Document ID: SEC-2012-0027-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2012-01-09T05:00Z

[Federal Register Volume 77, Number 5 (Monday, January 9, 2012)]
[Notices]
[Pages 1111-1114]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-111]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66086; File No. SR-Phlx-2011-181]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Access 
Service Fees

January 3, 2012.
    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 December 21, 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 proposes to amend the following Access Service Fees: 
(i) the Trading/Administrative Booths and

[[Page 1112]]

Market Maker Trading Space Fee; (ii) the Specialist Post Fee; and (iii) 
the Floor Facility Fee. The Exchange proposes to delete the following 
Access Service Fees: (i) the Shelf Space on Equity Option Trading Floor 
Fee; and (ii) Kiosk Construction Fee.
    While changes to the Fee Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative on January 3, 2012.
    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, 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 amend the following 
Access Service Fees: (i) the Trading/Administrative Booths and Market 
Maker Trading Space Fee; (ii) Specialist Post Fee and (iii) Floor 
Facility Fee to keep pace with rising overhead costs associated with 
maintaining the trading floor. In addition, the Exchange proposes to 
delete the Shelf Space on Equity Option Trading Floor Fee and the Kiosk 
Construction Fee because these fees are not relevant and the Exchange 
has absorbed such costs, respectively. Each fee will be described below 
separately.

Trading/Administrative Booths and Market Maker Trading Space Fee

    The Exchange is proposing to amend the name of the ``Trading/
Administrative Booths and Market Maker Trading Space'' Fee to the 
``Trading/Administrative Booths'' Fee. The Trading Post/Booth space is 
physical space on the Exchange's trading floor, which space typically 
is used by floor brokers and clearing firms. The Exchange is proposing 
changes to the Floor Facility Fees, described in more detail below, and 
therefore is amending the name of the Trading/Administrative Booths and 
Market Maker Trading Space Fee to reflect the changes described below. 
Registered Options Traders \3\ and SQTs \4\ would be assessed the Floor 
Facility Fee, instead of this fee. Any floor participant may elect to 
obtain a booth on the Exchange's trading floor. The Exchange is not 
proposing to amend the fee rate of the Trading/Administrative Booths 
Fee.
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    \3\ A Registered Options Trader (``ROT'') includes a Streaming 
Quote Trader (``SQT''), a Remote Streaming Quote Trader (``RSQT'') 
and a Non-SQT, which by definition is neither a SQT or a RSQT. A 
Registered Option Trader is defined in Exchange Rule 1014(b) as a 
regular member or a foreign currency options participant of the 
Exchange located on the trading floor who has received permission 
from the Exchange to trade in options for his own account. See 
Exchange Rule 1014 (b)(i) and (ii).
    \4\ An SQT is defined in Exchange Rule 1014(b)(ii)(A) as an ROT 
who has received permission from the Exchange to generate and submit 
option quotations electronically in options to which such SQT is 
assigned.
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Specialist Post Fee

    The Exchange proposes to amend the current fee structure for a 
Specialist Post and instead assess a $3,000 fee for such a post. 
Currently, Specialist Post Fees vary with the size of the post. 
Specialist units are assessed a Specialist Post Fee of $1,125 per month 
for a quarter post and $4,500 per month for a full post with a maximum 
fee of $4,500 per month. The Exchange proposes modifying the fee 
structure for a Specialist Post to assess the fee equally to all 
Specialist units. Each individual Specialist would also be assessed a 
Floor Facility Fee, as described below, which costs together (the 
Specialist Post Fee and the Floor Facility Fee) would assist the 
Exchange in recouping increasing occupancy costs, such as electricity 
usage due to the increase of member computers on the trading floor. The 
Exchange believes that the $3,000 Specialist Post Fee is consistent 
with costs incurred by the Exchange for the usage of space on the 
Exchange's trading floor \5\ by Specialists.
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    \5\ There are some Specialist units that currently pay a $1,125 
Specialist Post Fee that would experience an increased fee with the 
proposed $3,000 fee rate, however these Specialist units comprise 
less than two percent of the Specialist Units.
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Floor Facility Fee

    The Exchange proposes to increase the Floor Facility Fee from $200 
per month to $300 per month. Currently, the Floor Facility Fee is 
applicable to floor members that are not currently assessed fees 
related to the usage of a Trading/Administrative Booths and Market 
Maker Trading Space Fee. The Floor Facility Fee is intended to fairly 
allocate costs attendant to providing members with services necessary 
to the conduct of business on the floor of the Exchange. The Exchange 
proposes to increase this fee to offset the increased costs of 
operating a trading floor facility. In addition to increasing this fee, 
the Exchange proposes to apply the Floor Facility Fee to ROTs, SQTs and 
individual Specialists \6\ located on the Exchange's trading floor. 
Today, a ROT and SQT are assessed the Trading/Administrative Booths and 
Market Maker Trading Space Fee and an individual Specialist is not 
assessed such a fee. The Exchange also proposes to remove the qualifier 
that the Floor Facility Fee is applicable to floor members that are not 
currently assessed fees related to the usage of a Trading/
Administrative Booth or Market Maker Trading Space. Rather, ROTs, SQTs 
and individual Specialists on the Exchange's trading floor would be 
assessed a Floor Facility Fee. If a ROT or SQT also determined to 
acquire a Trading/Administrative Booth, they would also be assessed 
that fee as well. Each individual Specialist would be assessed this fee 
and the Specialist unit would be assessed the Specialist Post Fee. In 
the instance that an individual Specialist is also an SQT, that member 
will only pay a $300 Floor Facility Fee per month; that Specialist 
would not be assessed the fee for each capacity.
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    \6\ A Specialist is an Exchange member who is registered as an 
options specialist pursuant to Rule 1020(a). A Specialist Unit would 
be assessed the Specialist Post Fee and the individual Specialist 
would be assessed the Floor Facility Fee.
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Shelf Space on Equity Option Trading Floor

    The Exchange maintained various fees on its Fee Schedule relating 
to XLE, the Exchange's equity trading system. The Exchange ceased 
operation of the technology used to operate XLE on October 24, 2008 and 
filed a proposal to amend the administration and enforcement of certain 
rules.\7\ The Exchange also filed to delete XLE Fee Schedule and 
references to XLE fees

[[Page 1113]]

from the Fee Schedule.\8\ The Shelf Space on Equity Option Trading 
Floor Fee should have been deleted along with the other XLE fees. This 
fee inadvertently remained on the Fee Schedule. The Exchange proposes 
to delete this outdated fee.
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    \7\ See Securities Exchange Act Release No. 58613 (September 22, 
2008), 73 FR 57181 (October 1, 2008) (SR-Phlx-2008-65). The Exchange 
later filed to delete various Rules relating to XLE. See Securities 
Exchange Act Release No. 64338 (April 25, 2011), 76 FR 24069 (April 
29, 2011) (SR-Phlx-2011-13).
    \8\ See Securities Exchange Act Release No. 59030 (December 1, 
2008), 73 FR 74548 (December 8, 2008) (SR-Phlx-2008-80).
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Kiosk Construction Fee

    The Exchange proposes to amend the Fee Schedule to eliminate the 
Kiosk \9\ Construction Fee. This fee was adopted in 2002 to require 
individual Specialists and Specialist units to pay for the cost of 
construction of a kiosk if the Specialist unit initiates the 
construction request.\10\ The Exchange has not assessed this fee since 
approximately 2008. The Exchange has determined to absorb this cost in 
the few circumstances that it believes any construction would be 
necessary going forward. The Exchange proposes to eliminate the Kiosk 
Construction Fee.
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    \9\ A kiosk is an open, flat surface that contains computer 
terminals and allows the Specialist units to face the trading crowd.
    \10\ See Securities Exchange Act Release No. 458470 (April 20, 
2002), 67 FR 30409 (May 6, 2002) (SR-Phlx-2002-30).
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    While changes to the Fee Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative on January 3, 2012.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
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.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that it is reasonable to amend its Trading/
Administrative Booths Fee to eliminate the requirement that a market 
maker, which includes a ROT and a SQT in this case, pay the $300 
monthly fee. The Exchange also believes that it is reasonable to apply 
the Floor Facility Fees to ROTs, SQTs and individual Specialists and 
increase that fee to $300. Finally, the Exchange believes that it is 
reasonable to assess all Specialist Units a Specialist Post Fee of 
$3,000 instead of a fee based on the size of the post. The revenue from 
these fees would assist the Exchange in defraying the occupancy costs 
of maintaining the trading floor. The Exchange also believes that it is 
reasonable to assess ROTs and SQTs the Floor Facility Fee instead of 
the newly named ``Trading/Administrative Booths'' Fee in order that 
market makers retain their own fee category. There is no impact in 
terms of the amount such ROTS and SQTs will be assessed because both 
fees, the Trading/Administrative Booths Fee and the Floor Facility Fee, 
will be $300. Finally, the Exchange believes that removing the 
qualifier that the Floor Facility Fee is applicable to floor members 
that are not currently assessed fees related to the usage of a Trading/
Administrative Booth is reasonable because these fees are meant to 
apply to different types of market participants. In the event that a 
ROT or SQT determined that they would also require a booth, the 
Exchange believes that the use of the booth should be a separate fee 
from the Facility Fee.
    The Exchange also believes that the fee amendments to the newly 
named Trading/Administrative Booths Fee, Specialist Post Fee and Floor 
Facility Fees are equitable and not unfairly discriminatory because the 
Specialist Post Fees are higher because Specialists generate higher 
occupancy costs from electricity usage and other facility usage as 
compared to other floor participants. The Specialist Post Fee combined 
with the Floor Facility Fee would allow the Exchange to cover such 
costs as cleaning, HVAC and general maintenance. All other floor 
members would be assessed the Floor Facility Fee of $300 per month to 
conduct business on the Exchange's trading floor. The Exchange believes 
these fees are indicative of the costs attributable to each category of 
participant. In addition, the amendment to the Specialist Post Fee 
would cause all Specialist units to be uniformly assessed the same fee. 
All individual Specialists would also be uniformly assessed a $300 
Floor Facility Fee, which would be equal to the Trading/Administrative 
Booths Fee paid by floor brokers and clearing firms, also $300 per 
month. Only a small number of Specialist units would pay a higher cost 
for Specialist Posts. When combining the Specialist Post Fee and Floor 
Facility Fee some Specialists units/Specialists would experience a 
higher fee overall, which fees are consistent with increased costs to 
maintain the Exchange's trading floor. Other Specialist units/
Specialists would experience a lower fee overall. Finally, the Exchange 
believes that removing the qualifier that the Floor Facility Fee is 
applicable to floor members that are not currently assessed fees 
related to the usage of a Trading/Administrative Booth is equitable and 
not unfairly discriminatory because all members would be billed equally 
for each service based on their participation and requests for space.
    The Exchange believes that eliminating the outdated Shelf Space on 
Equity Option Trading Floor Fee is reasonable, equitable and not 
unfairly discriminatory because there is no longer an equity trading 
floor and the fee inadvertently remained on the Fee Schedule after the 
shutdown of XLE. Similarly, the Exchange believes that eliminating the 
Kiosk Construction Fee is reasonable, equitable and not unfairly 
discriminatory because the Exchange has recently not received any 
requests for construction and has determined to absorb such costs in 
the future if such construction is necessary. By eliminating this fee, 
no member on the Exchange's trading floor would be assessed for such a 
cost.

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\ 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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    \13\ 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:

[[Page 1114]]

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-2011-181 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-2011-181. 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-2011-181 and should be 
submitted on or before January 30, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Kevin M. O'Neill,
Deputy Secretary.
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    \14\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2012-111 Filed 1-6-12; 8:45 am]
BILLING CODE 8011-01-P