Document ID: SEC-2010-1719-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2010-11-12T05:00Z

[Federal Register Volume 75, Number 218 (Friday, November 12, 2010)]
[Notices]
[Pages 69486-69488]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-28454]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63252; File No. SR-Phlx-2010-150]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Amendments to the Fee Schedule

November 5, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on October 29, 2010, NASDAQ OMX PHLX LLC (``Phlx'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II 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 to amend its Fee Schedule to: (i) Delete a symbol from 
the list of ``Select Symbols'' included in the ``Rebates and Fees for 
Adding and Removing Liquidity in Select Symbols'' section of the Fee 
Schedule; (ii) change the symbol of a Select Symbol to reflect a recent 
corporate action; (iii) add the KBW Bank Index (``BKX'') to the list of 
symbols in the Equity Options Fees and assess an Options Surcharge on 
BKX; (iv) delete the Cancellation Fee for electronically delivered 
customer orders from Section I of the Fee Schedule; and (v) amend the 
fees for electronic auctions and opening process.
    While changes to the Exchange's Fee Schedule pursuant to this 
proposal are effective upon filing, the Exchange has designated this 
proposal to be effective for trades settling on or after November 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, 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.

[[Page 69487]]

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 Exchange's 
Fee Schedule, specifically Section I, Rebates and Fees for Adding and 
Removing Liquidity In Select Symbols, and Section II, Equity Options 
Fees.
Section I
BIDU and UAUA
    The Exchange is proposing to amend Section I of the Fee Schedule to 
remove the symbol for Baidu Inc. (``BIDU'') from the list of Select 
Symbols subject to the Rebates and Fees for Adding and Removing 
Liquidity. The Exchange also proposes to change the symbol for UAL 
Corporation from ``UAUA'' to ``UAL'' to reflect a recent corporate 
action.\3\
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    \3\ On October 1, 2010, UAL Corporation announced that as a 
result of a merger between UAL Corporation and Continental Airlines, 
Inc. that it would change its name and underlying symbol. UAL 
Corporation is now known as United Continental Holding, Inc.
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Cancellation Fee
    Currently, the Exchange assesses a Cancellation Fee on 
electronically delivered customer and Professional AON orders that are 
submitted by a member. The Exchange assesses $2.10 per order for each 
cancelled electronically delivered customer order and $1.10 per order 
for each cancelled electronically delivered AON order submitted by a 
Professional in excess of the number of customer or AON orders 
submitted by a Professional executed on the Exchange by a member 
organization in a given month.\4\ A Cancellation Fee is not assessed in 
a month in which fewer than 500 electronically delivered customer or 
AON orders submitted by a Professional, respectively, are cancelled.\5\
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    \4\ All customer and AON orders submitted by a Professional from 
the same member organization that are executed in the same series on 
the same side of the market at the same price within a 300 second 
period are aggregated and counted as one executed customer or AON 
option order submitted by a Professional.
    \5\ A Cancellation Fee does not apply to pre-market 
cancellations, Complex Orders that are submitted electronically, 
unexecuted Immediate-or-Cancel (IOC) customer orders or cancelled 
customer orders that improved the Exchange's prevailing bid or offer 
(PBBO) market at the time the customer orders were received by the 
Exchange.
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    The Exchange is proposing to amend the Cancellation Fee in Section 
I so that the Cancellation Fee would not apply to customer orders in 
the Select Symbols.\6\ The Cancellation Fee would continue to apply to 
Professional All-or-None (``AON'') orders in the Select Symbols. The 
Cancellation Fee for both customer and Professional AON orders would 
continue to apply for all other symbols.
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    \6\ The Select Symbols are listed in Section I of the Fee 
Schedule.
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    The Exchange believes the Cancellation Fee is no longer required 
for customers in the Select Symbols to cover the cost of system 
utilization due to planned capacity investments. In addition, the 
requirement to mark Professional orders has also alleviated some of the 
capacity issues that resulted from customer cancel orders.\7\ The 
Exchange believes that by removing the Cancellation Fee for customer 
orders in the Select Symbols only will encourage trading in those 
Select Symbols. The Exchange intends to evaluate the customer 
Cancellation Fee for non-Select Symbols as well to determine if the 
volume from cancelled customer orders contributes to the system 
congestion.
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    \7\ See Securities Exchange Act Release No. 61802 (April 5, 
2010), 75 FR 17193 (March 30, 2010) (SR-Phlx-2010-05).
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Electronic Auction and Opening Process
    The Exchange proposes to amend and clarify its Fee Schedule with 
respect to electronic auctions. Currently, complex orders executed 
electronically in the Exchange's Complex Order Live Auction (``COLA'') 
\8\ are assessed the Fees set forth in Part B of the Fee Schedule. 
Orders other than complex orders executed in electronic auctions (such 
as the Exchange's Quote Exhaust and Market Exhaust Auctions) \9\, and 
in the Exchange's opening process, are currently assessed the fees set 
forth in Part A of the Fee Schedule. The Exchange is proposing to 
assess all orders executed in any of the Exchange's electronic 
auctions, and the opening process, the fees set forth in Part B of the 
Fee Schedule.
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    \8\ COLA is the automated Complex Order Live Auction process. A 
COLA may take place upon identification of the existence of a COLA-
eligible order either: (1) Following a COOP, or (2) during normal 
trading if the Phlx XL II system receives a Complex Order that 
improves the cPBBO. See Exchange Rule 1080. In May 2009 the Exchange 
enhanced the system and adopted corresponding rules referring to the 
system as ``Phlx XL II.'' See Securities Exchange Act Release No. 
59995 (May 28, 2009), 74 FR 26750 (June 3, 2009) (SR-Phlx-2009-32). 
The Exchange intends to submit a separate technical proposed rule 
change that would change all references to the system from ``Phlx XL 
II'' to ``PHLX XL.''
    \9\ Market Exhaust occurs when there are no Phlx XL II 
participant (specialist, SQT or RSQT) quotations in the Exchange's 
disseminated market for a particular series and an initiating order 
in the series is received. In such a circumstance, the Phlx XL II 
system, using Market Exhaust, will initiate a Market Exhaust auction 
for the initiating order. Under Market Exhaust, any order volume 
that is routed to away markets will be marked as an Intermarket 
Sweep Order or ``ISO.'' See Exchange Rule 1082. In May 2009 the 
Exchange enhanced the system and adopted corresponding rules 
referring to the system as ``Phlx XL II.'' See Securities Exchange 
Act Release No. 59995 (May 28, 2009), 74 FR 26750 (June 3, 2009) 
(SR-Phlx-2009-32). The Exchange intends to submit a separate 
technical proposed rule change that would change all references to 
the system from ``Phlx XL II'' to ``PHLX XL.''
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BKX
    The Exchange is proposing to add BKX to the list of symbols that 
are subject to: (i) The fees set forth in Section II, and (ii) the 
options surcharge.\10\ The Exchange proposes to assess a $.10 per 
contract Option Surcharge on Specialists \11\, Registered Option 
Traders \12\, Streaming Quote Trader \13\, Remote Streaming Quote 
Trader \14\, Broker-Dealers and Firms. The Exchange believes that the 
addition of BKX will encourage order flow to the Exchange.
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    \10\ This footnote contained an inaccuracy and was deleted. See 
E-mail from Angela Saccomandi Dunn, Assistant General Counsel, Phlx 
to Ronesha A. Butler, Special Counsel, Division of Trading and 
Markets (``Division''), Commission dated November 2, 2010.
    \11\ A Specialist is an Exchange member who is registered as an 
options specialist pursuant to Rule 1020(a).
    \12\ A Registered Option Trader or ROT is defined in Exchange 
Rule 1014(b) as a regular member or a foreign currency options 
participant of the Exchange located on the trading floor who has 
received permission from the Exchange to trade in options for his 
own account. A ROT includes a SQT, a RSQT and a Non-SQT, which by 
definition is neither a SQT or a RSQT. See Exchange Rule 1014 (b)(i) 
and (ii).
    \13\ A Streaming Quote Trader or SQT is defined in Exchange Rule 
1014(b)(ii)(A) as an ROT who has received permission from the 
Exchange to generate and submit option quotations electronically 
through AUTOM in eligible options to which such SQT is assigned.
    \14\ A Remote Streaming Quote Trader or RSQT is defined Exchange 
Rule in 1014(b)(ii)(B) as 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.
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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 effective for trades settling on or after November 1, 
2010.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \15\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \16\ 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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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(4).
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    The removal of one symbol from the Fee Schedule regarding Rebates 
and

[[Page 69488]]

Fees for Adding and Removing Liquidity will apply to all categories of 
participants in the same manner. Also, the amendment to the UAUA symbol 
is for ease of reference in identifying symbols.
    The Exchange believes that the proposed amendments to the customer 
Cancellation Fee, with respect to Select Symbols, are reasonable 
because they are no longer required to recover costs associated with 
excessive order cancellation activity. The Exchange believes that the 
proposed rule change will enable the Exchange to determine the impact, 
if any, on system capacity when there is no fee to cancel certain order 
types. The Exchange believes that there should not be increased system 
congestion as a result of removing the customer Cancellation Fee in the 
Select Symbols. The Exchange will assess the impact to the system after 
the removal of the fee to determine if the number of cancellation does 
not once again increase. The Exchange removed the customer Cancellation 
Fee only in Select Symbols to make such a determination.
    The Exchange believes that the Cancellation Fee is still necessary 
with respect to Professional AON orders because those orders are 
treated as customer orders for purposes of priority. Member 
organizations must indicate whether orders are for Professionals. The 
Exchange believes that this requirement to mark an order as 
Professional has shifted the source of the system congestion from the 
customer orders to the Professional AON orders. By continuing to assess 
a Cancellation Fee for Professional AON orders in all symbols will 
continue to ease system congestion and allow the Exchange to recover 
costs associated with excessive order cancellation activity.
    The Exchange's proposal to assess all electronic auctions and the 
opening process the fees in Part B will simplify the Fee Schedule so 
that all participants will equally be assessed the complex order fees. 
The fees in Part B are reasonable because they are equal to or lower 
than the fees currently assessed on the various market participants. 
Customers will receive a higher rebate as a result of amending the 
fees.\17\
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    \17\ The Commission notes that firms and broker-dealers will 
also receive rebates under the proposed Fee Schedule.
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    The Exchange believes that assessing a $.10 Options Surcharge on 
BKX and adding BKX to Section II, Equity Options, is equitable since it 
is similar to option surcharges \18\ assessed by the International 
Securities Exchange, LLC (``ISE'') \19\ and NYSEArca, Inc. (``NYSE 
Arca'') \20\.
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    \18\ The Exchange revised the text to more accurately describe 
which Phlx fees were similar to ISE and NYSE Arca fees. See E-mail 
from Angela Saccomandi Dunn, Assistant General Counsel, Phlx to 
Ronesha A. Butler, Special Counsel, Division, Commission dated 
November 2, 2010.
    \19\ See ISE's Schedule of Fees.
    \20\ See NYSE Arca's Fee Schedule.
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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.\21\ 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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    \21\ 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2010-150 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-2010-150. 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,\22\ 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 website 
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 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-2010-150 and should be submitted on or before December 3, 2010.
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    \22\ The text of the proposed rule change is available on 
Exchange's Web site at http://nasdaqtrader.com/micro.aspx?id=PHLXfilings, on the Commission's Web site at http://www.sec.gov, at Phlx, and at the Commission's Public Reference Room.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-28454 Filed 11-10-10; 8:45 am]
BILLING CODE 8011-01-P