Document ID: SEC-2011-2006-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2011-12-23T05:00Z

[Federal Register Volume 76, Number 247 (Friday, December 23, 2011)]
[Notices]
[Pages 80442-80443]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-32888]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66004; File No. SR-Phlx-2011-155]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Fees for Certain Stock Execution Clerks and the Trading Floor Personnel 
Registration Fee

December 19, 2011.
    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 December 6, 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 eliminate the Fees for Certain Stock 
Execution Clerks from Section VI of the Fee Schedule.
    While changes to the Fee Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative on January 3, 2012.\3\
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    \3\ The Commission notes that the Exhibit 1 to the proposed rule 
change stated that December 1, 2011 is the operative date of the 
proposed rule change. The Exchange represents that the operative 
date of the proposed rule change is instead January 3, 2012. See 
email from Angela S. Dunn, Assistant General Counsel, Exchange, to 
Nicholas Shwayri, Attorney-Advisor, Division of Trading and Markets, 
Commission, dated December 16, 2011.
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    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, on the Commission's Web site at 
http://www.sec.gov/, 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to eliminate the Fees 
for Certain Stock Execution Clerks from the Fee Schedule and amend the 
Trading Floor Registration Fee to clarify that the fee applies to 
Clerks and Inactive Nominees.

Stock Execution Clerks

    A stock execution clerk is currently defined in Exchange Rule 1090 
as any clerk other than a specialist clerk on the Exchange trading 
floor who functions as an intermediary in a transaction (i) consummated 
on the Exchange; (ii) entered verbally for execution other than on the 
Exchange; or (iii) entered into a third party system designed to 
execute transactions other than on the Exchange.\4\ All stock execution 
clerks must register as such with the Exchange.\5\
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    \4\ See Exchange Rule 1090, Commentary .01(a). Further, No Stock 
Execution Clerk shall: (i) act as an intermediary in any transaction 
other than under the direct supervision of a member; (ii) enter into 
any clearing transaction or participate in any clearing process; 
(iii) have discretion or independent authority over any account or 
transaction. See Exchange Rule 1090, Commentary .01(d).
    \5\ Any member or member organization engaged as a stock 
execution clerk shall register as such with the Exchange's 
Membership Department. A stock execution clerk that performs any 
function other than a solely clerical or ministerial function shall, 
prior to performing any function as a stock execution clerk, (i) 
comply with the registration requirement(s) set forth in Exchange 
Rule 604, where applicable; (ii) disclose in detail to the Exchange, 
on an annual basis, the specific nature of such additional 
function(s); and (iii) in accordance with Exchange Rule 748, submit 
to the Exchange written supervisory procedures relating to such 
member or member organization's activities as a stock execution 
clerk. See Exchange Rule 1090, Commentary .01(b).
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    Generally, ``stock execution'' refers to the service used by 
options traders to hedge their options trades with the underlying 
stock. Although stock execution is often done electronically, stock 
execution clerks provide a service to Exchange members on the options 
floor by accepting orders for the purchase and sale of securities 
underlying options transactions. Once such orders are accepted, the 
stock execution clerk forwards such orders to the appropriate 
marketplace for execution. The transactions executed are typically 
hedging transactions in underlying stocks for Exchange specialists and 
Registered Options Traders.\6\ The transaction may be contingent on an 
options transaction \7\ or may stand independently (``stand-alone 
equity orders'').
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    \6\ A Registered Options Trader (``ROT'') includes a SQT, a RSQT 
and a Non-SQT, which by definition is neither a SQT or a RSQT. A 
Registered Option Trader 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. See 
Exchange Rule 1014(b)(i) and (ii).
    \7\ A contingency order is a limit or market order to buy or 
sell that is contingent upon a condition being satisfied while the 
order is at the post. For certain options contingency orders, the 
contingency involves buying or selling the underlying security 
(generally called ``stock'' in this proposal). See Exchange Rule 
1066(c).
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    The Exchange established this fee in 2007 to assess fees 
commensurate with the activities of stock execution clerks that handle 
stand-alone equity orders (i.e. orders that are not contingent on an 
options transaction) .\8\ For those stock execution clerks that handle 
orders that are contingent on an options transaction, i.e. orders that 
are packaged with an options trade, the Exchange filed to assess 
charges associated with those contingency orders, such as option 
transaction charges. The Exchange, however, does not assess fees in 
connection with stand-alone equity orders, which may be handled by a 
variety of intermediaries and which may be executed on different equity 
markets. The Exchange established this fee because these clerks 
generally are not subject to fees for doing business from the 
Exchange's options floor.
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    \8\ See Securities Exchange Act Release No. 56221 (August 8, 
2007), 72 FR 45855 (August 15, 2007) (SR-Phlx-2007-48).
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    The Exchange is proposing to eliminate this fee because there are 
no clerks registered as stock execution clerks today.\9\
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    \9\ In the instance that a clerk registers as a stock execution 
clerk in the future, that clerk would be billed the newly named 
``Clerk Fee.'' If the Exchange determined to assess Fees for Certain 
Stock Execution Clerks it would file with the Commission to 
reinstitute the fee.

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[[Page 80443]]

Trading Floor Personnel Registration Fee

    The Exchange currently assesses a Trading Floor Personnel 
Registration Fee of $100 per month on individuals who are employed by 
such member organizations and who work on the Exchange's trading floor, 
such as clerks (for purposes of this fee a clerk includes an Inactive 
Nominee), interns and stock execution clerks that handle equity orders 
that are part of an options contingency order and other associated 
persons. This fee is not imposed on permit holders.
    The Exchange proposes to continue assessing the fee as it is being 
assessed today, except the Exchange proposes to rename the fee as a 
``Clerk Fee'' and also clarify that the fee is imposed on any 
registered on-floor person employed by or associated with a member or 
member organization pursuant to Rule 1090, including an Inactive 
Nominee pursuant to Rule 1090. All non-members and Clerks are required 
to register pursuant to Rule 620, entitled ``Trading Floor 
Registration.'' \10\ Both Inactive Nominees and interns are clerks 
pursuant to Rule 1090. This fee will not be imposed on permit holders, 
as is the case today. The Exchange is proposing this text change to 
better describe the categories of non-members that are subject to the 
fee.
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    \10\ All trading floor personnel, including clerks, interns, 
stock execution clerks and any other associated persons, of a member 
organization not required to register pursuant to Rule 620(a) must: 
(i) Register as such with the Exchange by completing the appropriate 
form(s) for non-registered persons (with periodic updates submitted 
by the member organization, as determined by the Exchange); and (ii) 
submit hard copy fingerprint cards or results of processed cards to 
FINRA for processing. Further, the Exchange may require successful 
completion of an examination, in addition to requirements imposed by 
other Exchange Rules. The Exchange may also require periodic 
examinations due to changes in trading rules, products or automated 
systems. See Exchange Rule 620.
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    While changes to the Fee Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative on January 3, 2012.\11\
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    \11\ The Commission notes that the Exhibit 1 to the proposed 
rule change stated that January 3, 2011 is the operative date of the 
proposed rule change. The Exchange represents that the operative 
date of the proposed rule change is instead January 3, 2012. See 
supra note 3.
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2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
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.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that it is reasonable, equitable and not 
unfairly discriminatory to eliminate the Fees for Certain Stock 
Execution Clerks because there are no clerks today registered in this 
capacity. The Exchange also believes that it is reasonable, equitable 
and not unfairly discriminatory to rename the ``Trading Floor Personnel 
Registration Fee'' as the ``Clerk Fee'' and amend the text of the Fee 
Schedule to better explain the categories of persons subject to this 
fee.

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.\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 email to rule-comments@sec.gov. Please include 
File No. SR-Phlx-2011-155 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 No. SR-Phlx-2011-155. This 
file number should be included on the subject line if email 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 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 No. SR-Phlx-2011-155 and should be 
submitted on or before January 13, 2012.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-32888 Filed 12-22-11; 8:45 am]
BILLING CODE 8011-01-P