Document ID: SEC-2011-0437-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2011-04-04T04:00Z

[Federal Register Volume 76, Number 64 (Monday, April 4, 2011)]
[Notices]
[Pages 18587-18589]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-7814]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64141; File No. SR-Phlx-2011-32]

Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX LLC Relating 
to Inactive Nominees and Dividend and Merger Strategy Definitions

March 29, 2011.
    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 March 24, 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 Exchange's Fee Schedule to apply 
the Trading Floor Personnel Registration Fee to Inactive Nominees.\3\ 
In addition, the Exchange is proposing to amend the dividend and merger 
strategy text in the Exchange's Fee Schedule to add specificity to 
those definitions.
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    \3\ The term ``inactive nominee'' means a natural person 
associated with and designated as such by a member organization and 
who has been approved for such status and is registered as such with 
the Membership Department. An inactive nominee shall have no rights 
or privileges under a permit unless and until said inactive nominee 
becomes admitted as a member of the Exchange pursuant to the By-Laws 
and Rules of the Exchange. An inactive nominee merely stands ready 
to exercise rights under a permit upon notice by the member 
organization to the Membership Department on an expedited basis. See 
Exchange Rule 1(i).
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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 April 1, 2011.
    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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend the Exchange's 
Fee Schedule to provide that an Inactive Nominee must pay the Trading 
Floor Personnel Registration Fee in order to recover certain 
administrative expenses associated with Inactive Nominees. An Inactive 
Nominee's status requires additional administration because the 
Inactive Nominee is also deemed a clerk for the purpose of Exchange 
Rule 1090.
    Pursuant to By-Law Article X, Section 12-10, to be eligible as an 
Inactive Nominee, an individual must be approved as eligible to hold a 
permit in accordance with the Exchange's By-Laws and Rules. An Inactive 
Nominee does not have any rights or privileges of a permit holder 
unless and until the Inactive Nominee becomes an effective permit 
holder and all applicable Exchange fees are paid.\4\
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    \4\ An Inactive Nominee is currently required to pay $500 every 
6 months for the privilege of maintaining an Inactive Nominee 
Status. See the Inactive Nominee Fee on the Exchange's Fee Schedule. 
See also Exchange By-Law Article X, Section 12-10.
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    The Inactive Nominee allows a member to have additional flexibility 
in obtaining coverage on the trading floor. An Inactive Nominee stands 
ready to assume a membership upon notice by the member requesting that 
a specific permit be transferred intra-firm on an expedited and 
temporary basis. This transfer allows an Inactive Nominee to become an 
effective member of the

[[Page 18588]]

Exchange.\5\ By way of example, an Inactive Nominee would be activated 
in the event of an emergency due to illness or other factors. This 
would allow a member organization to have a full staff available to 
conduct business on the Exchange trading floor.
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    \5\ The Inactive Nominee is required to notify the Membership 
Department in writing prior to the trading day on which they will 
act in place of a member. The Exchange requires an Inactive Nominee 
on the Exchange's trading floor to wear a badge which is provided by 
the Exchange and contains identifying information. The Inactive 
Nominee cannot simultaneously act as a member and a clerk on the 
same day.
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    An Inactive Nominee is also deemed a clerk for purposes of Exchange 
Rule 1090.\6\ Rule 1090 was enacted to identify categories of persons 
that are not members of the Exchange and who are not eligible to effect 
transactions, but are located on the Exchange's trading floor. In order 
for Rule 1090 to apply to all categories of registered persons located 
on the Exchange's Options Floor that are generally not eligible to 
effect transactions, Inactive Nominees are deemed to be Clerks for 
purposes of that Rule.\7\
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    \6\ The term ``Clerk '' means any registered on-floor person 
employed by or associated with a member, member organization, 
participant, or participant organization who is not a member and is 
not eligible to effect transactions on the Options Floor as a 
Specialist, Registered Options Trader, or Floor Broker. See Exchange 
Rule 1090. For purposes of Rule 1090, an Inactive Nominee shall be 
deemed a Clerk.
    \7\ See Securities Exchange Act Release No. 46505 (September 17, 
2002), 67 FR 60273 (September 25, 2002) (SR-Phlx-2001-104).
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    Currently, the Exchange assesses a $100 per month Trading Floor 
Personnel Registration Fee. This fee is imposed on member/participant 
organizations for individuals who are employed by such member/
participant organizations and who work on the Exchange's trading floor, 
such as clerks, interns, stock execution clerks that handle equity 
orders that are part of an options contingency order and other 
associated persons, but who are not registered as members or 
participants. The Exchange currently does not impose the Trading Floor 
Personnel Registration Fee on Inactive Nominees because an Inactive 
Nominee is required to register as a member.
    The Exchange is proposing to eliminate the following qualifying 
language applicable to the Trading Floor Personnel Fee ``* * * but who 
are not registered as members or participants.'' In addition, the 
Exchange is proposing to add the following clarifying language ``[t]his 
fee is not imposed on permit holders.'' The Exchange also proposes to 
add a parenthetical to indicate that for purposes of the Trading Floor 
Personnel Registration Fee a Clerk includes an Inactive Nominee. This 
would add Inactive Nominees to the list of individuals who are employed 
on the Exchange's trading floor and are subject to the Trading Floor 
Personnel Registration Fee. The only participants that would not be 
subject to the fee would be permit holders.
    Additionally, the Exchange is proposing to amend the definitions of 
dividend and merger strategies in Section II of the Fee Schedule titled 
``Equity Options Fees.'' The Exchange recently amended the definitions 
of dividend and merger strategy to provide clarity with respect to the 
text ``prior to the date.'' \8\ The Exchange added the word 
``immediately'' to both definitions to make clear that the timing of 
the trigger event must occur the first business day prior to the 
trigger event. For example, with respect to a dividend strategy, the 
Exchange would interpret the proposed term ``immediately'' to mean the 
first business day prior to the date on which the underlying stock goes 
ex-dividend. With respect to a merger strategy, the Exchange would 
interpret the proposed term ``immediately'' to mean the first business 
day prior to the date on which shareholders of record are required to 
elect their respective form of consideration. In order that the meaning 
of immediately is clear, the Exchange is proposing to replace the words 
``immediately'' with ``the first business day'' in both the dividend 
and merger strategy definitions in Section II of the Fee Schedule.
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    \8\ See SR-Phlx-2011-20.
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2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \9\ in general, and furthers 
the objectives of Section 6(b)(4) of the Act \10\ in particular, in 
that it is an equitable allocation of reasonable fees and other charges 
among Exchange members and other persons using its facilities.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that applying the Trading Floor Personnel 
Registration Fee to Inactive Nominees is reasonable because Inactive 
Nominees are not subject to the permit fees which permit holders are 
required to pay to maintain their membership. Permit holders are 
required to pay a monthly Permit Fee in order to transact business at 
the Exchange. Similar to clerks, interns and stock execution clerks, 
Inactive Nominees do not pay a permit fee.
    The Exchange believes that applying the Trading Floor Personnel 
Registration Fee to Inactive Nominees is equitable because it would 
uniformly apply to all inactive nominees and overall the fee would 
apply to all individuals that do not maintain a permit.
    The Exchange believes that it is reasonable to amend the 
definitions of dividend and merger strategies to provide members with a 
definition that is clear and unambiguous. In addition, the Exchange 
believes that the amended definitions would provide members clear 
guidance on the applicability of the equity option transaction charges 
and the available caps.
    The Exchange believes that the proposed amendments are equitable 
because the proposed new definitions would apply equally to all members 
transacting dividend or merger strategies. The Exchange would uniformly 
apply the definitions to all members who transacted such dividend and/
or merger strategies when assessing equity option transaction charges 
and applying caps.

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.\11\ 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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    \11\ 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.

[[Page 18589]]

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-2011-32 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-2011-32. 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 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-2011-32, and should be submitted on or before April 25, 2011.

    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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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-7814 Filed 4-1-11; 8:45 am]
BILLING CODE 8011-01-P