Document ID: SEC-2011-1884-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2011-12-06T05:00Z

[Federal Register Volume 76, Number 234 (Tuesday, December 6, 2011)]
[Notices]
[Pages 76213-76215]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-31204]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65853; File No. SR-Phlx-2011-157]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Active Specialized Quote Feed Port Fee

November 30, 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 17, 2011, 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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[[Page 76214]]

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

    The Exchange proposes to amend its Fee Schedule to modify the 
Active Specialized Quote Feed (``SQF'') Port Fee.
    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.
    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, on the Commission's Web site at 
http://www.sec.gov/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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Active SQF Port Fee in Section 
VI of the Exchange's Fee Schedule, titled ``Access Service, 
Cancellation, Membership, Regulatory and Other Fees.'' SQF is an 
interface that enables specialists, SQTs and Remote Streaming Quote 
Traders (``RSQTs'') \3\ to connect and send quotes into Phlx XL.\4\ 
Active SQF ports are ports that receive inbound quotes at any time 
within that month.\5\ The Exchange intends to amend the tier structure, 
eliminate the $500 per month cap applicable to certain member 
organization and establish a new monthly cap now that all firms have 
transitioned from SQF 5.0 to SQF 6.0. The Exchange proposes these 
amendments to recoup fees.
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    \3\ A RSQT is defined in Exchange Rule in 1014(b)(ii)(B) as an 
ROT that is a member or member organization with no physical trading 
floor presence who has received permission from the Exchange to 
generate and submit option quotations electronically in options to 
which such RSQT has been assigned. An RSQT may only submit such 
quotations electronically from off the floor of the Exchange.
    \4\ See Securities Exchange Act Release No. 63034 (October 4, 
2010), 75 FR 62441 (October 8, 2010) (SR-Phlx-2010-124).
    \5\ The current version, SQF 6.0, allows member organizations to 
access, information such as execution reports, execution report 
messages, auction notifications, and administrative data through a 
single feed. Other data that is available on SQF 6.0 includes: (1) 
Options Auction Notifications (e.g., opening imbalance, market 
exhaust, PIXL or other information currently provided on SQF 5.0) 
;(2) Options Symbol Directory Messages (currently provided on SQF 
5.0); (3) System Event Messages (e.g., start of messages, start of 
system hours, start of quoting, start of opening); (4) Complex Order 
Strategy Auction Notifications (COLA); (5) Complex Order Strategy 
messages; (6) Option Trading Action Messages (e.g., trading halts, 
resumption of trading); and (7) Complex Strategy Trading Action 
Message (e.g., trading halts, resumption of trading).
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    The Exchange currently has a tiered Active SQF Port Fee as follows:

------------------------------------------------------------------------
                                                          Cost per port
               Number of Active SQF Ports                   per month
------------------------------------------------------------------------
0-4....................................................             $350
5-18...................................................            1,250
19-40..................................................            2,350
41 and over............................................            3,000
------------------------------------------------------------------------

    Today, the Exchange caps Active SQF Ports at $500 per month for 
member organizations that meet the following criteria: (i) Are not 
members of another national securities exchange (``Phlx Only 
Members''); and (ii) have 50 or less Streaming Quote Trader (``SQT'') 
\6\ assignments \7\ affiliated with the member organization. Also, 
Active SQF Port Fees are capped at $40,000 per month (``Cap'') until 
December 30, 2011 for all member organizations other than those member 
organizations who meet the requirements of the $500 per month cap. The 
purpose of the Cap was to ensure member organizations were not assessed 
fees in excess of the Active SQF Port Fees while they transitioned from 
SQF 5.0 to SQF 6.0 ports.\8\ The Cap is not in effect beyond December 
30, 2011.\9\
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    \6\ An SQT is defined in Exchange Rule 1014(b)(ii)(A) as an ROT 
who has received permission from the Exchange to generate and submit 
option quotations electronically in options to which such SQT is 
assigned.
    \7\ See Exchange Rules 1014(b) and 507 for qualifications 
relating to assignments.
    \8\ See Securities Exchange Release No. 65046 (August 5, 2011), 
76 FR 49821 (August 5, 2011) (SR-Phlx-2011-105).
    \9\ See Securities Exchange Release No. 65046 (August 5, 2011), 
76 FR 49821 (August 5, 2011) (SR-Phlx-2011-105).
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    The Exchange is proposing to amend the four SQF tiers to three SQF 
tiers and assess the following Active SQF Port Fees:

------------------------------------------------------------------------
                                                          Cost per port
               Number of Active SQF Ports                   per month
------------------------------------------------------------------------
0-4....................................................             $350
5-18...................................................            1,350
19 and over............................................            2,500
------------------------------------------------------------------------

The Exchange also proposes to eliminate the $500 per month cap that was 
applicable to certain member organizations that met the above listed 
criteria and replace the $40,000, per month cap that is set to expire 
after December 30, 2011, with a $41,000 monthly cap. The Exchange will 
also remove the restriction that it will not assess the Active SQF Port 
Fee for the use of active SQF 5.0 ports to the extent that the member 
organization is paying for the same (or greater) number of active SQF 
6.0 ports.
    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 \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.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that it is reasonable to modify the Active 
SQF Fee to amend the tiers and remove the caps because the release of 
SQF 6.0 is complete \12\ and the Exchange believes it has provided 
members ample opportunity to transition to SQF 6.0.\13\ The Exchange 
believes that the new tier structure is reasonable because the lower 
tier fee (0-4 ports) will remain the same and only the next two tiers, 
5-18 and 19 and over, will increase. SQF 6.0 offers users increased 
efficiency by allowing them to access in a single feed, rather than 
through accessing multiple feeds, information such as execution reports 
and other relevant data.\14\ In

[[Page 76215]]

addition, non quoting firms that would like to receive the relevant 
information available over SQF will be allowed to connect to the SQF 
interface, but not send quotes.\15\ The tiers are designed to recoup 
costs associated with the ports while providing increased efficiency 
with the new release.
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    \12\ The Exchange released SQF 6.0 on October 11, 2010.
    \13\ The Exchange anticipated that member organizations would 
utilize both SQF 5.0 and SQF 6.0 for a period of time. The Exchange 
believes that by January 3, 2012 all members should have 
transitioned and ample time was provided in 2011 to complete the 
transition.
    \14\ See Securities Exchange Act Release No. 63034 (October 4, 
2010), 75 FR 62441 (October 8, 2010) (SR-Phlx-2010-124). Data 
proposed for SQF 6.0 includes the following: (1) Options Auction 
Notifications (e.g., opening imbalance, market exhaust, PIXL or 
other information currently provided on SQF 5.0); (2) Options Symbol 
Directory Messages (currently provided on SQF 5.0); (3) System Event 
Messages (e.g., start of messages, start of system hours, start of 
quoting, start of opening); (4) Complex Order Strategy Auction 
Notifications (COLA); (5) Complex Order Strategy messages; (6) 
Option Trading Action Messages (e.g., halts, resumes); and (7) 
Complex Strategy Trading Action Message (e.g., halts, resumes).
    \15\ See Securities Exchange Act Release No. 63034 (October 4, 
2010), 75 FR 62441 (October 8, 2010) (SR-Phlx-2010-124).
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    The Exchange also believes that it is reasonable to eliminate the 
$500 per month cap for Phlx Only Members that have 50 or less SQT 
assignments affiliated with member organizations because there are no 
members today which meet the criteria for this cap.
    The Exchange believes that the amended tiers, which are increased 
for two categories, are equitable and not unfairly discriminatory 
because the features of SQF 6.0 are available to all participants. In 
addition, the member organizations with the greater number of ports, 
and therefore the greater system usage, will experience the increase.
    The Exchange believes that eliminating the $500 per month cap for 
the smaller organizations, defined as Phlx Only Members with 50 or less 
SQT assignments, is equitable and not unfairly discriminatory because 
there are no member organizations that will be impacted today by the 
elimination of this cap. There are no member organizations today that 
are eligible for the cap.
    The Exchange believes that adopting a $41,000 monthly cap is 
equitable and not unfairly discriminatory because all members utilizing 
SQF 6.0 ports may take advantage of the $41,000 cap without limitation. 
The Exchange believes that the member organizations with the greatest 
number of ports will benefit from the proposed $41,000 monthly cap. 
These are also the member organizations with the greatest system usage 
and therefore the largest costs.
    Finally, the Exchange believes that it is reasonable, equitable and 
not unfairly discriminatory to discontinue the practice of only billing 
member organizations for the use of active SQF 5.0 ports to the extent 
the member organization was paying is paying the same (or greater) 
number of active SQF 6.0 ports. As mentioned herein, the Exchange 
believes that it has provided member organizations ample time to 
transition and this practice is no longer necessary as there should be 
no member organizations utilizing SQF 6.0 [sic] by January 3, 2012.

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.\16\ 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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    \16\ 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 No. SR-Phlx-2011-157 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-2011-157. 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 available publicly. All 
submissions should refer to File No. SR-Phlx-2011-157 and should be 
submitted on or before December 27, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-31204 Filed 12-5-11; 8:45 am]
BILLING CODE 8011-01-P