Document ID: SEC-2010-0359-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, Inc.
Posted Date: 2010-03-09T05:00Z

[Federal Register: March 9, 2010 (Volume 75, Number 45)]
[Notices]               
[Page 10857-10858]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09mr10-104]                         

[[Page 10857]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61617; File No. SR-Phlx-2010-22]

 
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Linkage Pilot

March 1, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on February 24, 2010, NASDAQ OMX PHLX, Inc. (``Phlx'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. 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 discontinue its current pilot program (the 
``pilot'') relating to fees applicable to Principal Acting as Agent 
Orders (``P/A Orders'') \3\ and Principal Orders (``P Orders'').\4\ The 
text of the proposed rule change is available on Phlx's Web site at 
http://www.nasdaqtrader.com, on the Commission's Web site at http://
www.sec.gov, at Phlx, and at the Commission's Public Reference Room.
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    \3\ A P/A Order is an order for the principal account of a 
specialist (or equivalent entity on another participant exchange 
that is authorized to represent Public Customer orders), reflecting 
the terms of a related unexecuted Public Customer order for which 
the specialist is acting as agent. See Exchange Rule 1088, Phase Out 
of Intermarket Linkage Rules.
    \4\ A Principal Order is an order for the principal account of 
an Eligible Market Maker and is not a P/A Order. See Exchange Rule 
1088, Phase Out of Intermarket Linkage Rules.
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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 self-regulatory organization 
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 those 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 parts 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 discontinue the 
current pilot program related to transaction fees for P/A Orders and P 
Orders sent to the Exchange via the Intermarket Option Linkage 
(``Linkage'') under the former Plan for the Purpose of Creating and 
Operating an Intermarket Linkage (``Linkage Plan'').\5\ The current 
pilot is set to expire July 31, 2010.\6\
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    \5\ See Securities Exchange Act Release No. 60363 (July 22, 
2009), 74 FR 37270 (July 28, 2009) (SR-Phlx-2009-61). Linkage was 
governed by the Options Linkage Authority under the conditions set 
forth under the Plan for the Purpose of Creating and Operating an 
Intermarket Option Linkage approved by the Commission. The 
registered U.S. options markets are linked together on a real-time 
basis through a network capable of transporting orders and messages 
to and from each market.
    \6\ See Securities Exchange Act Release No. 60210 (July 1, 
2009), 74 FR 32989 (July 9, 2009) (SR-Phlx-2009-53).
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    On June 17, 2008, the Exchange filed an executed copy of the 
Options Order Protection and Locked/Crossed Market Plan (``Plan''), 
joining all other approved options markets in adopting the Plan.\7\ The 
Plan requires each options exchange to adopt rules implementing various 
requirements specified in the Plan.\8\
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    \7\ See Securities Exchange Act Release Nos. 60405 (July 20, 
2009) (National Market System Plan Relating to Options Order 
Protection and Locked/Crossed Markets). The Plan is a national 
market system plan proposed by the seven existing options exchanges 
and approved by the Commission. See Securities Exchange Act Release 
No. 59647 (March 30, 2009), 74 FR 15010 (April 2, 2009) (File No. 4-
546) (``Plan Notice'') and 60405 (July 30, 2009), 74 FR 39362 
(August 6, 2009) (File No. 4-546) (``Plan Approval''). The seven 
options exchanges are: Chicago Board Options Exchange, Incorporated 
(``CBOE''); International Securities Exchange LLC (``ISE''); NASDAQ 
OMX BX, Inc. (``BOX''); The NASDAQ Stock Market LLC (``Nasdaq''); 
NYSE Amex LLC (``NYSE Amex''); NYSE Arca, Inc. (``NYSE Arca''); and 
Phlx (each exchange individually a ``Participant'' and, together, 
the ``Participating Options Exchanges'').
    \8\ See Securities Exchange Act Release No. 60363 (July 22, 
2009), 74 FR 37270 (July 28, 2009) (SR-Phlx-2009-61). Linkage was 
governed by the Options Linkage Authority under the conditions set 
forth under the Plan for the Purpose of Creating and Operating an 
Intermarket Option Linkage approved by the Commission. The 
registered U.S. options markets are linked together on a real-time 
basis through a network capable of transporting orders and messages 
to and from each market.
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    The Plan replaces the Linkage Plan. The Linkage Plan required 
Participating Options Exchanges to operate a stand-alone system or 
``Linkage'' for sending order-flow between exchanges to limit trade-
throughs.\9\ The Options Clearing Corporation (``OCC'') operated the 
Linkage system (the ``System'').\10\ The Exchange adopted various new 
rules in connection with the Plan to avoid trade-throughs and locked 
markets, among other things.\11\ The Exchange currently offers private 
routing directly to away markets.\12\
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    \9\ See footnote 7.
    \10\ See footnote 7.
    \11\ See footnote 7.
    \12\ See Exchange Rule 1080(m).
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    The pilot, which is set to expire on July 31, 2010, relates to fees 
charged by the Exchange for both P/A and P Orders. The Exchange 
currently charges $.45 per option contract for P Orders sent to the 
Exchange and $0.30 per option contract for P/A Orders. The current 
pilot program has been renewed periodically over several years.\13\ 
Because there are no longer any participant exchanges to the Linkage 
Plan who send Linkage P or P/A Orders, the Exchange proposes to 
discontinue the pilot.
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    \13\ See Securities Exchange Act Release Nos. 60210 (July 1, 
2009), 74 FR 32989 (July 9, 2009) (SR-Phlx-2009-53); 58144 (July 11, 
2008), 73 FR 41394 (July 18, 2008) (SR-Phlx-2008-49); 56166 (July 
30, 2007), 72 FR 43312 (August 3, 2007) (SR-Phlx-2007-52); 54233 
(July 27, 2006), 71 FR 44070 (August 3, 2006) (SR-Phlx-2006-44); 
51257 (February 25, 2005), 70 FR 10736 (March 4, 2005) (SR-Phlx-
2005-10); 50125 (July 30, 2004), 69 FR 47479 (August 5, 2004) (SR-
Phlx-2004-44); 49163 (January 30, 2004), 69 FR 5885 (February 6, 
2004) (SR-Phlx-2003-89); and 47953 (May 30, 2003), 68 FR 34027 (June 
6, 2003) (SR-Phlx-2003-16).
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    The Exchange also proposes to amend its Fee Schedule to remove all 
references to Linkage fees.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \14\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \15\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest, by removing all references to Linkage in the Fee Schedule and 
to clarify that Linkage fees are no longer applicable.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
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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.

[[Page 10858]]

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

    Because the foregoing proposed rule change: (i) Does not 
significantly affect the protection of investors or the public 
interest; (ii) does not impose any significant burden on competition; 
and (iii) by its terms, does not become operative for 30 days from the 
date on which it was filed, or such shorter time as the Commission may 
designate, if consistent with the protection of investors and the 
public interest, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \16\ and Rule 19b-4(f)(6) thereunder.\17\
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the self-regulatory organization to submit to the 
Commission written notice of its intent to file the proposed rule 
change, along with a brief description and text of the proposed rule 
change, at least five business days prior to the date of filing of 
the proposed rule change, or such shorter time as designated by the 
Commission. The Exchange has satisfied this requirement.
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    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.

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-2010-22 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-2010-22. 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 on official business 
days between the hours of 10 a.m. and 3 p.m. Copies of such 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-2010-22 and should be submitted on or before March 30, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-4913 Filed 3-8-10; 8:45 am]
BILLING CODE 8011-01-P