Document ID: SEC-2010-0280-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, Inc.
Posted Date: 2010-02-24T05:00Z

[Federal Register: February 24, 2010 (Volume 75, Number 36)]
[Notices]               
[Page 8421-8423]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24fe10-154]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61529; File No. SR-Phlx-2010-17]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX, Inc. Relating 
to the Options Regulatory Fee

February 17, 2010.
    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 4, 2010, 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. 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 its Options Regulatory Fee.
    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, at the Commission's Public Reference 
Room, and on the Commission's Web site at http://www.sec.gov.

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

[[Page 8422]]

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 amend the Options 
Regulatory Fee to eliminate the minimum one-cent charge per trade. The 
Exchange notes that the total monthly charges to be assessed in a given 
month will be rounded to the nearest $0.01. The Exchange believes that 
by eliminating the one-cent charge per trade this should reduce fees 
related to the ORF for members.
    Currently, the Exchange assesses $.0035 per contract to each member 
for all options transactions executed or cleared by the member that are 
cleared by The Options Clearing Corporation (``OCC'') in the customer 
range (i.e., that clear in the customer account of the member's 
clearing firm at OCC), excluding P/A Orders as defined in the Options 
Intermarket Linkage Plan (``Linkage'').\3\ The ORF is imposed upon all 
such transactions executed by a member, even if such transactions do 
not take place on the Exchange.\4\ The ORF also includes options 
transactions that are not executed by an Exchange member but are 
ultimately cleared by an Exchange member. The Exchange charges members 
$.0035 per contract for all options transactions executed or cleared by 
the member that are cleared by OCC in the customer range, excluding 
Linkage P/A Orders, regardless of the marketplace of execution. In the 
case where one member both executes a transaction and clears the 
transaction, the ORF is assessed to the member only once on the 
execution. In the case where one member executes a transaction and a 
different member clears the transaction, the ORF is assessed only to 
the member who executes the transaction and is not assessed to the 
member who clears the transaction. In the case where a non-member 
executes a transaction and a member clears the transaction, the ORF is 
assessed to the member who clears the transaction. The ORF is not 
charged for member options transactions because members incur the costs 
of owning memberships and through their memberships are charged 
transaction fees, dues and other fees that are not applicable to non-
members.\5\ The dues and fees paid by members go into the general funds 
of the Exchange, a portion of which is used to help pay the costs of 
regulation. The ORF is collected indirectly from members through their 
clearing firms by OCC on behalf of the Exchange. Currently, there is a 
minimum one-cent charge per trade.\6\
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    \3\ See Securities Exchange Act Release Nos. 60405 (July 30, 
2009), 74 FR 39362 (August 6, 2009) (National Market System Plan 
Relating to Options Order Protection and Locked/Crossed Markets).
    \4\ The ORF would apply to all ``C'' account origin code orders 
executed by a member on the Exchange. Exchange rules require each 
member to record the appropriate account origin code on all orders 
at the time of entry in order to allow the Exchange to properly 
prioritize and route orders and assess transaction fees pursuant to 
the rules of the Exchange and report resulting transactions to the 
OCC. See Exchange Rule 1063, Responsibilities of Floor Brokers, and 
Options Floor Procedure Advice F-4, Orders Executed as Spreads, 
Straddles, Combinations or Synthetics and Other Order Ticket Marking 
Requirements. The Exchange represents that it has surveillances in 
place to verify that members mark orders with the correct account 
origin code.
    \5\ For example, non-broker-dealer customers generally are not 
charged transaction fees to trade equity options on the Exchange.
    \6\ See Securities and Exchange Act Release No. 61133 (December 
9, 2009), 74 FR 66715 (December 16, 2009) (SR-Phlx-2009-100).
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    The ORF is designed to recover a portion of the costs to the 
Exchange of the supervision and regulation of its members, including 
performing routine surveillances, investigations, examinations, 
financial monitoring, and policy, rulemaking, interpretive, and 
enforcement activities. The Exchange believes that revenue generated 
from the ORF, when combined with all of the Exchange's other regulatory 
fees, will cover a material portion, but not all, of the Exchange's 
regulatory costs. The Exchange monitors the amount of revenue collected 
from the ORF to ensure that it, in combination with its other 
regulatory fees and fines, do not exceed regulatory costs. If the 
Exchange determines regulatory revenues would exceed regulatory costs, 
the Exchange would adjust the ORF by submitting a fee change filing to 
the Commission.
    Presently, the Exchange, in monitoring its revenue, has determined 
that regulatory revenues may exceed regulatory costs on an annual 
basis. The Exchange is proposing to adjust the ORF to ensure that it, 
in combination with its other regulatory fees and fines, does not 
exceed regulatory costs. The Exchange will continue to monitor the 
amount of revenue collected from the ORF.
2. Statutory Basis
    The Exchange believes that its proposal to amend its schedule of 
fees is consistent with Section 6(b) of the Act\7\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act\8\ in particular, 
in that it is an equitable allocation of reasonable fees and other 
charges among Exchange members. The Exchange believes that this fee 
proposal is equitable because it eliminates the minimum one-cent charge 
per trade and reduces the monthly ORF charge for all members.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 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\9\ and paragraph (f)(2) of Rule 19b-4\10\ 
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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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 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-2010-17 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-2010-17. This file

[[Page 8423]]

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, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the 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-2010-17 and should be 
submitted on or before March 17, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-3546 Filed 2-23-10; 8:45 am]
BILLING CODE 8011-01-P