Document ID: SEC-2009-0971-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change as Modified by Amendment No. 2 Thereto Relating to Complex Orders
Posted Date: 2009-07-15T04:00Z

[Federal Register: July 15, 2009 (Volume 74, Number 134)]
[Notices]               
[Page 34385-34386]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15jy09-132]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60267; File No. SR-Phlx-2009-42]

 
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change as Modified 
by Amendment No. 2 Thereto Relating to Complex Orders

July 9, 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 June 26, 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. On July 
2, 2009, the Exchange filed Amendment No. 1 to the proposed rule 
change. On July 7, 2009, Phlx filed Amendment No. 2 to the proposed 
rule change and withdrew Amendment No. 1. 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 assess a $.01 per contract fee for Complex 
Orders \3\ in equity options that are directed to specialists, 
Streaming Quote Traders (``SQTs'') \4\ and Remote Streaming Quote 
Traders (``RSQTs'') \5\ by a member or member organization and are 
executed electronically as part of a Complex Order.
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    \3\ A Complex Order is composed of two or more components and is 
priced as a single order (a ``Complex Order Strategy'') on a net 
debit or credit basis. See Exchange Rule 1080, Commentary .08. For a 
complete description of the Exchange's Complex Order System. [sic] 
See also Securities Exchange Act Release No. 58361 (August 14, 
2008), 73 FR 49529 (August 21, 2008) (SR-Phlx-2008-50).
    \4\ 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).
    \5\ 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).
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    While changes to the Exchange's fee schedule pursuant to this 
proposal are effective upon filing, the Exchange has designated this 
proposal to be effective for trades settling on or after July 1, 2009.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nasdaqtrader.com/micro.aspx?id=PHLXRulefilings, 
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 assess a $.01 per 
contract fee for Complex Orders \6\ in equity options that are directed 
to specialists, Streaming Quote Traders (``SQTs'') \7\ and Remote 
Streaming Quote Traders (``RSQTs'') (``Directed Participants'' or 
``Directed Specialists, RSQTs, or SQTs'') \8\ by a member or member 
organization (``Order Flow Provider'' or ``OFP''),\9\ and executed 
electronically on the Exchange's electronic trading platform for 
options, the Phlx XL II system.\10\ The $0.01 per contract rate would 
be assessed to the Direct [sic] Participants, in lieu of the equity 
options transactions fees of $.22 per contract side for Registered 
Option Traders (``ROTs'') (on-floor) and $.21 per contract side for 
specialists on contracts executed electronically as part of a Complex 
Order.\11\ This fee assessment would not apply to single sided Directed 
Orders \12\ pursuant to

[[Page 34386]]

Exchange Rule 1080(l). Customers who are on the contra-side of a trade 
involving Directed Orders would not be subject to a fee. Also, Complex 
Orders in index and foreign currency options would not be subject to 
this assessment, but will continue to be assessed the option 
transaction charges in effect on the Exchange for simple orders for all 
participants. The Exchange proposes this amendment in order to create 
incentives for specialists, SQTs and RSQTs that receive directed order 
flow to provide liquidity in Complex Orders sent to the Exchange for 
execution and to encourage directed order flow.
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    \6\ A Complex Order is composed of two or more components and is 
priced as a single order (a ``Complex Order Strategy'') on a net 
debit or credit basis. See Exchange Rule 1080, Commentary .08. For a 
complete description of the Exchange's Complex Order System. [sic] 
See also Securities Exchange Act Release No. 58361 (August 14, 
2008), 73 FR 49529 (August 21, 2008) (SR-Phlx-2008-50).
    \7\ 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).
    \8\ See Exchange Rule 1080(l), ``* * * The term `Directed 
Specialist, RSQT, or SQT' means a specialist, RSQT, or SQT that 
receives a Directed Order.'' A Directed Participant has a higher 
quoting requirement as compared with a specialist, SQT or RSQT who 
is not acting as a Directed Participant. See Exchange Rule 1014.
    \9\ See Exchange Rule 1080(l). ``* * * The term `Order Flow 
Provider' (`OFP') means any member or member organization that 
submits, as agent, customer orders to the Exchange.''
    \10\ See Securities Exchange Act Release No. 59995 (May 28, 
2009), 74 FR 26750 (June 3, 2009) (SR-Phlx-2009-32).
    \11\ In addition the Exchange notes that currently Registered 
Option Traders (on-floor) and specialists that exceed 4.5 million 
contracts (``Volume Threshold'') in a given month are assessed $.01 
per contract on contract volume above the Volume Threshold instead 
of the applicable options transaction charges.
    \12\ See Exchange Rule 1080(l), ``* * * The term `Directed 
Order' means any customer order (other than a stop or stop-limit 
order as defined in Rule 1066) to buy or sell which has been 
directed to a particular specialist, RSQT, or SQT by an Order Flow 
Provider, as defined below. To qualify as a Directed Order, an order 
must be delivered to the Exchange via AUTOM.'' See also See [sic] 
Securities Exchange Act Release No. 59995 (May 28, 2009), 74 FR 
26750 (June 3, 2009) (SR-Phlx-2009-32) (The Exchange replaced the 
terms AUTOM and AUTO-X with the Phlx XL System, such that references 
to both terms refer to Phlx XL.)
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    Currently, the Exchange assesses an equity option transaction 
charge of $.08 per contract side for specialists and ROTs, including 
SQTs and RSQTs, on contracts executed electronically as part of a 
Complex Order in equity options. Market participants other than 
specialists and ROTs are assessed the applicable current equity option 
transaction charge. Complex Orders are currently assessed on a net 
debit/credit basis and are billed on a per contract side basis, 
regardless of the manner in which the order was delivered to the 
Exchange.
2. Statutory Basis
    The Exchange believes that its proposal to amend its schedule of 
fees is consistent with Section 6(b) of the Act \13\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \14\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among Exchange members. Specifically, the Exchange 
believes that this proposal is equitable because it would apply evenly 
to specialists, SQTs and RSQTs transacting with Complex Orders sent to 
the Exchange for execution, in that any specialist, SQT or RSQT may act 
as a Directed Participant and receive the $.01 per contract fee. Also, 
the Exchange believes this proposal will increase liquidity in Complex 
Orders.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 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 \15\ and paragraph (f)(2) of Rule 19b-4 \16\ 
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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    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \16\ 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:

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-2009-42 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-2009-42. 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 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-2009-42 and should be 
submitted on or before August 5, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
 [FR Doc. E9-16714 Filed 7-14-09; 8:45 am]

BILLING CODE 8010-01-P