Document ID: SEC-2010-0428-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, Inc.
Posted Date: 2010-03-22T04:00Z

[Federal Register: March 22, 2010 (Volume 75, Number 54)]
[Notices]               
[Page 13618-13620]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22mr10-119]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61699; File No. SR-Phlx-2010-42]

 
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
to Fees and Rebates for Adding and Removing Liquidity

March 12, 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 (``Commission'') the 
proposed rule change as described in Items I, II and III below, which 
Items have been prepared by the Exchange. Phlx has designated this 
proposal as one establishing or changing a member due, fee, or other 
charge imposed under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 
19b-4(f)(2) thereunder,\4\ which renders the proposal effective upon 
filing with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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

    The Exchange proposes to amend the applicability of Complex Orders 
to fees and rebates for adding and removing liquidity.
    While changes to the Fee Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative for transactions settling on or after March 1, 2010.\5\
---------------------------------------------------------------------------

    \5\ The Commission notes that the fees in this proposed rule 
change were effective upon filing on March 1, 2010 and apply solely 
to trades effected on or after that date.
---------------------------------------------------------------------------

    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, at the Commission's Public Reference 
Room, and on the Commission's Web site at http://www.sec.gov.

[[Page 13619]]

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 amend the 
applicability of Complex Orders to remain competitive.
    The Exchange proposes modifying the applicability of Complex Orders 
to the fees and rebates for adding and removing liquidity. Currently, 
single contra-side orders that are executed against the individual 
components of Complex Orders will be charged under the proposed Fee 
Schedule. The individual components of such a Complex Order will not be 
charged. The Exchange proposes amending this exception to state that 
individual components of such a Complex Order will be charged according 
to the fees and rebates for adding and removing liquidity. The Exchange 
is amending the applicability of Complex Orders to the fees described 
herein because the Exchange no longer believes that this incentive is 
necessary.
    Currently, the Exchange assesses a per-contract transaction charge 
in Standard and Poor's Depositary Receipts/SPDRs (``SPY'') \6\, the 
PowerShares QQQ Trust (``QQQQ'')[reg]; Ishares Russell 2000 (``IWM'') 
and Citigroup Inc. (``C'')options on five different categories of 
market participants that submit orders and/or quotes that remove, or 
``take,'' liquidity from the Exchange. The per-contract transaction 
charge depends on the category of market participant submitting an 
order or quote to the Exchange that removes liquidity.\7\
---------------------------------------------------------------------------

    \6\ SPY options are based on the SPDR exchange-traded fund 
(``ETF''), which is designed to track the performance of the S&P 500 
Index.
    \7\ See SR-Phlx-2010-33.
---------------------------------------------------------------------------

    The market participants are as follows: (i) Specialists, Registered 
Options Traders (``ROTs''), Streaming Quote Traders (``SQTs'') \8\ and 
Remote Streaming Quote Traders (``RSQTs''); \9\ (ii) customers; \10\ 
(iii) specialists, ROTs, SQTs and RSQTs that receive Directed Orders 
(``Directed Participants'' \11\ or ``Directed Specialists, RSQTs, or 
SQTs'' \12\); (iv) Firms; and (v) broker-dealers.
---------------------------------------------------------------------------

    \8\ An SQT is an Exchange Registered Options Trader (``ROT'') 
who has received permission from the Exchange to generate and submit 
option quotations electronically through an electronic interface 
with AUTOM via an Exchange approved proprietary electronic quoting 
device in eligible options to which such SQT is assigned. See 
Exchange Rule 1014(b)(ii)(A).
    \9\ An RSQT is 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 through AUTOM in eligible options to which such RSQT 
has been assigned. An RSQT may only submit such quotations 
electronically from off the floor of the Exchange. See Exchange Rule 
1014(b)(ii)(B).
    \10\ This applies to all customer orders, directed and non-
directed.
    \11\ For purposes of this fee, a Directed Participant is a 
Specialist, SQT, or RSQT that executes a customer order that is 
directed to them by an Order Flow Provider and is executed 
electronically on the Exchange's electronic trading platform for 
options, PHLX XL II.
    \12\ See Exchange Rule 1080(l), ``* * * The term `Directed 
Specialist, RSQT, or SQT' means a specialist, RSQT, or SQT that 
receives a Directed Order.'' A Directed Participant has a higher 
quoting requirement as compared with a specialist, SQT or RSQT who 
is not acting as a Directed Participant. See Exchange Rule 1014.
---------------------------------------------------------------------------

    The per-contract transaction charges are assessed on participants 
who submit proprietary quotes and/or orders that remove liquidity from 
the Exchange's market in options listed on the Fee Schedule. The 
Exchange also assesses a transaction charge to Firms and broker-dealers 
that add liquidity.
    Additionally, the Exchange has in place a per-contract rebate 
relating to transaction charges for orders or quotations that add 
liquidity to the Exchange's market in options listed on the fee 
schedule. The amount of the rebate depends on the category of 
participant whose order or quote was executed as part of the Phlx 
disseminated Best Bid and/or Offer.
2. Statutory Basis
    The Exchange believes that its proposal to amend its schedule of 
fees is consistent with Section 6(b) of the Act \13\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \14\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among Exchange members. The impact of the proposal 
upon the net fees paid by a particular market participant will depend 
on a number of variables, including its monthly volumes, the order 
types it uses, and the prices of its quotes and orders (i.e., its 
propensity to add or remove liquidity). The rate increase to Firms for 
adding liquidity in the various symbols including the additional 
Symbols is the same rate that is currently being assessed on Broker-
Dealers.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    Specifically, the Exchange believes that amending the applicability 
of the complex orders to these fees is equitable as that will apply 
equally to all participants.
    Accordingly, the Exchange also believes that the addition of the 
options to this portion of the Fee Schedule is equitable in that it 
will apply to all categories of participants in the same manner.

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 \15\ and paragraph (f)(2) of Rule 19b-4 \16\ 
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.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \16\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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

[[Page 13620]]

Number SR-Phlx-2010-42 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2010-42. 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 publicly available. All 
submissions should refer to File Number SR-Phlx-2010-42 and should be 
submitted on or before April 12, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-6115 Filed 3-19-10; 8:45 am]
BILLING CODE 8011-01-P