Document ID: SEC-2011-1923-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2011-12-12T05:00Z

[Federal Register Volume 76, Number 238 (Monday, December 12, 2011)]
[Notices]
[Pages 77277-77279]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-31734]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65897; File No. SR-Phlx-2011-163]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
to the Options Regulatory Fee

 December 6, 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 November 23, 2011, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``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 increase its Options Regulatory Fee 
(``ORF'').
    While changes to the Fee Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative 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

[[Page 77278]]

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 ORF to 
increase it from $0.0035 per contract to $0.004 per contract in order 
to recoup increased regulatory expenses while also ensuring that the 
ORF will not exceed costs.
    The ORF is assessed to each member for all options transactions 
executed or cleared by the member that are cleared by The Options 
Clearing Corporation (``OCC'') in the customer range (i.e., that clear 
in the customer account of the member's clearing firm at OCC). The 
Exchange monitors the amount of revenue collected from the ORF to 
ensure that it, in combination with its other regulatory fees and 
fines, does not exceed regulatory costs. The ORF is imposed upon all 
[sic] transactions executed by a member, even if such transactions do 
not take place on the Exchange.\3\ The ORF also includes options 
transactions that are not executed by an Exchange member but are 
ultimately cleared by an Exchange member.\4\ The ORF is not charged for 
member options transactions because members incur the costs of owning 
memberships and through their memberships are charged transaction fees, 
dues and other fees that are not applicable to non-members. The dues 
and fees paid by members go into the general funds of the Exchange, a 
portion of which is used to help pay the costs of regulation. The ORF 
is collected indirectly from members through their clearing firms by 
OCC on behalf of the Exchange.
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    \3\ The ORF applies to all ``C'' account origin code orders 
executed by a member on the Exchange. Exchange rules require each 
member to record the appropriate account origin code on all orders 
at the time of entry in order to allow the Exchange to properly 
prioritize and route orders and assess transaction fees pursuant to 
the rules of the Exchange and report resulting transactions to the 
OCC. See Exchange Rule 1063, Responsibilities of Floor Brokers, and 
Options Floor Procedure Advice F-4, Orders Executed as Spreads, 
Straddles, Combinations or Synthetics and Other Order Ticket Marking 
Requirements. The Exchange represents that it has surveillances in 
place to verify that members mark orders with the correct account 
origin code.
    \4\ In the case where one member both executes a transaction and 
clears the transaction, the ORF is assessed to the member only once 
on the execution. In the case where one member executes a 
transaction and a different member clears the transaction, the ORF 
is assessed only to the member who executes the transaction and is 
not assessed to the member who clears the transaction. In the case 
where a non-member executes a transaction and a member clears the 
transaction, the ORF is assessed to the member who clears the 
transaction.
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    The ORF is designed to recover a portion of the costs to the 
Exchange of the supervision and regulation of its members, including 
performing routine surveillances, investigations, examinations, 
financial monitoring, and policy, rulemaking, interpretive, and 
enforcement activities. The Exchange believes that revenue generated 
from the ORF, when combined with all of the Exchange's other regulatory 
fees, will cover a material portion, but not all, of the Exchange's 
regulatory costs. The Exchange will continue to monitor the amount of 
revenue collected from the ORF to ensure that it, in combination with 
its other regulatory fees and fines, do not exceed regulatory costs. If 
the Exchange determines regulatory revenues exceed regulatory costs, 
the Exchange will adjust the ORF by submitting a fee change filing to 
the Commission.
    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 \5\ in general, and furthers 
the objectives of Section 6(b)(4) of the Act \6\ in particular, in that 
it is an equitable allocation of reasonable fees and other charges 
among Exchange members. The Exchange believes that the fee change is 
reasonable because the Exchange desires to recoup its regulatory 
expenses while also ensuring that the revenue collected from the ORF 
does not exceed regulatory costs.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the ORF is equitable and not unfairly 
discriminatory because it is objectively allocated to Exchange members 
in that it would continue to be charged to all members on all of their 
transactions that clear as customer at OCC. The Exchange is assessing 
higher fees to those member firms that require more Exchange regulatory 
services based on the amount of customer options business they conduct. 
In addition, the ORF seeks to recover the costs of supervising and 
regulating members, including performing routine surveillances, 
investigations, examinations, financial monitoring, and policy, 
rulemaking, interpretive, and enforcement activities. The ORF is not 
charged for member options transactions because members incur the costs 
of owning memberships and through their memberships are charged 
transaction fees, dues and other fees that are not applicable to non-
members. Additionally, the dues and fees paid by members go into the 
general funds of the Exchange, a portion of which is used to help pay 
the costs of regulation.

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.\7\ 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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    \7\ 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

[[Page 77279]]

     Send an email to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2011-163 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-2011-163. 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 publicly available. All 
submissions should refer to File Number SR-Phlx-2011-163 and should be 
submitted on or before January 3, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-31734 Filed 12-9-11; 8:45 am]
BILLING CODE 8011-01-P