Document ID: SEC-2009-0507-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Change: NASDAQ OMX PHLX, Inc.
Posted Date: 2009-04-13T04:00Z

[Federal Register: April 13, 2009 (Volume 74, Number 69)]
[Notices]               
[Page 16906-16907]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13ap09-129]                         

[[Page 16906]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59705; File No. SR-Phlx-2009-28]

 
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
the Option Floor Broker Subsidy

April 3, 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 March 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. 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 threshold volume requirements 
related to the Options Floor Broker Subsidy and amend the Per Contract 
Average Daily Volume Subsidy Payment from a five tiered structure to a 
three tiered structure.
    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 April 1, 2009.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqomxphlx.cchwallstreet.com/NASDAQOMXPHLX/
Filings/, 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 increase the 
threshold volume requirements related to the Options Floor Broker 
Subsidy and simplify the current tiered fee structure for the Options 
Floor Broker Subsidy Per Contract Average Daily Volume Subsidy Payment 
by reducing the number of tiers. The Exchange believes the proposed 
tier structure is more aligned with existing average daily volumes and 
that increasing the threshold volume requirement and compressing the 
tiers is necessary to continue to attract additional floor brokerage 
business to the Exchange.
    The Exchange currently pays an Options Floor Broker Subsidy to 
member organizations with Exchange registered floor brokers for 
eligible contracts that are entered into the Exchange's Floor Broker 
Management System (``FBMS'').\3\ To qualify for the per contract 
subsidy, a member organization with Exchange registered floor brokers 
must have: (1) More than an average of 75,000 executed contracts per 
day in the applicable month; and (2) at least 40,000 executed contracts 
or more per day for at least eight trading days during that same 
month.\4\ Only the floor broker volume from orders entered into FBMS 
and subsequently executed on the Exchange would be counted. The 75,000 
contract and 40,000 contract thresholds, as described above, would be 
calculated per member organization floor brokerage unit. In the event 
that two or more member organizations with Exchange registered floor 
brokers each entered one side of a transaction into FBMS, then the 
executed contracts would be divided among each qualifying member 
organization that participates in that transaction.\5\
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    \3\ FBMS is designed to enable floor brokers and/or their 
employees to enter, route, and report transactions stemming from 
options orders received on the Exchange. FBMS also is designed to 
establish an electronic audit trail for options orders represented 
and executed by floor brokers on the Exchange. See Exchange Rule 
1080, commentary .06.
    \4\ For purposes of calculating the 75,000 and 40,000 
thresholds, customer-to-customer transactions, customer-to-non-
customer transactions, and non-customer-to-non-customer transactions 
would be included.
    \5\ Customer-to-customer transactions would count towards 
reaching the 75,000 contract and 40,000 contract thresholds, but a 
per contract subsidy would not be paid on any customer-to-customer 
transactions. Dividend, merger and short stock interest strategies 
would be excluded from all threshold volume calculations, and no per 
contract subsidy would be paid on these transactions. The per 
contract subsidy would be paid based on the average daily contract 
volume for that month, which are customer-to-non-customer 
transactions and are in excess of 75,000 contracts. Payments would 
be made at the stated rate for each tier for those contracts that 
fall within that tier. These contracts may include customer-to-
customer transactions for the purposes of reaching a tier, but as 
stated above, a per contract subsidy would not be paid on these 
executions. When computing the threshold amounts, the Exchange 
intends to first count all customer-to-customer transactions and 
then all other customer-to-non-customer transactions. See also 
Securities Exchange Act Release No. 57253 (February 1, 2008), 73 FR 
7352 (February 7, 2008) (SR-Phlx-2008-08) (adopting a tiered per 
contract floor broker options subsidy payable to member organization 
with Exchange registered floor brokers).
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    The Exchange proposes amending the threshold volume requirements 
related to the Option Floor Broker Subsidy so that in order to qualify 
for the per contract subsidy a member organization with Exchange 
registered floor brokers must have more than an average of 100,000, 
instead of 75,000, executed contracts per day in the applicable 
month.\6\ The Exchange also proposes amending the current five tiered 
Per Contract Average Daily Volume Subsidy Payment to a three tiered 
structure. Currently, in order to be eligible for the Options Floor 
Broker Subsidy, the member organization must have an average daily 
volume in a particular calendar month as follows:
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    \6\ The second of the two threshold volume requirements, ``* * * 
at least 400,000 [sic] executed contracts or more per day for at 
least eight trading days during that same month'', would remain the 
same.

                                Per Contract Average Daily Volume Subsidy Payment
----------------------------------------------------------------------------------------------------------------
             Tier I                     Tier II            Tier III             Tier IV             Tier V
----------------------------------------------------------------------------------------------------------------
75,001 to 100,000...............  100,001 to 200,000  200,001 to 300,000  300,001 to 400,000  400,001 and
                                                                                               greater.
$0.01 per contract..............  $0.04 per contract  $0.05 per contract  $0.06 per contract  $0.07 per
                                                                                               contract.
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[[Page 16907]]

    The Exchange proposes a three tiered structure where to be eligible 
for the Options Floor Broker Subsidy, the member organization must have 
an average daily volume in a particular calendar month as follows:

            Per Contract Average Daily Volume Subsidy Payment
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           Tier I                Tier III [sic]         Tier IV [sic]
------------------------------------------------------------------------
100,001 to 200,000..........  200,001 to 300,000..  300,001 and greater.
$0.04 per contract..........  $0.05 per contract..  $0.06 per contract.
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    In connection with increasing the threshold volume requirements, 
the Exchange proposes increasing the corresponding eligible contract 
requirements to reflect the increase from 75,000 to 100,000 for average 
executed contracts per day in the applicable month as follows:
     Customer-to-customer executions will count towards 
reaching the 100,000 contract and 40,000 contract thresholds, but a per 
contract subsidy will not be paid on any customer-to-customer 
executions.
     Orders entered through FBMS but executed away through 
Linkage, as well as dividend, merger and short stock interest 
strategies will not count towards the 100,000 contract or the 40,000 
contract thresholds nor will a per contract subsidy be paid on these 
transactions.
     Only the largest component of a Complex Order (i.e., the 
component that includes the greatest number of contracts) will count 
towards the 100,000 contract and the 40,000 contract thresholds. The 
Options Floor Broker Subsidy does not apply to any contracts that are 
executed as part of a Complex Order.
    Similarly, the Exchange proposes to amend the fee schedule to note 
that ``[t]he per contract subsidy would be paid based on the average 
daily contract volume on customer-to-non-customer as well as non-
customer-to-non-customer transactions for that month in excess of 
100,000 contracts'' instead of 75,000 as currently stated.
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. Pursuant to this proposal, 
all member organizations with Exchange registered floor brokers are 
offered the continued opportunity to receive a subsidy. By allowing for 
a subsidy, the Exchange believes that floor brokers will be encouraged 
to send additional orders to the Exchange for execution.
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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-2009-28 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-2009-28. 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-2009-28 and should be 
submitted on or before May 4, 2009.

    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. E9-8324 Filed 4-10-09; 8:45 am]

BILLING CODE 8010-01-P