Document ID: SEC-2012-2131-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2012-12-26T05:00Z

[Federal Register Volume 77, Number 247 (Wednesday, December 26, 2012)]
[Notices]
[Pages 76128-76129]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-30981]

[[Page 76128]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68473; File No. SR-Phlx-2012-140]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
the Permit and Order Entry Port Fee

December 19, 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 December 12, 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 Permit Fee and Order Entry Port 
Fee.
    While changes to the Pricing Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated the proposed 
amendment to be operative on January 2, 2013.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqomxphlx.cchwallstreet.com/, 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 increase the Permit 
Fee in Section VI, entitled ``Membership Fees'' at Part A entitled 
``Permit and Registration Fees'' of the Pricing Schedule to recoup 
costs associated with the administration of the Exchange's members. The 
Exchange also proposes to amend Section VII entitled ``Other Member 
Fees'' at Part B entitled ``Port Fees'' of the Pricing Schedule to 
increase the Order Entry Port \3\ Fee. The Exchange believes that this 
increase is necessary to keep pace with escalating technology costs.
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    \3\ The Order Entry Port Fee is a connectivity fee assessed on 
members in connection with routing orders to the Exchange via an 
external order entry port. Members access the Exchange's network 
through order entry ports. A member organization may have more than 
one order entry port.
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Permit Fee
    The Exchange assesses two different Permit Fees based on whether a 
member or member organization is transacting business on the Exchange. 
The Exchange assesses members and member organizations that are 
transacting business on the Exchange a Permit Fee of $2,000 per month. 
A member or member organization will be assessed the $2,000 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) is a clearing member of The Options Clearing Corporation or a 
Floor Broker; or (3) 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\ The Exchange assesses members and member 
organizations that are not transacting business on the Exchange 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 Only Participant; \5\ 
or (ii) not engaged in an options business at Phlx 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'' is 
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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    The Exchange is proposing to increase the $2,000 Permit Fee for 
members transacting business on the Exchange to $2,100 per month. The 
Exchange is seeking to recoup costs incurred from the membership 
administration function.\7\
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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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Order Entry Port Fee
    The Exchange currently assesses an Order Entry Port Fee per month, 
per mnemonic \8\ of $500. This fee is assessed on members regardless of 
whether the order entry mnemonic is active \9\ during the billing 
month. The fee is assessed regardless of usage, and solely on the 
number of order entry ports assigned to each member organization.\10\ 
The Exchange proposes to increase the Order Entry Port Fee from $500 to 
$550 per month, per mnemonic. The Exchange believes that this increase 
would allow the Exchange to keep pace with increasing technology costs.
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    \8\ Order entry mnemonics are codes that identify member 
organization order entry ports.
    \9\ An order entry mnemonic is considered active if a member 
organization sends at least one order to the Exchange using that 
order entry mnemonic during the applicable billing month. See 
Securities Exchange Act Release No. 58728 (October 3, 2008), 73 FR 
59695 (October 9, 2008) (SR-Phlx-2008-70).
    \10\ The Exchange waives the $500 per month per mnemonic Order 
Entry Port Fee for mnemonics used exclusively for complex orders 
where one of the components of the complex order is the underlying 
security.
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2. Statutory Basis
    The Exchange believes that its proposal to amend its Pricing 
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 and other persons using its 
facilities.
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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 the proposed increase to the Permit Fee 
for members transacting business on the Exchange is reasonable because 
the Exchange is seeking to recoup costs

[[Page 76129]]

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 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. The Exchange also believes that 
the increased fee is equitable and not unfairly discriminatory because 
the Permit Fee for not transacting business on the Exchange remains 
substantially higher as is the case today.
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    \13\ See the Chicago Board Options Exchange, Incorporated's Fees 
Schedule. Per month a Market Maker Trading Permit is $5,500, a SPX 
Tier Appointment is $3,000, a VIX Tier Appointment if $2,000, a 
Floor Broker Trading Permit is $9,000, an 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 an Electronic Access Member is assessed $500.00 for 
membership and a market maker is assessed from $2,000 to $4,000 per 
membership depending on the type of market maker. See also C2 
Options Exchange, Incorporated's Fees Schedule. Per month, a market-
maker is assessed a $5,000 permit fee, an Electronic Access Permit 
is assessed a $1,000 permit fee and a SPXM Tier appointment is 
assessed a $4,000 fee after March 31, 2013. See also NYSE Arca, 
Inc.'s Fee Schedule. Per month, a Floor Broker, Office and Clearing 
Firm are assessed a $1,000 per month fee for the first Options 
Trading Permit (``OTP'') and $250 thereafter, and a market maker is 
assessed a $4,000 per month fee for one to four OTPs and $2,000 
thereafter.
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    The Exchange believes that the increase to the Order Entry Port Fee 
is reasonable because it would allow the Exchange to keep pace with 
increasing technology costs. The Exchange believes that the increase to 
the Order Entry Port Fee is equitable and not unfairly discriminatory 
because all members would be subject to the same fees and waivers 
related to the Order Entry Port 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. The proposed fee increases are 
competitive with fees at other options exchanges.

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 Number SR-Phlx-2012-140 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-2012-140. 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 10:00 a.m. and 
3:00 p.m. Copies of the 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-2012-140 and 
should be submitted on or before January 16, 2013.

    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. 2012-30981 Filed 12-21-12; 4:15 pm]
BILLING CODE 8011-01-P