Document ID: SEC-2010-0588-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, Inc.
Posted Date: 2010-04-21T04:00Z

[Federal Register: April 21, 2010 (Volume 75, Number 76)]
[Notices]               
[Page 20871-20873]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21ap10-103]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61905; File No. SR-Phlx-2010-55]

 
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
a New Category of Fees for ``Professionals''

April 14, 2010.
    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 31, 2010, 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 adopt fees for a new type of participant 
called ``professional.'' \3\
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    \3\ See Securities Exchange Act Release No. 61802 (March 30, 
2010), 75 FR 17193 (April 5, 2010) (SR-Phlx-2010-05).
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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 operative on April 1, 2010.
    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, at the Commission's Public Reference 
Room, and on the Commission's Web site at http://www.sec.gov.

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 adopt a new category 
of fees, ``professional.'' The Exchange believes that the proposed fees 
for professional orders will allow the Exchange to remain competitive 
with other options exchanges who apply fees to professional orders.
    The Exchange defines a ``professional'' as any person or entity 
that (i) is not a broker or dealer in securities, and (ii) places more 
than 390 orders in listed options per day on average during a calendar 
month for its own beneficial account(s) \4\ (hereinafter 
``Professional'').
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    \4\ A Professional will be treated in the same manner as an off-
floor broker-dealer for purposes of Rules 1014(g) (except with 
respect to all-or-none orders, which will be treated like customer 
orders), 1033(e), 1064.02 (except professional orders will be 
considered customer orders subject to facilitation), and 1080.08 as 
well as Options Floor Procedure Advices B-6, B-11 and F-5. Member 
organizations must indicate whether orders are for professionals.
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    The Exchange proposes to add a ``Professional'' fee category to its 
transaction fees for equity options, index options and foreign currency 
options. The Exchange proposes to amend Categories II, III and IV of 
the Fee Schedule to assess a $0.20 transaction fee on Professional 
orders in all equity option classes, a $0.35 transaction fee on 
Professional orders in sector index options and a $0.30 transaction fee 
on Professional orders in U.S. dollar-settled foreign currency options.

[[Page 20872]]

    The Exchange is also proposing that Payment For Order Flow Fees \5\ 
not be assessed on Professional orders and is amending Category II of 
the Fee Schedule to reflect that. The Exchange would not assess a 
payment for order flow fee on professional orders, because the Exchange 
believes payment for order flow fees are not required to remain 
competitive with other options exchanges with respect to Professional 
orders.\6\
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    \5\ The Exchange currently assesses $.25 per contract for 
options that are executed in the penny pilot program and $.70 for 
remaining equity options. These fees are assessed for trades 
resulting from either Directed or non-Directed Orders that are 
delivered electronically and executed on the Exchange: Assessed on 
ROTs, specialists and Directed ROTs on those trades when the 
specialist unit or Directed ROT elects to participate in the payment 
for order flow program.
    \6\ See Securities Exchange Act Release No. 61693 (March 11, 
2010), 75 FR 13175 (March 18, 2010) (SR-ISE-2010-16).
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    In Category V of the Fee Schedule, the Exchange is also proposing 
that Cancellation Fees \7\ not be assessed on Professional orders. The 
Exchange is excluding professional orders from the computation of the 
Cancellation Fee, because the Exchange does not believe that these 
orders raise the types of issues that the Cancellation Fee is intended 
to address.\8\
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    \7\ The Exchange currently assesses $2.10 per order for each 
cancelled electronically delivered customer order in excess of the 
number of customer orders executed on the Exchange by a member 
organization in a given month. All customer orders from the same 
member organization that are executed in the same series on the same 
side of the market at the same price within a 300 second period will 
be aggregated and counted as one executed customer options order.
    \8\ See Securities Exchange Act Release No. 60188 (June 29, 
2009), 74 FR 32986 (July 9, 2009) (SR-Phlx-2009-48).
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    The Exchange also proposes to add a notation to the Routing Fees in 
Category IX to indicate that Professional orders will be subject to the 
Routing Fees.
2. Statutory Basis
    The Exchange believes that its proposal to amend its schedule of 
fees 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. The Exchange believes that 
adding Professional fees to the fees applicable to the other equity 
options, sector index options and foreign currency options transaction 
fees is fair and reasonable, because the proposed fees are similar to 
the transaction fees applicable to broker-dealers trading on Phlx \11\ 
as well as fees assessed by other options exchanges. For example, CBOE 
assesses a $0.20 per contract fee for professional orders in equity 
options,\12\ the same as the Exchange's proposed Category II fees.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
    \11\ The options transaction charge for firms is $.25 per 
contract; see Category II of the Fee Schedule.
    \12\ See Securities Exchange Act Release No. 61329 (January 11, 
2010), 75 FR 2901 (January 19, 2010) (SR-CBOE-2009-101).
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    With regard to the sector index options fees and foreign currency 
options fees proposed for Professionals, these charges are similar to 
the current transaction fees assessed on the Exchange's Registered 
Options Traders pursuant to Categories III and IV of the Exchange's Fee 
Schedule; and therefore, the Exchange believes the proposed fee is fair 
and reasonable.
    The Exchange believes that excluding Professional orders from the 
computation of the Cancellation Fee will continue to fairly allocate 
costs among members according to system use, which is the purpose of 
cancellation fees. In addition, the Exchange will not assess 
specialists, SQTs, RSQTs and ROTs a payment for order flow fee on 
Professional orders, in order to compete with other options exchanges.
    The Exchange also proposes to specify that Routing Fees apply to 
Professional orders for purposes of clarity.

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\ and paragraph (f)(2) of Rule 19b-4 \14\ 
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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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 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 No. SR-Phlx-2010-55 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-2010-55. 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, 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 Phlx. 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-2010-55 and should be 
submitted on or before May 12, 2010.
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    \15\ 17 CFR 200.30-3(a)(12).

[[Page 20873]]

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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-9115 Filed 4-20-10; 8:45 am]
BILLING CODE 8011-01-P