Document ID: SEC-2010-0645-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, Inc.
Posted Date: 2010-04-30T04:00Z

[Federal Register: April 30, 2010 (Volume 75, Number 83)]
[Notices]               
[Page 22882-22884]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30ap10-150]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61971; File No. SR-Phlx-2010-62]

 
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Routing Fees

April 23, 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 April 16, 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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[[Page 22883]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its fees governing pricing for 
Exchange members using the Phlx XL II system,\3\ for routing 
standardized equity and index option customer orders to away markets 
for execution.
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    \3\ For a complete description of Phlx XL II, see Securities 
Exchange Act Release No. 59995 (May 28, 2009), 74 FR 26750 (June 3, 
2009) (SR-Phlx-2009-32). The instant proposed fees will apply only 
to option orders entered into, and routed by, the Phlx XL II system.
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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 for trades settling on or after April 19, 
2010.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqtrader.com/micro.aspx?id=PHLXfilings, on the 
Commission's Web site at http://www.sec.gov, 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 recoup costs that the 
Exchange incurs for routing and executing customer orders in equity and 
index options to away markets.
    In May 2009, the Exchange adopted Rule 1080(m)(iii)(A) to establish 
Nasdaq Options Services LLC (``NOS''), a member of the Exchange, as the 
Exchange's exclusive order router.\4\ NOS is utilized by the Phlx XL II 
system solely to route orders in options listed and open for trading on 
the Phlx XL II system to destination markets.
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    \4\ See Securities Exchange Act Release No. 59995 (May 28, 
2009), 74 FR 26750 (June 3, 2009) (SR-Phlx-2009-32).
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    The Exchange proposes to add a ``professional'' fee category to its 
Routing Fees. 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) \5\ (hereinafter 
``Professional'').
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    \5\ 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 charge the following Professional Routing 
Fees: (i) A $0.26 per contract side fee for Professional orders routed 
to NYSE Amex LLC (``NYSE Amex'') in all options; (ii) a $0.36 per 
contract side fee for Professional orders routed to BATS Exchange, Inc. 
(``BATS'') in all options; (iii) a $.06 per contract side fee for 
Professional orders routed to the Boston Options Exchange Group LLC 
(``BOX'') in all options; (iv) a $0.26 per contract fee for 
Professional orders routed to the Chicago Board of Options Exchange, 
Inc. (``CBOE'') in all options; (v) a $.06 per contract side fee for 
Professional orders routed to the International Securities Exchange, 
LLC (``ISE'') in all options; (vi) a $0.50 per contract side fee for 
Professional orders routed to NYSE Arca, Inc. (``NYSEArca'') in penny 
options; (vii) a $.06 per contract side fee for Professional orders 
routed to NYSEArca in all other options (excluding penny options); 
(viii) a $.40 per contract side fee for Professional orders routed to 
NASDAQ Options Market (``NOM'') in penny options; and (ix) a $.56 per 
contract side fee for Professional orders routed to NOM in the NASDAQ 
100 Index Option (``NDX'') and the mini NASDAQ 100 Index Option 
(``MNX''). The proposed Professional Routing Fees for NYSE Amex and 
CBOE are higher for a Professional as opposed to a customer ($0.26 
versus $0.06) because of the $.20 transaction fees that both NYSE Amex 
and CBOE assess for Professional orders.\6\ Since these transaction 
charges do not exist for customer orders, the customer Routing Fees are 
lower for these away markets as compared to the Professional Routing 
Fees.\7\
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    \6\ See NYSE Amex Options Fee Schedule and CBOE Fees Schedule.
    \7\ See E-mail from Angela S. Dunn, Assistant General Counsel, 
Phlx, to Richard R. Holley, Senior Special Counsel, Johnna B. 
Dumler, Special Counsel, and Daniel T. Gien, Staff Attorney, 
Division of Trading and Markets, Commission, dated April 22, 2010 
(making clarifying changes to this paragraph).
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    Currently, the Exchange's Fee Schedule includes Routing Fees to the 
aforementioned exchanges for customer orders. Professional orders are 
currently assessed these customer Routing Fees.\8\ The existing 
customer routing fees will be unchanged.
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    \8\ See Securities Exchange Act Release No. 61905 (April 14, 
2010), 75 FR 20871 (April 21, 2010) (SR-Phlx-2010-55).
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    The Exchange is proposing these charges in order to recoup clearing 
and transaction charges which are incurred by the Exchange when orders 
are routed to these away markets.\9\ As with all fees, the Exchange may 
adjust these Routing Fees in response to competitive conditions by 
filing a new proposed rule change.
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    \9\ Each destination market's transaction charge varies and 
there is a standard clearing charge for each transaction incurred by 
the Exchange. The Exchange basis [sic] the above fees on the total 
of these costs for each destination market in assessing fees.
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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 for trades settling on or after April 19, 
2010.
2. Statutory Basis
    The Exchange believes that its proposal to amend its schedule of 
fees is consistent with Section 6(b) of the Act \10\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \11\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among Exchange members because Exchange members would 
equally be assessed the costs incurred by the Exchange to route 
customer orders to away markets on behalf of its members.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4).
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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.

[[Page 22884]]

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\ and paragraph (f)(2) of Rule 19b-4 \13\ 
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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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 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 Number SR-Phlx-2010-62 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-2010-62. 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 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-2010-62 and should be 
submitted on or before May 21, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-10030 Filed 4-29-10; 8:45 am]
BILLING CODE 8011-01-P