Document ID: SEC-2010-0386-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, Inc.
Posted Date: 2010-03-12T05:00Z

[Federal Register: March 12, 2010 (Volume 75, Number 48)]
[Notices]               
[Page 11957-11958]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12mr10-170]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61664; File No. SR-Phlx-2010-32]

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

March 5, 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 March 1, 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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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 March 1, 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 certain better-priced 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 adding the following Routing Fees: (i) A 
$0.06 per contract side fee for customer orders routed to NYSE Amex LLC 
(``NYSE Amex'') in all options; (ii) a $0.36 per contract side fee for 
customer orders routed to BATS Exchange, Inc. (``BATS'') in all 
options; (iii) a $.06 per contract side fee for customer orders routed 
to the Boston Options Exchange Group LLC (``BOX'') in all options; (iv) 
a $0.06 per contract fee for customer orders route to the Chicago Board 
of Options Exchange, Inc. (``CBOE'') in all options; (v) a $.06 per 
contract side fee for customer orders routed to International 
Securities Exchange, LLC (``ISE'') in all options; and (vi) a $0.06 per 
customer side fee for customer orders routed to NYSE Arca, Inc. 
(``NYSEArca'') in non-penny options. The Exchange is proposing a $.06 
transaction fee on NYSE AMEX, BOX, CBOE, ISE and NYSEArca in order to 
recoup clearing charges which are incurred by the Exchange when orders 
are routed to these away markets. The Exchange is proposing a $.36 
transaction fee on BATS in order to recoup most clearing charges which 
are incurred by the Exchange when orders are routed to these away 
markets as well as a transaction charge which is assessed by BATS.
    Currently, the Exchange's Fee Schedule includes a Routing Fee of 
$0.50 per contract side for customer orders routed to NYSEArca in penny 
options for execution\5\ and a Routing Fee of $0.40 per contract side 
for customer orders routed to the NASDAQ Options Market (``NOM'') in 
penny options for execution. Also, the Exchange assesses a Routing Fee 
of $.56 per contract side for customer orders routed to NOM in the 
NASDAQ 100 Index Option (``NDX'') and the mini NASDAQ 100 Index Option 
(``MNX'').\6\ The Exchange is currently only assessing the Routing Fee 
in NDX and MNX for orders routed to NOM. There are currently no Routing 
Fees for orders routed to away markets other than NYSEArca and NOM in 
penny options. Also, currently, except for NDX and MNX, there are no 
transaction fees for executing customer orders at away markets in non-
penny classes.
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    \5\ See Securities Exchange Act Release No. 61374 (January 19, 
2010), 75 FR 4123 (January 26, 2010) (SR-PHLX-2010-01).
    \6\ See SR-NASDAQ-2010-016. The NASDAQ Stock Market LLC 
(``NASDAQ'') recently established pricing for NDX and MNX. 
Specifically, NASDAQ established a fee of $.50 per executed contract 
for Customers, Firms, and Non-NOM Market Makers to remove liquidity 
in NDX and MNX Options and a $.40 per executed contract for NOM 
Market Makers to remove liquidity in NDX and MNX.
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    The Exchange is proposing these fees to recoup the majority of 
transaction and clearing costs associated with routing customer orders 
to each destination market. The Exchange believes that the routing fees 
proposed will enable the Exchange to recover the transaction fees 
assessed by away markets, where applicable, plus clearing fees for the 
execution of customer orders routed from the Phlx XL II system. As with 
all fees, the Exchange may adjust these Routing Fees in response to 
competitive conditions by filing a new proposed rule change.
    The Exchange also proposes reformatting the Routing Fee table for 
purposes of clarity. The Exchange proposes eliminating the penny and 
non-penny columns and only specifying such a distinction, where 
applicable.
    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

[[Page 11958]]

for trades settling on or after March 1, 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 \7\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \8\ 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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    \7\ 15 U.S.C. 78f(b).
    \8\ 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.

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 \9\ and paragraph (f)(2) of Rule 19b-4 \10\ 
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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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 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-2010-32 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-2010-32. 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-2010-32 and should be 
submitted on or before April 2, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-5316 Filed 3-11-10; 8:45 am]
BILLING CODE 8011-01-P