Document ID: SEC-2011-1947-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2011-12-15T05:00Z

[Federal Register Volume 76, Number 241 (Thursday, December 15, 2011)]
[Notices]
[Pages 78064-78066]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-32140]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65925; File No. SR-Phlx-2011-166]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Permit Fees

December 9, 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 28, 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

[[Page 78065]]

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 Permit Fee in Section VI of its 
Fee Schedule.
    While changes to the Fee Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated the amendments 
entitled ``Permit Fees'' 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 purpose of the proposed rule change is to amend the Permit Fee 
in Section VI, entitled ``Access Service, Cancellation, Membership, 
Regulatory and Other Fees'' to recoup costs associated with the 
administration of its members. The Exchange also proposes a clarifying 
amendment to the applicability of the Permit Fees to both Clearing 
Members of The Options Clearing Corporation (``OCC Clearing Members'') 
\3\ and Floor Brokers.
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    \3\ These OCC Clearing Members are also Phlx Members.
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    The Exchange assesses two different Permit Fees based on whether a 
member is transacting business on the Exchange. The Exchange assesses 
members who are transacting business on the Exchange a Permit Fee of 
$1,100 per month. A member or member organization is assessed the 
$1,100 monthly Permit Fee if that member or member organization: (1) 
Transacts its option orders in its assigned Phlx house account in a 
particular month; or (2) for those member organizations which are under 
common ownership, transacts at least one options trade in a Phlx house 
account that is assigned to one of the member organizations under 
common ownership.\4\ Members who are not transacting business on the 
Exchange are assessed a Permit Fee of $7,500 per month. A member or 
member organization is assessed the $7,500 Permit Fee for not 
transacting business on the Exchange if that member is either: (i) Not 
a PSX Participant; \5\ or not engaged in an options business at the 
Exchange in a particular month. In addition, a member or member 
organization that sponsors an options participant \6\ would pay an 
additional Permit Fee for each sponsored options participant.
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    \4\ For purposes of the Permit Fee, ``common ownership'' shall 
be defined as at least 75% common ownership between the member 
organizations.
    \5\ Applicants that apply for membership solely to participate 
in the NASDAQ OMX PSX equities market are not assessed a Permit Fee, 
Application Fee, Initiation Fee, or Account Fee. See Securities 
Exchange Act Release No. 61863 (April 7, 2010), 75 FR 20021 (April 
16, 2010) (SR-Phlx-2010-54).
    \6\ See Exchange Rule 1094 titled Sponsored Participants. A 
Sponsored Participant may obtain authorized access to the Exchange 
only if such access is authorized in advance by one or more 
Sponsoring Member Organizations. Sponsored Participants must enter 
into and maintain participant agreements with one or more Sponsoring 
Member Organizations establishing a proper relationship(s) and 
account(s) through which the Sponsored Participant may trade on the 
Exchange.
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Permit Fees

    The Exchange is proposing to increase the $1,100 monthly Permit Fee 
for members transacting business on the Exchange to $2,000. The 
Exchange is seeking to recoup costs incurred from the membership 
administration function.\7\ While changes to the Fee Schedule pursuant 
to this proposal are effective upon filing, the Exchange has designated 
this amendment entitled ``Permit Fees'' to be operative on January 3, 
2012.
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    \7\ The Exchange is not amending the Permit Fee for members who 
are not transacting business on the Exchange.
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Application of Permit Fees

    The Exchange is proposing a clarifying amendment regarding the 
applicability of the $1,100 Permit Fee to certain types of members, 
namely OCC Clearing Members and Floor Brokers.\8\ Both OCC Clearing 
Members and Floor Brokers conduct business on an agency basis, in other 
words they enter trades on behalf of another person or entity and not 
for their own account. OCC Clearing Members may never trade, but are 
required to be a member of the Exchange in order to clear for a Phlx 
member.\9\ As both these members are not transacting options for their 
own account, they are not conducting business in an assigned house 
account and therefore would not be eligible for the $1,100 Permit Fee. 
The Exchange proposes to amend its Fee Schedule to indicate that both 
OCC Clearing Members and Floor Brokers would be assessed the $1,100 
Permit Fee. It was not the intent of the Exchange in requiring members 
to transact business in their house account to prevent OCC Clearing 
Members and Floor Brokers from being eligible for the $1,100 Permit 
Fee. The Exchange amended its Rules to require trading in the house 
account in order that the Exchange may automate its billing 
process.\10\ With respect to OCC Clearing Members and Floor Brokers, 
the Exchange is able to identify these members and member organizations 
and, through its automated billing, assess them the $1,100 Permit Fee. 
The Exchange intends that this section entitled ``Clarifying 
Amendment'' will be effective upon filing.
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    \8\ The Exchange is able to verify OCC Clearing Members from 
information provided by OCC. Pursuant to Rule 1061, entitled 
``Registration of Floor Brokers'', Floor Brokers are required to 
register with the Exchange.
    \9\ See Exchange Rules 911 entitled ``Member and Member 
Organization Participation'' and ``Rule 1052 entitled Responsibility 
of Clearing Options Members For Exchange Options Transactions.''
    \10\ See Securities Exchange Act Release No. 65574 (October 14, 
2011), 76 FR 65228 (October 20, 2011) (SR-Phlx-2011-134).
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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 \11\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \12\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among Exchange members.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that proposed amendment to the Permit Fee is 
reasonable because the Exchange is seeking to recoup costs related to 
membership administration. The proposed fee is in the range of similar 
fees at other exchanges and less than other fees.\13\ In addition, the 
Exchange

[[Page 78066]]

believes that the Permit Fee is equitable and not unfairly 
discriminatory, because unlike other exchanges, Phlx's Permit Fees are 
the same for every options permit holder that is conducting business at 
the Exchange.
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    \13\ See the Chicago Board of Trade, Incorporated's Fees 
Schedule. Per month a Market Maker Trading Permit is $6,000, a SPX 
Tier Appointment is $3,000, a VIX Tier Appointment if $1,000, Floor 
Broker Trading Permit is $6,000, Electronic Access Permit is $1,600 
and there is no access fee for a CBSX Trading Permit. See also the 
International Securities Exchange LLC's Schedule of Fees. Per month 
a EAM is $500.00 and a market maker ranges from $2,000 to $4,000. 
See also C2, Inc.'s Fee Schedule. Per month, a market-maker permit 
is $5,000, an Electronic Access Permit is $1,000 and a SPXM Tier 
appointment is $4,000 after November 30, 2011. See also NYSE Arca, 
Inc.'s Fee Schedule. Per month, a Floor Broker, Office and Clearing 
Firm is $1,000 and a market maker is $4,000. See also NYSE Amex, 
LLC's Fee Schedule. Per month, Per month, a Floor Broker, Order 
Routing and Clearing Firm is $500 and a market maker is $5,000.
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    The Exchange believes that its clarifying amendment is reasonable 
the Exchange recognizes that the members and member organizations that 
are registered as OCC Clearing Members and Floor Brokers facilitate 
transactions for others at the Exchange and are therefore unable to 
utilize the house account in the same way as other members. In 
addition, the Exchange believes that it is reasonable to assess a 
$1,100 Permit Fee for OCC Clearing Members and Floor Brokers that are 
transacting business at the Exchange in a capacity that facilitates 
trading.
    The Exchange believes that it is equitable and not unfairly 
discriminatory to assess OCC Clearing Members and Floor Brokers the 
$1,100 as compared to other members who may not transact business, 
because the OCC Clearing Member and Floor Broker are trading for others 
as compared to the member who chooses whether to transact business in 
his/her own account. Other members are only required to transact one 
trade in their house account in order to be assessed the lower Permit 
Fee.

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 
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-2011-166 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-2011-166. 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-2011-166 and should be 
submitted on or before January 5, 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. 2011-32140 Filed 12-14-11; 8:45 am]
BILLING CODE 8011-01-P