Document ID: SEC-2012-0136-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2012-01-26T05:00Z

[Federal Register Volume 77, Number 17 (Thursday, January 26, 2012)]
[Notices]
[Pages 4077-4079]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-1583]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66208; File No. SR-Phlx-2012-06]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Amending the 
Real-Time Risk Management Fee and Other Clarifying Amendments

January 20, 2012.
    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 January 10, 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 amend the Real-Time Risk Management Fee to 
further clarify the application of the Fee. The Exchange also proposes 
to relocate the FLEX and Cabinet Options Transaction Fees within 
Section II of the Exchange's Fee Schedule and add clarifying text.
    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, 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 memorialize the Exchange's practice of 
limiting the assessment of the Real-time Risk Management Fee to two (2) 
ports. The Exchange also proposes to add language to clarify the types 
of ports that are subject to this fee.
    The Exchange initially filed to adopt a real-time, trade 
information fee (Real-time Risk Management Fee) for members receiving 
option trading information on-line (i.e., electronically) from the 
Exchange.\3\ The purpose of the fee was to provide members and member 
organizations with option trade information electronically on a real-
time basis. Members and member organizations were able to log on to an 
interface with AUTOM to receive options (among other information) 
transaction information real-time. When adopted, the Exchange limited 
the assessment of the Real-Time Risk Management Fee to two ports.\4\ 
The Exchange has not assessed any member or member organization in 
excess of two

[[Page 4078]]

ports since this Fee was adopted in 2000.\5\ The Exchange proposes to 
memorialize this practice in its Fee Schedule. The port may be either a 
Specialized Quote Feed (``SQF'') \6\ Port or a Clearing Trade Interface 
(``CTI'') \7\ Port. The member/member organization is assessed up to 
two ports. The Exchange proposes to add the following language to the 
Fee Schedule: ``$.003 per contract for members and member organizations 
receiving information on a real-time basis up to a maximum of two 
ports, which may be either an SQF Port or a CTI Port'' (new language in 
bold), to memorialize its current practice.
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    \3\ See Securities Exchange Act Release No. 43719 (December 13, 
2000), 65 FR 80975 (December 22, 2000) (SR-Phlx-00-97). The Exchange 
initially assessed $.0025 per contract and later raised this fee to 
$.003 per contract. See also Securities Exchange Act Release No. 
61685 (March 10, 2010), 75 FR 13187 (March 18, 2010) (SR-Phlx-2010-
39).
    \4\ See Securities Exchange Act Release No. 43719 (December 13, 
2000), 65 FR 80975 (December 22, 2000) (SR-Phlx-00-97). The 
information included symbol, volume, price, time and clearing 
information.
    \5\ It was always the intent of the Exchange to limit this Fee 
to two ports, although the initial filing does not state this 
limitation, this has always been the practice of the Exchange.
    \6\ SQF is an interface that allows specialists, streaming quote 
traders and remote streaming quote traders to connect and send 
quotes into Phlx XL. SQF 6.0 allows participants to access 
information in a single feed available to all participants, rather 
than through accessing multiple feeds. The information available 
includes execution reports and other relevant data. Non quoting 
firms may also receive relevant information available over SQF by 
connecting to the SQF interface, but they may not send quotes. The 
set of data offered over this data feed is administrative in nature 
or is used to attract liquidity to the Exchange in response to an 
auction. Participants who write interfaces to the Phlx system use 
the administrative data to determine the current state of the 
trading system. For example, this data displays which symbols are 
trading on the Phlx, the current state of an options symbol (i.e., 
open for trading, trading, halted or closed from trading), as well 
as similar information regarding complex order strategies. This 
administrative data also includes the definition of complex order 
strategies. See Securities Exchange Act Release No. 63034 (October 
4, 2010), 75 FR 62441 (October 8, 2010) (SR-Phlx-2010-124).
    \7\ CTI provides Exchange members with real-time clearing trade 
updates. The updates include the members clearing trade messages on 
a low latency, real-time basis. The trade messages are routed to a 
member's connection containing certain information. The information 
includes, among other things, the following: (i) The Clearing Member 
Trade Agreement or ``CMTA'' or The Options Clearing Corporation or 
``OCC'' number; (ii) Exchange badge or house number; and (iii) the 
Exchange internal firm identifier. The administrative and market 
event messages include, but are not limited to: System event 
messages to communicate operational-related events; options 
directory messages to relay basic option symbol and contract 
information for options traded on the Exchange; complex strategy 
messages to relay information for those strategies traded on the 
Exchange; and trading action messages to inform market participants 
when a specific option or strategy is halted or released for trading 
on the Exchange. The information related to complex order strategy 
messages includes information that lists the legs and the leg 
ratios, which uniquely defines this strategy for an underlying. In 
addition, the interface contains an indicator which distinguishes 
electronic and non-electronic delivered orders. This information 
will be available to members on a real-time basis. See Securities 
Exchange Act Release No. 62155 (May 24, 2010), 75 FR 30081 (May 28, 
2010) (SR-Phlx-2010-67).
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    The Exchange also proposes to relocate the FLEX \8\ and Cabinet \9\ 
Options transaction fees within Section II of the Fee Schedule, 
entitled ``Equity Option Fees,'' and add additional text to clarify 
that the transaction fees for FLEX \10\ and Cabinet \11\ Options are 
not in addition to the Options Transaction Charges. The Exchange also 
proposes to include text concerning the waiver of facilitation orders, 
currently in Section II in another part of Section II which addresses 
other facilitation waivers. The Exchange believes that relocating this 
text and adding a sentence which states ``Cabinet and FLEX Option Fees 
above are not in addition to the Options Transaction Charges'' will add 
more clarity to the Fee Schedule.
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    \8\ A FLEX option is a customized option that provides parties 
to the transaction with the ability to fix terms including the 
exercise style, expiration date, and certain exercise prices. See 
Exchange Rule 1079. FLEX Options are a trademark of the Chicago 
Board Options Exchange.
    \9\ An ``accommodation'' or ``cabinet'' trade refers to trades 
in listed options on the Exchange that are worthless or not actively 
traded. Cabinet trading is generally conducted in accordance with 
Exchange Rules, except as provided in Exchange Rule 1059 entitled 
``Accommodation Trading'', which sets forth specific procedures for 
engaging in cabinet trading below $ 1 per option contract. Cabinet 
or accommodation trading of option contracts is intended to 
accommodate persons wishing to effect closing transactions in those 
series of options dealt in on the Exchange for which there is no 
auction market.
    \10\ FLEX transaction fees are $0.10 per contract side for all 
participants, except Customers. Specifically, the Exchange assess a 
$.10 transaction charge on Professionals, Specialists, Registered 
Options Traders, Streaming Quote Traders, Remote Streaming Quote 
Traders, Broker-Dealers and Firms. Customers are not assessed a 
transaction charge for FLEX Options. See Securities Exchange Act 
Release No. 62379 (June 25, 2010), 75 FR 38163 (July 1, 2010) (SR-
Phlx-2010-87).
    \11\ Cabinet transaction fees are $ 0.10 per contract side for 
all participants, except Customers. Specifically, the Exchange 
assess a $.10 transaction charge on Professionals, Specialists, 
Registered Options Traders, Streaming Quote Traders, Remote 
Streaming Quote Traders, Broker-Dealers and Firms. Customers are not 
assessed a transaction charge for Cabinet Options. See Securities 
Exchange Act Release No. 65740 (November 18, 2011), 76 FR 72744 
(November 25, 2011) (SR-Phlx-2011-150).
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2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \12\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \13\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among Exchange members.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that amending the Fee Schedule to memorialize 
the Exchange's practice of not assessing the Real-time Risk Management 
Fee on more than two ports is reasonable because this practice will be 
clearly stated on the Fee Schedule. Also, the Exchange believes that it 
is reasonable to clearly note the types of ports that are subject to 
this Fee. The Exchange also believes that this amendment is equitable 
and not unfairly discriminatory because the Exchange is uniformly 
assessing the Real-time Risk Management Fee on all members and member 
organizations. Every member or member organization will not be assessed 
the Real-time Risk Management Fee in excess of two ports, either an SQF 
Port or a CTI Port.
    The Exchange believes that its proposal to relocate the Cabinet and 
FLEX Options section within Section II of the Fee Schedule and add more 
clarity concerning the assessment of these fees is reasonable, 
equitable and not unfairly discriminatory because the amendments will 
further clarify the application of Section II fees. The proposed 
amendments are not substantive. The Exchange believes the amendments 
would create a more user-friendly Fee Schedule.

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.\14\ 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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    \14\ 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

[[Page 4079]]

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-2012-06 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-2012-06. 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-2012-06 and should be 
submitted on or before February 13, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-1583 Filed 1-25-12; 8:45 am]
BILLING CODE 8011-01-P