Document ID: SEC-2010-1643-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2010-10-27T04:00Z

[Federal Register: October 27, 2010 (Volume 75, Number 207)]
[Notices]               
[Page 66168-66170]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27oc10-117]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63145; File No. SR-Phlx-2010-143]

 
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Active SQF Port Fee

October 21, 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 October 15, 2010, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'') 
filed with the Securities and Exchange Commission

[[Page 66169]]

(``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 fee calculations for the Active SQF 
Port Fee. 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.

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 Active SQF 
Port Fee calculation to account for a new version of the Specialized 
Quote Feed (``SQF'') interface, which was recently released by the 
Exchange. The Exchange is amending the Active SQF Port Fee calculation 
so that member organizations not be assessed port fees for use of the 
prior version of the interface (SQF 5.0) while transitioning to (and 
paying for) the new version (SQF 6.0).
    In a given month, active SQF ports are ports that receive inbound 
quotes at any time within that month. SQF is an interface that enables 
specialists, Streaming Quote Traders (SQTs'') \3\ and Remote Streaming 
Quote Traders (``RSQTs'') \4\ to connect and send quotes into Phlx 
XL.\5\ The Exchange released SQF 6.0 on October 11, 2010. The Exchange 
anticipates that member organizations will utilize both SQF 5.0 and SQF 
6.0 for a period of time.
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    \3\ 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).
    \4\ 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).
    \5\ See Securities Exchange Act Release No. 63034 (October 4, 
2010), 75 FR 62441 (October 8, 2010) (SR-Phlx-2010-124).
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    Presently, quoting participants (users of SQF 5.0) do not receive 
reports of executions against their quote or other information that is 
relevant to their quoting application over SQF 5.0. SQF 6.0 provides 
more information than SQF 5.0. SQF 6.0 increases efficiency by allowing 
member organizations to access, information such as execution reports 
and other relevant data through a single feed, rather than through 
accessing multiple feeds, which was necessary under SQF 5.0.\6\
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    \6\ Member organizations that have written interfaces to the 
PHLX system could use the administrative data to determine the 
current status of the Exchange's market for a particular option. For 
example, this data would show which symbols are trading on the PHLX, 
the current state of an options symbol (i.e., open for trading, 
trading, halted or closed), as well as similar information regarding 
complex order strategies.
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    This administrative data will also include the definition of 
complex order strategies.\7\ Auction notifications are available on SQF 
6.0.\8\ The new interface, SQF 6.0, will also contain execution report 
messages, which are not contained in SQF 5.0.\9\ Other data is also 
available on SQF 6.0.\10\
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    \7\ See Exchange Rule 1080.08.
    \8\ A member organization's quoting application can receive 
these notifications over the same interface it sends quotes to the 
Exchange, SQF, and can now use the data to respond to auctions 
quickly and efficiently. This data is not sent as a quote to the 
market because it represents interest that is not immediately 
executable or, in the case of complex orders, represents a complex 
strategy which is not disseminated by the Options Price Reporting 
Authority.
    \9\ The Exchange currently provides Exchange members with 
execution reports through two interfaces. Execution reports are made 
available to all exchange participants on a Risk Management Feed 
known as ``RMP,'' as well as an interface replacing RMP known as the 
Clearing Trade Interface or ``CTI''. See Securities Exchange Act 
Release No. 62155 (May 24, 2010), 75 FR 30081 (May 28, 2010) (SR-
Phlx-2010-67).
    \10\ Other data that is available on SQF 6.0 includes: (1) 
Options Auction Notifications (e.g., opening imbalance, market 
exhaust, PIXL or other information currently provided on SQF 5.0) 
;(2) Options Symbol Directory Messages (currently provided on SQF 
5.0); (3) System Event Messages (e.g., start of messages, start of 
system hours, start of quoting, start of opening); (4) Complex Order 
Strategy Auction Notifications (COLA); (5) Complex Order Strategy 
messages; (6) Option Trading Action Messages (e.g., trading halts, 
resumption of trading); and (7) Complex Strategy Trading Action 
Message (e.g., trading halts, resumption of trading).
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    The Exchange currently assesses an Active SQF Port Fee of $500 per 
month per port. Active SQF ports refer to ports that receive inbound 
quotes at any time within that month. The Exchange anticipates that 
member organizations will utilize both SQF 5.0 and SQF 6.0 for a period 
of time.
    SQF 5.0 and SQF 6.0 require different port configurations, and, as 
a consequence, a member organization could be charged for both types of 
active SQF ports in a given month as the member organization 
transitions from SQF 5.0 to SQF 6.0. Therefore, the Exchange proposes 
not to charge a member organization for the use of SQF 5.0 active ports 
to the extent that the member is paying for the same (or greater) 
number of SQF 6.0 active ports. (If a member organization has more SQF 
5.0 than SQF 6.0 active ports, then the member organization would 
continue to pay for the ``extra'' active SQF 5.0 ports.) This would 
avoid duplicative billing while a member organization transitions its 
ports from SQF 5.0 to SQF 6.0.\11\
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    \11\ The Exchange anticipates that it will take several months 
for this transition to occur.
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2. Statutory Basis
    The Exchange believes that its proposal to amend its schedule of 
fees is consistent with Section 6(b) of the Act \12\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \13\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among Exchange members and other persons using its 
facilities. Specifically, the Exchange believes that this fee proposal 
is fair, reasonable and equitable because it will prevent all member 
organizations from experiencing an unintended increase in SQF port 
charges during the transition from SQF 5.0 to SQF 6.0.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 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.

[[Page 66170]]

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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2010-143 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-2010-143. 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. 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-2010-143 and should be submitted on or before 
November 17, 2010.

    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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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-27140 Filed 10-26-10; 8:45 am]
BILLING CODE 8011-01-P