Document ID: SEC-2010-1850-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2010-12-08T05:00Z

[Federal Register Volume 75, Number 235 (Wednesday, December 8, 2010)]
[Notices]
[Pages 76509-76510]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-30703]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63411; File No. SR-Phlx-2010-169]

Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX LLC To Modify 
Fees for NASDAQ OMX PSX

December 2, 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 November 23, 2010, NASDAQ OMX PHLX LLC (``Phlx'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. 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 modify the fees applicable to trading on 
the NASDAQ OMX PSX system (``PSX''). 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 self-regulatory organization 
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 those 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 parts 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 Exchange is proposing to modify order execution fees applicable 
to use of PSX. Specifically, the Exchange is modifying the credit 
provided to PSX Participants that provide liquidity to support 
executions on the platform. In keeping with the goal of PSX to provide 
an electronic exchange environment that encourages display of larger 
order sizes through its unique price-size order execution algorithm, 
the Exchange proposes to offer a larger liquidity provider credit to 
Participants when Displayed Orders with an original order size of 2,000 
or more shares are executed. Specifically, the credit will be $0.0024 
per share executed for Displayed Orders with an original order size of 
2,000 or more shares, but will only be $0.0018 per share executed for 
Non-Displayed Orders or for Displayed Orders with an original order 
size of less than 2,000. Through the change, the Exchange hopes to 
further promote PSX as a venue that enhances price discovery and 
efficiency by encouraging transparent trading of larger orders.
    The higher credit would apply to an order as it is decremented by 
partial executions, but would not apply in circumstances where an order 
for 2,000

[[Page 76510]]

or more shares is entered and then reduced in size by the entering 
Participant, such that the order is subsequently in the System for less 
than 2,000 shares. Moreover, changes to orders that result from system 
operations other than execution and decrementation will also be deemed 
to result in new orders. For example, a Pegged Order will be considered 
a new order each time its price changes.
    Thus, if a Participant entered a 2,400 share order that posted to 
the PSX book, the order was executed for 1,000 shares, and the 
remainder of the order was then executed for 1,400, both of the 
executions would receive the $0.0024 credit. However, if a PSX 
Participant entered a 2,400 share order and subsequently modified the 
order down to 1,500 shares, the $0.0018 credit would apply. Finally, if 
a Participant entered a 2,400 share buy order pegged to the national 
best bid, the order executed for 1,000 shares, and the order then 
repriced due to a change in the national best bid, the 1,000 share 
execution would receive the $0.0024 credit but a subsequent execution 
of the repriced order would receive the $0.0018 credit because it would 
be treated as a new order with a size below 2,000 shares.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\3\ in general, and with 
Section 6(b)(4) of the Act,\4\ in particular, in that it provides for 
the equitable allocation of reasonable dues, fees and other charges 
among members and issuers and other persons using any facility or 
system which the Exchange operates or controls. The impact of the price 
changes upon the net fees paid by a particular market participant will 
depend upon a number of variables, including the prices of the market 
participant's quotes and orders relative to the national best bid and 
offer (i.e., its propensity to add or remove liquidity), its usage of 
Non-Displayed orders, and the size of the orders that it enters.
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    \3\ 15 U.S.C. 78f.
    \4\ 15 U.S.C. 78f(b)(4).
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    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily direct order flow to competing 
venues if they deem fee levels at a particular venue to be excessive. 
The change will result in a fee reduction to PSX Participants that 
provide liquidity through PSX using relatively large orders, and a fee 
increase to Participants using small orders or Non-Displayed Orders. If 
particular market participants object to the proposed fee changes 
because they prefer the use of smaller or Non-Displayed Orders, they 
may readily direct order flow to other venues. The Exchange believes 
that its fees continue to be reasonable and equitably allocated to 
members on the basis of whether they opt to direct orders to the 
Exchange and thereby make use of its order execution services.

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 that is not necessary or appropriate 
in furtherance of the purposes of the Act, as amended. Because the 
market for order execution and routing is extremely competitive, 
members may readily direct orders to the Exchange's competitors. 
Indeed, as a relatively new market entrant, the Exchange believes that 
its pricing will promote further competition by enhancing the ability 
of PSX to compete with alternative trading systems that seek to attract 
larger order sizes through pricing or by operating as ``dark pools.''

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.\5\ 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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    \5\ 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2010-169 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-2010-169. 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,\6\ 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 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-2010-169 and should be 
submitted on or before December 29, 2010.
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    \6\ The text of the proposed rule change is available on the 
Commission's Web site at http://www.sec.gov/rules/sro.shtml.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-30703 Filed 12-7-10; 8:45 am]
BILLING CODE 8011-01-P