Document ID: SEC-2009-1287-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX, Inc. Relating to a Retroactive Waiver of the Cancellation Fee
Posted Date: 2009-09-08T04:00Z

[Federal Register: September 8, 2009 (Volume 74, Number 172)]
[Notices]               
[Page 46264-46266]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08se09-138]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60606; File No. SR-Phlx-2009-76]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX, Inc. Relating 
to a Retroactive Waiver of the Cancellation Fee

September 1, 2009.
    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 August 27, 2009, 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 retroactively waive the Cancellation Fee 
for the month of July 2009 and issue a rebate to member organizations 
for Cancellation Fees that were assessed in July 2009.
    The text of the proposed rule change is available on the Exchange's 
Website at http://nasdaqomxphlx. cchwallstreet.com/NASDAQOMXPHLX/

[[Page 46265]]

Filings/, 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 rebate monies 
previously assessed for the Cancellation Fee in July 2009 to all member 
organizations. During the month of July 2009, member organizations were 
assessed $2.10 per order for each cancelled electronically-delivered 
\3\ order in excess of the number of orders executed on the Exchange by 
a member organization in a given month.\4\ The Exchange calculates the 
Cancellation Fee by aggregating all orders and cancels received by the 
Exchange and totaling those orders by member organization. The Exchange 
aggregates and counts as one executed customer \5\ option order all 
customer orders 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.\6\ The following order activity is exempt from the 
Cancellation Fee: (i) Pre-market cancellations \7\ (ii) Complex Orders 
\8\ that are submitted electronically; (iii) unfilled Immediate-or-
Cancel \9\ customer orders; and (iv) 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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    \3\ See Exchange Rule 1080.
    \4\ See Securities Exchange Act Release No. 60046 (June 4, 
2009), 74 FR 28083 (June 12, 2009) (SR-Phlx-2009-44) (assessing 
$2.10 per order for each cancelled electronically-delivered order 
and limit the applicability of the Cancellation Fee to cancelled 
electronically delivered customer orders.)
    \5\ See e.g. Exchange Rule 1080(b)(i)(A) which defines customer 
order as ``* * * is any order entered on behalf of a public 
customer, and does not include any order entered for the account of 
a broker-dealer, or any account in which a broker-dealer or an 
associated person of a broker-dealer has any direct or indirect 
interest.''
    \6\ See Securities Exchange Act Release No. 60188 (June 29, 
2009), 74 FR 32986 (July 9, 2009) (SR-Phlx-2009-48) (aggregating 
options orders within a specified time period for the purpose of 
assessing the Cancellation Fee). At least 500 cancellations must be 
made in a given month by a member organization in order for a member 
organization to be assessed the Cancellation Fee. The Cancellation 
Fee is not assessed in a month in which fewer than 500 
electronically-delivered orders are cancelled. Simple cancels and 
cancel-replacement orders are the types of orders that are counted 
when calculating the number of electronically-delivered orders. (A 
cancel-replacement order is a contingency order consisting of two or 
more parts which require the immediate cancellation of a previously 
received order prior to the replacement of a new order with new 
terms and conditions. If the previously placed order is already 
filled partially or in its entirety the replacement order is 
automatically canceled or reduced by such number.) See Exchange Rule 
1066(c)(7). Also, pre-market cancellations are not included in the 
calculation of the Cancellation Fee as well as Complex Orders that 
are submitted electronically. See Securities Exchange Act Release 
Nos. 53226 (February 3, 2006), 71 FR 7602 (February 13, 2006) (SR-
Phlx-2005-92); and 53670 (April 18, 2006), 71 FR 21087 (April 24, 
2006) (SR-Phlx-2006-21).
    \7\ See Securities Exchange Act Release Nos. 53226 (February 3, 
2006), 71 FR 7602 (February 13, 2006) (SR-Phlx-2005-92); and 53670 
(April 18, 2006), 71 FR 21087 (April 24, 2006) (SR-Phlx-2006-21). 
See also Securities Exchange Act Release No. 60046 (June 4, 2009), 
74 FR 28083 (June 12, 2009) (SR-Phlx-2009-44).
    \8\ A Complex Order is composed of two or more option components 
and is priced as a single order (a ``Complex Order Strategy'') on a 
net debit or net credit basis.
    \9\ An Immediate-or-Cancel (IOC) order is a limit order that is 
to be executed in whole or in part upon receipt. Any portion not so 
executed shall be cancelled.
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    The Exchange assessed the applicable Cancellation Fee of $2.10 per 
order on member organizations, as specified above, during the month of 
July 2009. The Exchange believes that recent changes to the 
Cancellation Fee may have created confusion among its members as to the 
applicability of the fee and/or its calculation. The Exchange has 
explained the current fee applicability to its member organizations 
\10\ and as a result would propose to retroactively waive the 
Cancellation Fee for the month of July 2009 and issue a rebate to all 
member organizations for Cancellation fees assessed in July 2009. The 
Exchange believes that member organizations have been adequately 
educated as to the Exchange's current Cancellation Fee and its 
applicability for future assessments.
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    \10\ NASDAQ OMX PHLX staff contacted all member organizations 
who were assessed a Cancellation Fee in July 2009 concerning the 
applicability and calculation of this fee prior to August 1, 2009. 
Additionally, the Exchange produces a daily cancellation fee 
reconciliation report as a tool for member organizations to monitor 
their cancel volume and potential charges.
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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 \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. The Exchange believes that 
the proposal to retroactively waive the Cancellation Fee for the month 
of July 2009 and issue a rebate to all member organizations for fees 
previously assessed in July 2009 is fair and equitable in that the 
waiver will apply to all member organizations. The Exchange believes 
that it has educated its members as to the applicability of the current 
Cancellation Fee and any confusion has been remedied for future 
assessment of this fee.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 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 \13\ and paragraph (f)(2) of Rule 19b-4 \14\ 
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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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 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:

[[Page 46266]]

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-2009-76 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-2009-76. 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 inspection and 
copying 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-2009-76 and 
should be submitted on or before September 29, 2009.

    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. E9-21611 Filed 9-4-09; 8:45 am]

BILLING CODE 8010-01-P