Document ID: SEC-2009-0349-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, Inc.
Posted Date: 2009-03-16T04:00Z

[Federal Register: March 16, 2009 (Volume 74, Number 49)]
[Notices]               
[Page 11151-11152]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16mr09-108]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59537; File No. SR-Phlx-2009-19]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change as Modified by Amendment No. 1 
Thereto by NASDAQ OMX PHLX, Inc. To Amend the Exchange's Fee Schedule 
Relating to the Market Access Provider Subsidy

March 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 February 25, 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 
March 3, 2009, the Exchange filed Amendment No. 1 to the proposal.\3\ 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 clarified that if there is any change to the 
status of the Monthly MAP Volume Bonus and/or the MAP Marketing 
Subsidy, or if the Exchange negotiates any MAP Agreement extension, 
the Exchange will file a proposed rule change with the Commission.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its schedule of fees to remove 
certain subsidies that are available to qualifying Phlx member 
organizations that offer to customers automated order routing systems 
and electronic market access to U.S. options markets (``Market Access 
Providers'' or ``MAPs''). Specifically, the Exchange proposes to amend 
the Market Access Provider Subsidy section of its fee schedule by 
deleting the following subsidies: (i) A $0.01 per contract incentive 
above the previously established per-contract subsidy rate upon the 
renewal of a MAP Agreement; (ii) a $50,000 per month bonus payment (the 
``Monthly MAP Volume Bonus'') for each month in which the number of 
contracts routed to the Exchange exceeds a defined number of contracts; 
and (iii) a $25,000 per month marketing subsidy (the ``MAP Marketing 
Subsidy''), as defined below.
    The proposed rule change is filed for immediate effectiveness and 
will be effective for trades settling on or after March 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 manage Exchange 
expenses by removing certain subsidies from the Exchange's fee 
schedule.

Market Access Provider

    In August, 2007, the Exchange amended its fee schedule to provide a 
per contract Subsidy (the ``Subsidy'') for certain Exchange members 
known as MAPs.\4\ A MAP is an Exchange member organization that offers 
to customers automated order routing systems and electronic market 
access to U.S. options markets. The Exchange pays a per-contract MAP 
Subsidy to any Exchange member organization that qualifies as a MAP (an 
``Eligible MAP'') \5\ who elects to participate by submitting any 
application(s) and/or form(s) required by the Exchange, and complying 
with other conditions.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 56274 (August 16, 
2007), 72 FR 48720 (August 24, 2007) (SR-Phlx-2007-54).
    \5\ The term ``Eligible MAP'' is defined in current footnote 
5(b) of the Market Access Provider Subsidy section of the Exchange's 
fee schedule.
---------------------------------------------------------------------------

    A MAP must enter into and maintain an Agreement (a ``MAP 
Agreement'') with the Exchange to function as an Eligible MAP and be in 
compliance with all terms thereof.

MAP Subsidy

    The Exchange currently pays a Subsidy to Eligible MAPs on a monthly 
basis, of $0.10 (the ``Subsidy Rate'') for each Eligible Contract (as 
defined below) executed in the immediately preceding calendar month 
above the particular Eligible MAP's Baseline Order Flow (as defined 
below).
    ``Eligible Contracts'' means contracts that result from the 
execution on the Exchange of: (1) Equity option orders (other than 
crosses) sent electronically to an Eligible MAP (and routed to the 
Exchange electronically by the Eligible MAP) by its customers; and (2) 
MAP Routing Orders (other than crosses) sent electronically by the 
Eligible MAP.
    ``Baseline Order Flow'' for an Eligible MAP means the higher of: 
(1) 500,000 contracts; or (2) the average contracts per month, 
calculated for the 3-month period immediately preceding the Eligible 
MAP entering into an agreement with the Exchange, that resulted from 
the execution on the Exchange of equity option orders (other than 
crosses) routed to Phlx electronically by such Eligible MAP.
    In addition, the Exchange pays an additional $0.01 per contract 
above the previously established per-contract Subsidy Rate upon the 
renewal of a MAP Agreement.\6\
---------------------------------------------------------------------------

    \6\ A MAP Agreement is typically in effect for a period of one 
year, and the Exchange may, by giving written notice to the Eligible 
MAP, elect to extend it for additional one year terms, in which case 
the per contract Subsidy payable during any extension period for 
that Eligible MAP is $0.01 per contract greater than the Subsidy 
Rate then in effect at the date of renewal. See supra note 4.
---------------------------------------------------------------------------

    The Exchange proposes to delete the additional $0.01 per contract 
payment provision respecting extended MAP Agreements from the Market 
Access Provider Subsidy section of its fee schedule. The Exchange 
believes that it would benefit both parties to negotiate the terms of 
any MAP Agreement extension on a case-by-case basis, rather than having 
fixed terms already in

[[Page 11152]]

place. In that way, the parties can evaluate their current business 
situation and negotiate an extension, if any, that is reasonable and 
appropriate under then-existing conditions existing within each party, 
and under then-existing market and economic situations as a whole.\7\
---------------------------------------------------------------------------

    \7\ In the event that there is any change to the status of the 
Monthly MAP Volume Bonus and/or the MAP Marketing Subsidy, or if the 
Exchange negotiates any MAP Agreement extension, the Exchange will 
file a proposed rule change pursuant to Section 19(b)(3)(A)(ii) of 
the Act and Rule 19b-4(f)(2) thereunder.
---------------------------------------------------------------------------

Monthly MAP Volume Bonus

    The Exchange pays each Eligible MAP $50,000 per month (the ``Volume 
Bonus'') for each month in which the Eligible Contracts of such 
Eligible MAP in the immediately preceding calendar month exceed the 
higher of: (1) 1,500,000; or (2) three times the Baseline Order Flow of 
such Eligible MAP. The Volume Bonus is in addition to the amount for 
any Subsidy that is payable.
    The Exchange proposes to delete the monthly MAP Volume Bonus from 
the Market Access Provider Subsidy section of its fee schedule in order 
to be in a better position to manage its allocation of costs.

Marketing Subsidy

    Currently, the Exchange pays a MAP Marketing Subsidy of $25,000.00 
per month, for a maximum of three months (totaling $75,000.00) to 
Eligible MAPs, in addition to the per-contract Subsidy.
    The MAP Marketing Subsidy is intended to be used by the Eligible 
MAP to: (i) Promote the Subsidy program; (ii) provide technical 
assistance and information to its customers on the equity options order 
routing functionality that pertains to the Subsidy program; and (iii) 
analyze the volume based usage of such order routing functionality by 
the Eligible MAP and its customers, in each case with a view towards 
the successful launch of the Eligible MAP's participation in the 
Subsidy for Eligible MAPs.
    The Exchange proposes to delete the Marketing Subsidy from the 
Market Access Provider Subsidy section of its fee schedule. The 
Exchange intends to attract new participants into the MAP program using 
more of a variable cost rather than a fixed cost.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \8\ in general, and furthers the objectives of Sections 
6(b)(4) of the Act \9\ in particular, in that it is designed to provide 
for the equitable allocation of reasonable dues, fees and other charges 
among Exchange members by deleting standardized volume bonuses and 
marketing subsidies, thus enabling the Exchange to manage its costs 
relating to MAPs.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

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 \10\ and paragraph (f)(2) of Rule 19b-4 \11\ 
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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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-2009-19 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-2009-19. 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 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-2009-19 and should be submitted on or before April 6, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-5564 Filed 3-13-09; 8:45 am]

BILLING CODE 8011-01-P