchange approved proprietary electronic quoting 
device in eligible options to which such SQT is assigned. See 
Exchange Rule 1014(b)(ii)(A).
    \5\ An RSQT is an ROT that is a member or member organization 
with no physical trading floor presence who has received permission 
from the Exchange to generate and submit option quotations 
electronically through AUTOM in eligible options to which such RSQT 
has been assigned. An RSQT may only submit such quotations 
electronically from off the floor of the Exchange. See Exchange Rule 
1014(b)(ii)(B).
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    While changes to the Exchange's fee schedule pursuant to this 
proposal are effective upon filing, the Exchange has designated this 
proposal to be effective for trades settling on or after August 25, 
2009.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqomxphlx.cchwallstreet.com/NASDAQOMXPHLX/
Filings/, 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.

[[Page 46291]]

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 create incentives for 
specialists, SQTs and RSQTs that receive directed order flow to provide 
liquidity in SPY equity options contracts sent to the Exchange for 
execution. The Exchange believes this incentive will allow the Exchange 
to remain competitive, while encouraging additional order flow in 
options overlaying SPY. The Exchange proposes to assess a $.05 per 
contract fee in SPY equity options that are directed to specialists, 
SQTs and RSQTs (``Directed Participants'' or ``Directed Specialists, 
RSQTs, or SQTs''\6\) by a member or member organization (``Order Flow 
Provider'' or ``OFP'')\7\, and executed electronically on the 
Exchange's electronic trading platform for options, the Phlx XL II 
system. The $0.05 per contract rate would be assessed to the Direct 
Participants, in lieu of the equity options transactions fees of $.22 
per contract side for Registered Option Traders (``ROTs'') (on-floor) 
and $.21 per contract side for specialists on contracts executed 
electronically. Customers who are on the contra-side of a trade 
involving Directed Orders would not be subject to a fee and will remain 
free of charge.
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    \6\ See Exchange Rule 1080(l), ``[hellip]The term `Directed 
Specialist, RSQT, or SQT' means a specialist, RSQT, or SQT that 
receives a Directed Order.'' A Directed Participant has a higher 
quoting requirement as compared with a specialist, SQT or RSQT who 
is not acting as a Directed Participant. See Exchange Rule 1014.
    \7\ See Exchange Rule 1080(l). ``[hellip]The term ``Order Flow 
Provider'' (``OFP'') means any member or member organization that 
submits, as agent, customer orders to the Exchange.''
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    The Exchange currently provides a discount for ROTs (on-floor) and 
specialists that exceed 4.5 million contracts in a given month (the 
``Volume Threshold'') by assessing $ 0.01 per contract on contract 
volume above the Volume Threshold instead of the applicable options 
transaction charges. The Exchange aggregates the trading activity of 
separate ROTs (on-floor) and specialists for purposes of the Volume 
Threshold if there is at least 75% common ownership between the member 
organizations as reflected on each member organization's Form BB, 
Schedule A. The Exchange proposes to assess a $0.01 per contract 
instead of a $0.05 per contract fee for SPY equity option transactions 
when the Directed Participant exceeds the 4.5 million contracts Volume 
Threshold in a given month. The contract volume associated with SPY 
equity options contracts, including the proposal to assess a $.05 per 
contract fee in SPY equity options, would therefore be included in the 
Volume Threshold calculation and the $0.01 per contract rate would 
apply in the event a Directed Participant reaches the 4.5 million 
contracts Volume Threshold.
2. Statutory Basis
    The Exchange believes that its proposal to amend its schedule of 
fees 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. Specifically, the Exchange 
believes that this proposal is equitable because it would apply evenly 
to specialists, SQTs and RSQTs transacting SPY equity options contracts 
sent to the Exchange for execution, in that any specialist, SQT or RSQT 
[sic]
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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 \10\ and paragraph (f)(2) of Rule 19b-4 \11\ 
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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    \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:

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-2009-73 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-2009-73. 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 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 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-2009-73, and should be submitted on or before September 29, 2009.

    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. E9-21457 Filed 9-4-09; 8:45 am]

BILLING CODE 8010-01-P