Document ID: SEC-2011-0570-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2011-04-20T04:00Z

[Federal Register Volume 76, Number 76 (Wednesday, April 20, 2011)]
[Notices]
[Pages 22158-22160]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-9478]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64300; File No. SR-Phlx-2011-52]

 Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX LLC Relating 
to Rebates and Fees for Customer Complex Orders

April 14, 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 April 8, 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 amend its Complex Order \3\ Fees in 
Section I of its Fee Schedule titled ``Rebates and Fees for Adding and 
Removing Liquidity in Select Symbols.''
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    \3\ A Complex Order is any order involving the simultaneous 
purchase and/or sale of two or more different options series in the 
same underlying security, priced at a net debit or credit based on 
the relative prices of the individual components, for the same 
account, for the purpose of executing a particular investment 
strategy. Furthermore, a Complex Order can also be a stock-option 
order, which is an order to buy or sell a stated number of units of 
an underlying stock or ETF coupled with the purchase or sale of 
options contract(s). See Exchange Rule 1080, Commentary .08(a)(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 11, 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, 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 amend Section I, Part 
B of the Exchange's Fee Schedule, titled ``Complex Order'' to: (i) Pay 
a Customer Complex Order Rebate for Adding Liquidity of $0.25 per 
contract for options overlying the iShares Russell 2000 Index 
(``IWM''); and (ii) waive the Customer Complex Order Fee for Removing 
Liquidity for options overlying Standard and Poor's Depositary 
Receipts/SPDRs (``SPY'') \4\; the PowerShares QQQ Trust 
(``QQQ'')[supreg]; and Apple, Inc. (``AAPL'') [sic]. The Exchange is 
proposing these amendments to the Fee Schedule in order to continue to 
attract additional Customer order flow.
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    \4\ SPY options are based on the SPDR exchange-traded fund 
(``ETF''), which is designed to track the performance of the S&P 500 
Index.
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Complex Order Rebate for Adding Liquidity
    Currently, the Exchange pays the following Complex Order Rebates 
for Adding Liquidity in the Select Symbols:

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                                                                                            Specialist,
                                                             Customer        Directed      ROT, SQT and        Firm        Broker-dealer   Professional
                                                                            participant        RSQT
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Rebate for Adding Liquidity in all Select Symbols except           $0.24           $0.00           $0.00           $0.00           $0.00           $0.00
 SPY, QQQ and AAPL......................................
Rebate for Adding Liquidity for SPY, QQQ and AAPL.......            0.25            0.00            0.00            0.00            0.00            0.00
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[[Page 22159]]

    With respect to Complex Orders, the Exchange pays Customers a rate 
of $0.25 per contract in specific Select Symbols, namely SPY, QQQ and 
AAPL. The Exchange currently pays a Complex Order Customer Rebate of 
$0.24 per contract for transactions that add liquidity in IWM (``IWM 
Rebate'').\5\ The Exchange is proposing to change the IWM Customer 
Complex Order Rebate for Adding Liquidity from $0.24 to $0.25 per 
contract. The Exchange would continue to pay all other Select Symbols, 
except SPY, QQQ and AAPL, a Customer Complex Order Rebate for Adding 
Liquidity of $0.24 per contract. Other, non-Customer market 
participants would not be paid a Complex Order Rebate for Adding 
Liquidity.\6\ The Exchange believes that this increased rebate for 
Customers transacting Complex Orders in options overlying IWM will 
attract additional Customer order flow to the Exchange in IWM.
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    \5\ The Exchange currently also pays a $0.24 per contract 
Customer Complex Order Rebate for Adding Liquidity in all Select 
Symbols except SPY, QQQ and AAPL.
    \6\ The only market participant that receives a Rebate for 
Adding Liquidity for Complex Orders today is a Customer.
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Complex Order Fee for Removing Liquidity
    Currently, the Exchange assesses the following Complex Orders Fees 
for Removing Liquidity in the Select Symbols:

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                                                                                            Specialist,
                                                             Customer        Directed      ROT, SQT and        Firm        Broker-dealer   Professional
                                                                            participant        RSQT
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Fee for Removing Liquidity..............................           $0.25           $0.25           $0.27           $0.28           $0.35           $0.28
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    With respect to Complex Orders, the Exchange currently assesses 
Customers a Fee for Removing Liquidity of $0.25 per contract in all 
Select Symbols. The Exchange is proposing to waive the Customer Complex 
Order Fee for Removing Liquidity for options overlying SPY, QQQ, IWM 
and AAPL. All other Select Symbols would continue to be subject to a 
Customer Complex Order Fee for Removing Liquidity of $0.25 per 
contract. The Exchange is not proposing to waive the Complex Order Fee 
for Removing Liquidity for any other market participant.\7\ The 
Exchange believes that this waiver of the Customer Complex Order Fee 
for Removing Liquidity for options overlying SPY, QQQ, IWM and AAPL 
will attract additional Customer order flow to the Exchange in those 
Select Symbols.
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    \7\ The other non-Customer market participants would continue to 
be assessed a Complex Order Fee for Removing Liquidity as noted 
above.
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    The Exchange does not propose to amend the fees in Section I, Part 
A titled ``Single contra-side order.'' 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 11, 
2011.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \8\ in general, and furthers 
the objectives of Section 6(b)(4) of the Act \9\ in particular, in that 
it is an equitable allocation of reasonable fees and other charges 
among Exchange members. The Exchange also believes that there is an 
equitable allocation of reasonable rebates among Exchange members.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that it is reasonable to pay an increased 
Complex Order Rebate for Adding Liquidity to Customers in options 
overlying IWM and waive the Complex Order Fee for Removing Liquidity 
for Customers in options overlying SPY, QQQ, IWM and AAPL, because both 
the proposed Customer rebate and waiver of the fee should attract 
additional Customer order flow to the Exchange for the benefit of all 
market participants. The Exchange believes that the proposal is 
equitable because by paying an increased Complex Order Rebate for 
Adding Liquidity to Customers transacting options overlying IWM and 
waiving the Customer Fee for Removing Liquidity in options overlying 
SPY, QQQ, IWM and AAPL, all market participants should benefit from the 
increased liquidity which increased Customer order flow should bring to 
the Exchange. In addition, the aforementioned proposals are equitable 
because the Exchange would uniformly pay and waive the rebate and fee, 
respectively, for all Customer Complex Orders in the applicable 
symbols.
    Also, the Exchange believes that it is reasonable to assess a 
different Fee for Removing Liquidity in certain symbols. For example, 
Chicago Board Options Exchange, Incorporated (``CBOE'') assesses 
Customers different fees for transacting QQQ [sic] and SPY as compared 
to other equity options.\10\
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    \10\ See CBOE's Fees Schedule.
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    The Exchange operates in a highly competitive market comprised of 
nine U.S. options exchanges in which sophisticated and knowledgeable 
market participants can readily send order flow to competing exchanges 
if they deem fee levels at a particular exchange to be excessive. The 
Exchange believes that the Complex Order fees and rebates it assesses 
must be competitive with fees and rebates assessed in place on other 
options exchanges. The Exchange believes that this competitive 
marketplace impacts the fees and rebates present on the Exchange today 
and influences the proposals set forth above.

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

[[Page 22160]]

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. 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-2011-52 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-2011-52. 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 website 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 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-2011-52 and should be 
submitted on or before May 11, 2011.
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    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-9478 Filed 4-19-11; 8:45 am]
BILLING CODE 8011-01-P