Document ID: SEC-2012-1167-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2012-07-17T04:00Z

[Federal Register Volume 77, Number 137 (Tuesday, July 17, 2012)]
[Notices]
[Pages 42050-42052]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-17326]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67398; File No. SR-Phlx-2012-88]

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

July 11, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given 
that, on June 28, 2012, 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 adopt certain Routing Fees to recoup costs 
incurred by the Exchange when routing to NASDAQ OMX BX, Inc. (``BX 
Options'').
    While the changes proposed herein are effective upon filing, the 
Exchange has designated these changes to be operative on July 2, 2012.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.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 this filing is to recoup costs that the Exchange 
incurs for routing and executing certain orders in equity options to BX 
Options.
    The Exchange's Pricing Schedule at Section V currently includes the 
following Routing Fees for routing Customer, Professional, Firm, 
Broker-Dealer and Market Maker \3\ orders to away markets.
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    \3\ For the purposes of Routing Fees, a Market Maker includes 
Specialists (see Rule 1020) and ROTs (Rule 1014(b)(i) and (ii), 
which includes SQTs (see Rule 1014(b)(ii)(A)) and RSQTs (see Rule 
1014(b)(ii)(B)).

------------------------------------------------------------------------
                                                           Firm/ broker-
                                                              dealer/
          Exchange             Customer    Professional     specialist/
                                                           market maker
------------------------------------------------------------------------
NYSE AMEX...................       $0.11           $0.31           $0.55
BATS Penny..................        0.55            0.55            0.55
BATS non-Penny..............        0.86            0.91            0.91
BOX.........................        0.11            0.11            0.55
CBOE........................        0.11            0.31            0.55
CBOE orders greater than 99         0.29            0.31            0.55
 contracts in RUT, RMN, NDX,
 MNX, ETFs, ETNs and HOLDRs.
C2..........................        0.55            0.56            0.55
ISE.........................        0.11            0.29            0.55
ISE Select Symbols \13\.....        0.31            0.39            0.55
NYSE ARCA (Penny Pilot).....        0.55            0.55            0.55
NYSE ARCA (Standard)........        0.11            0.11            0.55
NOM.........................        0.54            0.54            0.55
NOM-MNX.....................        0.56            0.56            0.55
NOM-NDX.....................        0.11            0.81            0.81
------------------------------------------------------------------------
\13\ These fees are applicable to orders routed to ISE that are subject
  to Rebates and Fees for Adding and Removing Liquidity in Select
  Symbols. See ISE's Schedule of Fees for the complete list of symbols
  that are subject to these fees.

    The Exchange is proposing to adopt the following Routing Fees when 
routing to the BX Options:

[[Page 42051]]

------------------------------------------------------------------------
                                                           Firm/ broker-
                                                              dealer/
          Exchange             Customer    Professional     specialist/
                                                           market maker
------------------------------------------------------------------------
BX Options Market...........       $0.11           $0.54           $0.54
------------------------------------------------------------------------

    BX Options received approval to operate a new options market \4\ 
and filed to adopt various fees and rebates which would become 
operative on July 2, 2012. Specifically, BX Options will assess a Fee 
to Remove Liquidity of $0.43 per contract to BX Options Market Makers 
and Non-Customers which includes Professionals, Firms, Broker-Dealers 
and Non-BX Options Marker Makers.\5\ Customers would not be assessed a 
Fee to Remove Liquidity on BX Options. The Exchange is seeking to adopt 
new Routing Fees to account for these new fees and other routing costs 
incurred by the Exchange when routing to BX Options as of July 2, 2012.
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    \4\ See Securities Exchange Act Release No. 67256 (June 26, 
2012) (SR-BX-2012-030).
    \5\ See Securities Exchange Act Release No. 67339 (SR-BX-2012-
043). This filing will become operative on July 2, 2012.
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    Nasdaq Options Services LLC (``NOS''), a member of the Exchange, is 
the Exchange's exclusive order router.\6\ NOS serves as the Routing 
Facility of BX Options. Each time NOS routes to away markets NOS is 
charged a $0.06 clearing fee and, in the case of certain exchanges, a 
transaction fee is also charged in certain symbols, which fees are 
passed through to the Exchange. The Exchange currently recoups clearing 
and transaction charges incurred by the Exchange as well as certain 
other costs incurred by the Exchange when routing to away markets, such 
as administrative and technical costs associated with operating NOS, 
membership fees at away markets, and technical costs associated with 
routing.\7\ The Exchange would therefore assess Customers $0.11 per 
contract, Firms would be assessed $0.54 per contract, Market Makers 
would be assessed $0.54 per contract and Professionals would be 
assessed $0.54 per contract.\8\ The Exchange proposes to title the new 
fees ``BX Options.''
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    \6\ See Chapter VI, Section 11(e) (Order Routing).
    \7\ In addition to membership fees and transaction fees, the 
Exchange also incurs an Options Regulatory Fee when routing to an 
away market that assesses that fee.
    \8\ The Exchange's proposed Routing Fees for BX would include 
the Fees for Removing Liquidity of $0.43 per contract, a $0.06 
clearing cost and another $0.05 per contract associated with 
administrative and technical costs associated with operating NOS, a 
total of $0.54 per contract. The Exchange would only assess a 
Customer the $0.06 clearing cost and another $0.05 per contract 
associated with administrative and technical costs associated with 
operating NOS (a total of $0.11 per contract) because a Customer is 
not assessed a Fee for Removing Liquidity on BX.
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    As with all fees, the Exchange may adjust these Routing Fees in 
response to competitive conditions by filing a new proposed rule 
change.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Pricing 
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.
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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 the proposed BX Options Routing Fees are 
reasonable because they seek to recoup costs that are incurred by the 
Exchange when routing Customer, Professional, Firm, Broker-Dealer, 
Specialist and Market Maker orders to BX Options on behalf of members, 
respectively. Each destination market's transaction charge varies and 
there is a standard clearing charge for each transaction incurred by 
the Exchange along with other administrative and technical costs that 
are incurred by the Exchange. The Exchange believes that the proposed 
Routing Fees would enable the Exchange to recover the remove fees 
assessed to market participants by BX Options, plus clearing and other 
administrative and technical fees for the execution of Customer, 
Professional, Firm, Broker-Dealer, Specialist and Market Maker orders 
when routed to BX Options. The Exchange also believes that the proposed 
BX Options Routing Fees are equitable and not unfairly discriminatory 
because they would be uniformly applied to all Customer, Professional, 
Firm, Broker-Dealer, Specialist and Market Maker orders that are routed 
to BX Options.

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. To the contrary, Phlx Routing 
Fees seek to recoup costs for Routing Orders to other exchanges on 
behalf of its members. Options Participants may choose to mark the 
order as ineligible for routing to avoid incurring these fees. In 
addition, a member may designate an order as not available for routing 
to avoid routing fees.\11\
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    \11\ See Rules 1066(h) (Certain Types of Orders Defined) and 
1080(b)(i)(A) (PHLX XL and PHLX XL II).
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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.\12\ 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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    \12\ 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 Number SR-Phlx-2012-88 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission,

[[Page 42052]]

100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2012-88. 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 
10:00 a.m. and 3:00 p.m. Copies of the 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 Number SR-Phlx-2012-88 and should be 
submitted on or before August 7, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-17326 Filed 7-16-12; 8:45 am]
BILLING CODE 8011-01-P