Document ID: SEC-2011-1953-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2011-12-15T05:00Z

[Federal Register Volume 76, Number 241 (Thursday, December 15, 2011)]
[Notices]
[Pages 78055-78057]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-32139]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65924; File No. SR-Phlx-2011-167]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
the Permit Fee

December 9, 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 November 28, 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 the Exchange's Fee Schedule to waive 
Permit Fees for existing Exchange members or member organizations that 
were members on the Exchange prior to the initiation of PSX and have 
since determined to commence an equities business.
    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 extend the waiver of 
Permit Fees to Exchange members or member organizations that were 
members on the Exchange prior to the initiation of PSX and have since 
determined to commence an equities business. The Exchange continues to 
seek to encourage members to trade on NASDAQ OMX PSX (``PSX'') \3\ 
under a market participant identifier (``MPID'') \4\ registered to the 
member or member organization.
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    \3\ PSX is the Exchange's cash equities market electronic 
trading platform.
    \4\ An MPID is a four-letter code used by a member to categorize 
its trading activity for a specific purpose.
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    Currently, the Exchange assesses members and member organizations 
who are transacting business on the Exchange a Permit Fee of $1,100 per 
month.\5\ A member or member organization is assessed the $1,100 
monthly Permit Fee if that member or member organization: (1) Transacts 
its option orders in its assigned Phlx house account in a particular 
month; (2) is a clearing member of The Options Clearing Corporation or 
a Floor Broker; or (3) for those member organizations which are under 
common ownership, transacts at least one options trade in a Phlx house 
account that is assigned to one of the member organizations under 
common ownership.\6\ Members who are not transacting business on the 
Exchange are assessed a Permit Fee of $7,500 per month. A member or 
member organization is assessed the $7,500 Permit Fee for not 
transacting business on the Exchange if that member is either: (i) Not 
a PSX Participant;\7\ or not engaged in an options business at the 
Exchange in a particular month. In

[[Page 78056]]

addition, a member or member organization that sponsors an options 
participant \8\ would pay an additional Permit Fee for each sponsored 
options participant. If the Exchange member or member organization 
meets the exemption criteria related to the $7,500 Permit Fee, the 
member or member organization would be assessed the $1,100 Permit Fee 
or $2,000 as of January 3, 2012.
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    \5\ The Exchange recently filed to amend its Permit Fees to 
$2,000 for members transacting business on the Exchange. The rule 
text of Exhibit 5 reflects the text of that currently effective 
filing which will be operative on January 3, 2012, in part. See SR-
Phlx-2011-166.
    \6\ For purposes of the Permit Fee, ``common ownership'' shall 
be defined as at least 75% common ownership between the member 
organizations.
    \7\ Applicants that apply for membership solely to participate 
in the NASDAQ OMX PSX equities market are not assessed a Permit Fee, 
Application Fee, Initiation Fee, or Account Fee. See Securities 
Exchange Act Release No. 61863 (April 7, 2010), 75 FR 20021 (April 
16, 2010) (SR-Phlx-2010-54).
    \8\ See Exchange Rule 1094 titled Sponsored Participants. A 
Sponsored Participant may obtain authorized access to the Exchange 
only if such access is authorized in advance by one or more 
Sponsoring Member Organizations. Sponsored Participants must enter 
into and maintain participant agreements with one or more Sponsoring 
Member Organizations establishing a proper relationship(s) and 
account(s) through which the Sponsored Participant may trade on the 
Exchange.
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    At the time PSX began operations in October 2010, the Exchange 
filed a rule change to waive the Application Fee, Initiation Fee, 
Permit Fee and Account Fee for applicants applying to participate in 
PSX (``October 2010 Rule Change'').\9\ The October 2010 Rule Change 
applied the waivers to new Exchange members that solely participated in 
PSX.\10\ Also, the October 2010 Rule Change did not apply the waivers 
to an applicant seeking approval to participate solely in the options 
market, or to an applicant seeking to participate in both the equities 
and the options markets.\11\ Finally, the October 2010 Rule Change did 
not apply waivers to members or member organizations that cease their 
options operations, but remain as sole PSX Participants. The Exchange 
subsequently filed an amendment to allow existing members or member 
organizations that cease to conduct an options business on Phlx XL 
II,\12\ but continue to conduct business PSX, to receive a waiver of 
Permit Fee.\13\
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    \9\ See Securities Exchange Act Release No. 63351 (November 19, 
2010), 75 FR 73140 (November 29, 2010) (SR-Phlx-2010-54).
    \10\ See Securities Exchange Act Release No. 63351 (November 19, 
2010), 75 FR 73140 (November 29, 2010) (SR-Phlx-2010-54).
    \11\ See Securities Exchange Act Release No. 63351 (November 19, 
2010), 75 FR 73140 (November 29, 2010) (SR-Phlx-2010-54).
    \12\ Phlx XL II is the Exchange's electronic options trading 
platform.
    \13\ See Securities Exchange Act Release No. 64265 (April 8, 
2011), 76 FR 21080 (April 14, 2011) (SR-Phlx-2011-43).
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    This filing proposes to apply the waiver of the Permit Fee \14\ to 
those Exchange members and member organizations that were members of 
the Exchange before the initiation of PSX, but were not conducting an 
options business, and thereafter commenced conducting an equities 
business. These members and member organizations were not considered 
``new'' members and were therefore not subject to the waiver. The 
Exchange proposes to allow these members and member organizations to 
receive a waiver of the Permit Fee. These members and member 
organizations must not be conducting an options business to receive the 
waiver, but would be considered PSX only.
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    \14\ These members and member organizations would not be 
assessed an Application Fee or Initiation Fee because they are 
already Exchange members or member organizations and have previously 
paid those fees. In addition, the monthly Account Fee would not be 
applicable to PSX Participants as MPIDs are used to identify member 
firms' participation, not account numbers.
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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 \15\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \16\ 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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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that it is reasonable to waive fees as an 
incentive for existing Exchange members and member organizations to 
continue to transact business on PSX.
    The Exchange believes that the proposal is equitable and not 
unfairly discriminatory because the waiver applies uniformly to any 
members and member organizations that solely conduct an equities 
business on the Exchange. The fact that these members and member 
organizations were at the Exchange prior to the commencement of PSX 
should not prohibit them from receiving the same waiver as other 
equities members who are not conducting an options Exchange.

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.\17\ 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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    \17\ 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-2011-167 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-2011-167. 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

[[Page 78057]]

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-
2011-167 and should be submitted on or before January 5, 2012.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-32139 Filed 12-14-11; 8:45 am]
BILLING CODE 8011-01-P