Document ID: SEC-2011-1165-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2011-08-11T04:00Z

[Federal Register Volume 76, Number 155 (Thursday, August 11, 2011)]
[Notices]
[Pages 49810-49812]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-20376]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65049; File No. SR-Phlx-2011-103]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Rebates and Fees for Adding and Removing Liquidity in Select Symbols

August 5, 2011.
    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 August 1, 2011, 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 its Complex Order Fees in Section I 
of its Fee Schedule titled ``Rebates and Fees

[[Page 49811]]

for Adding and Removing Liquidity in Select Symbols.''
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqtrader.com/micro.aspx?id=PHLXRulefilings, 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.

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 Section I, Part 
B of the Exchange's Fee Schedule for Complex Orders. A Complex Order is 
any order involving the simultaneous purchase and/or sale of two or 
more different options series in the same underlying security, priced 
at a net debit or credit based on the relative prices of the individual 
components, for the same account, for the purpose of executing a 
particular investment strategy. Furthermore, a Complex Order can also 
be a stock-option order, which is an order to buy or sell a stated 
number of units of an underlying stock or ETF coupled with the purchase 
or sale of options contract(s).\3\
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    \3\ See Exchange Rule 1080, Commentary .08(a)(i).
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    The Exchange proposes to increase the current Customer Rebate for 
Adding Liquidity with respect to Complex Orders for options overlying: 
(i) Standard and Poor's Depositary Receipts/SPDRs (``SPY''); \4\ (ii) 
the PowerShares QQQ Trust (``QQQ'')[supreg]; (iii) Apple, Inc. 
(``AAPL''); (iv) iShares Russell 2000 Index (``IWM''); (v) Bank of 
America Corporation (''BAC''); (vi) Citigroup, Inc. (''C''); (vii) SPDR 
Gold Trust (''GLD''); (viii) Intel Corporation (``INTC''); (ix) 
JPMorgan Chase & Co. (''JPM''); (x) iShares Silver Trust (''SLV''); 
(xi) Financial Select Sector SPDR (''XLF''); and (xii) Ford Motor 
Company (``F'') (taken together, ``Designated Options''). The Exchange 
also proposes to waive the Customer Complex Order Fee for Removing 
Liquidity of $0.25 per contract for the following symbols: BAC, C, GLD, 
INTC, JPM, SLV, XLF and F. The Exchange believes that increasing the 
Customer Complex Order Rebate to Add Liquidity and waiving the Customer 
Complex Order Fee for Removing Liquidity for the symbols listed above, 
respectively, would attract additional Customer order flow to the 
Exchange.
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    \4\ SPY options are based on the SPDR exchange-traded fund 
(``ETF''), which is designed to track the performance of the S&P 500 
Index.
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    Currently, the Exchange pays a Customer Complex Order Rebate for 
Adding Liquidity of $0.25 per contract in certain Select Symbols, 
namely SPY, QQQ, AAPL and IWM. The Exchange currently pays a Customer 
Complex Order Rebate for Adding Liquidity \5\ of $0.24 per contract in 
all other Select Symbols, excluding SPY, QQQ, AAPL and IWM.\6\ The 
Exchange also currently waives the Customer Complex Order Fee for 
Removing Liquidity for options overlying SPY, QQQ, AAPL and IWM.\7\ The 
proposal would increase the Customer Rebate for Adding Liquidity to 
$0.26 per contract for all Designated Options.\8\ In addition, the 
proposal would extend the current waiver of the Customer Complex Order 
Fee for Removing Liquidity to include the following symbols: BAC, C, 
GLD, INTC, JPM, SLV, XLF and F.
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    \5\ The only market participant that receives a Rebate for 
Adding Liquidity for Complex Orders today is a Customer.
    \6\ A list of all symbols subject to the Rebates and Fees for 
Adding and Removing Liquidity are listed in Section I of the 
Exchange's Fee Schedule and titled ``Select Symbols.''
    \7\ All other market participants are assessed a Fee for 
Removing Liquidity today other than Customer Complex Orders in SPY, 
QQQ, IWM and AAPL.
    \8\ This would result in a $0.01 per contract rebate increase 
for SPY, QQQ, IWM and AAPL and a $0.02 per contract rebate increase 
for BAC, C, GLD, INTC, JPM, SLV, XLF and F.
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    Under this proposal, the Exchange will pay Customer Complex Orders 
a Rebate for Adding Liquidity of $0.24 per contract, in any Select 
Symbol, except the Designated Options. The Exchange will also assess 
the Customer Complex Order Fee for Removing Liquidity of $0.25 per 
contract, in any Select Symbol, except the Designated Options.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \9\ in general, and furthers 
the objectives of Section 6(b)(4) of the Act \10\ in particular, in 
that it is an equitable allocation of reasonable fees and other charges 
among Exchange members. The Exchange also believes that there is an 
equitable allocation of reasonable rebates among Exchange members.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that it is reasonable and equitable to only 
pay a Complex Order Rebate for Adding Liquidity to Customers, as 
compared to other market participants, because the Customer rebate will 
attract Customer order flow to the Exchange for the benefit of all 
market participants. Likewise, the Exchange believes that it is 
reasonable to waive the Complex Order Fee for Removing Liquidity for 
Customers transacting BAC, C, GLD, INTC, JPM, SLV, XLF and F, because 
by waiving the fee, this also will attract Customer order flow to the 
Exchange which in turn also benefits all market participants.
    The Exchange believes that these proposals are equitable and not 
unfairly discriminatory because by paying an increased Rebate for 
Adding Liquidity to Customers transacting Complex Orders in certain 
symbols and waiving Fees for Adding Liquidity to Customers transacting 
Complex Orders in certain additional symbols, all market participants 
will benefit from the increased liquidity which increased Customer 
order flow would bring to the Exchange.
    With respect to the Customer Complex Order Rebate for Adding 
Liquidity the Exchange believes that it is reasonable to pay a 
different rebate for transacting equity options in certain symbols and 
with respect to the Customer Complex Order Fee for Removing Liquidity 
the Exchange believes that it is reasonable to assess a different Fee 
for Removing Liquidity in certain symbols. The Exchange currently pays 
a different Customer Complex Order Rebate for Adding Liquidity and 
assesses a different Customer Complex Order Fee for Removing Liquidity 
in SPY, QQQ, IWM and AAPL as compared to other Select Symbols. Trading 
in these Select Symbols is different from trading in other symbols in 
that they are more liquid, have higher volume and competition for 
executions is more intense. The Exchange believes the same rationale 
applies in paying a different Customer Complex Order Rebate for Adding 
Liquidity and assessing a different Customer Complex Order Fee for 
Removing Liquidity in BAC, C, GLD, INTC, JPM, SLV, XLF and F in that 
these symbols are also more liquid, have higher volume and competition 
for executions is more intense.

[[Page 49812]]

    The Exchange believes that its proposal to pay a higher rebate for 
transactions in equity options in the Designated Options, as compared 
to the other Select Symbols, is equitable and not unfairly 
discriminatory because the Exchange would uniformly pay the same 
Customer Complex Order Rebate for Adding Liquidity for all Customer 
Complex Orders in all Designated Options. The Exchange believes that 
waiving the Customer Complex Order Fee for Removing Liquidity for the 
following additional symbols: BAC, C, GLD, INTC, JPM, SLV, XLF and F is 
equitable and not unfairly discriminatory because the Exchange is 
uniformly waiving the Customer Complex Order Fee for Removing 
Liquidity.
    The Exchange operates in a highly competitive market comprised of 
nine U.S. options exchanges in which sophisticated and knowledgeable 
market participants can readily send order flow to competing exchanges 
if they deem fee levels at a particular exchange to be excessive. The 
Exchange believes that the Complex Order fees and rebates it pays/
assesses must be competitive with fees and rebates in place on other 
exchanges. The Exchange believes that this competitive marketplace 
impacts the fees and rebates present on the Exchange today and 
influences the proposals set forth above.

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.\11\ 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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    \11\ 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-2011-103 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-2011-103. 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 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-2011-103 and should be 
submitted on or before September 1, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-20376 Filed 8-10-11; 8:45 am]
BILLING CODE 8011-01-P