Document ID: SEC-2010-0644-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, Inc.
Posted Date: 2010-04-30T04:00Z

[Federal Register: April 30, 2010 (Volume 75, Number 83)]
[Notices]               
[Page 22881-22882]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30ap10-149]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61961; File No. SR-Phlx-2010-61]

 
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
to Fees and Rebates for Adding and Removing Liquidity

April 22, 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 April 22, 2010, NASDAQ OMX PHLX, Inc. (``Phlx'' or ``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 Exchange. Phlx has designated this 
proposal as one establishing or changing a member due, fee, or other 
charge imposed under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 
19b-4(f)(2) thereunder,\4\ which renders the proposal effective upon 
filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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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 fees and rebates for adding and 
removing liquidity for options overlying various select symbols.
    While changes to the Fee Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative for transactions settling on or after May 3, 2010.
    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 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 Exchange proposes to amend its current fees and rebates for 
adding and removing liquidity by eliminating the fees for adding 
liquidity. Specifically, the Exchange proposes to eliminate the current 
$0.45 Firm and $0.45 Broker-Dealer per-contract fees for adding 
liquidity.
    The Exchange currently assesses a per-contract transaction charge 
in various select symbols \5\ on six different categories of market 
participants that submit orders and/or quotes that remove, or ``take,'' 
liquidity from the Exchange: (i) Specialists, Registered Options 
Traders (``ROTs''), Streaming Quote Traders (``SQTs'') \6\ and Remote 
Streaming Quote Traders (``RSQTs''); \7\ (ii) customers; \8\ (iii) 
specialists, SQTs and RSQTs that receive Directed Orders (``Directed 
Participants'' \9\ or ``Directed Specialists, RSQTs, or SQTs'' \10\); 
(iv) Firms; (v) broker-dealers; and (vi) Professionals.\11\ The current 
per-contract transaction charge depends on the category of market 
participant submitting an order or quote to the Exchange that removes 
liquidity.
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    \5\ The fees and rebates for adding and removing liquidity are 
applicable to executions in options overlying AA, AAPL, AIG, ALL, 
AMD, AMR, AMZN, BAC, C, CAT, CSCO, DELL, DIA, DRYS, EK, F, FAS, FAZ, 
GDX, GE, GLD, GS, INTC, IWM, JPM, LVS, MGM, MSFT, MU, NEM, PALM, 
PFE, POT, QCOM, QQQQ, RIMM, SBUX, SKF, SLV, SMH, SNDK, SPY, T, UAUA, 
UNG, USO, UYG, VZ, WYNN, X and XLF (``Symbols'').
    \6\ An SQT is an Exchange Registered Options Trader (``ROT'') 
who has received permission from the Exchange to generate and submit 
option quotations electronically through an electronic interface 
with AUTOM via an Exchange approved proprietary electronic quoting 
device in eligible options to which such SQT is assigned. See 
Exchange Rule 1014(b)(ii)(A).
    \7\ An RSQT is an ROT that is a member or member organization 
with no physical trading floor presence who has received permission 
from the Exchange to generate and submit option quotations 
electronically through AUTOM in eligible options to which such RSQT 
has been assigned. An RSQT may only submit such quotations 
electronically from off the floor of the Exchange. See Exchange Rule 
1014(b)(ii)(B).
    \8\ This applies to all customer orders, directed and non-
directed.
    \9\ For purposes of the fees and rebates related to adding and 
removing liquidity, A Directed Participant is a Specialist, SQT, or 
RSQT that executes a customer order that is directed to them by an 
Order Flow Provider and is executed electronically on PHLX XL II.
    \10\ See Exchange Rule 1080(l), `` * * * The term `Directed 
Specialist, RSQT, or SQT' means a specialist, RSQT, or SQT that 
receives a Directed Order.'' A Directed Participant has a higher 
quoting requirement as compared with a specialist, SQT or RSQT who 
is not acting as a Directed Participant. See Exchange Rule 1014.
    \11\ The Exchange defines a ``professional'' as any person or 
entity that (i) is not a broker or dealer in securities, and (ii) 
places more than 390 orders in listed options per day on average 
during a calendar month for its own beneficial account(s) 
(hereinafter ``Professional'').
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    The per-contract transaction charges that are currently assessed on 
participants who submit proprietary quotes and/or orders that remove 
liquidity in the applicable Symbols are, by category:

------------------------------------------------------------------------
                                                           Charge (per
                       Category                             contract)
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Customer..............................................             $0.25
Directed Participants.................................              0.30
Specialist, ROT, SQT, RSQT............................              0.32
Firms.................................................              0.45
Broker-Dealers........................................              0.45
Professional..........................................              0.40
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    The Exchange also currently assesses a per-contract rebate relating 
to transaction charges for orders or quotations that add liquidity in 
the select Symbols. The amount of the rebate depends on the category of 
participant whose order or quote was executed as part of the Phlx Best 
Bid and Offer. Specifically, the per-contract rebates are, by category:

------------------------------------------------------------------------
                                                           Rebate (per
                       Category                             contract)
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Customer..............................................             $0.20
Directed Participants.................................              0.25

[[Page 22882]]

Specialist, ROT, SQT, RSQT............................              0.23
Firms.................................................              0.00
Broker-Dealers........................................              0.00
Professional..........................................              0.20
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    The Exchange also currently assesses a transaction charge of $0.45 
per contract to Firms and $0.45 per contract to broker-dealers that add 
liquidity, which this proposal seeks to eliminate.
    The Exchange also proposes to amend the Fee Schedule to remove all 
references to the fees for adding liquidity.
    While changes to the Fee Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative for transactions settling on or after May 3, 2010.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \12\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \13\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among Exchange members. The Exchange believes that 
the elimination of the fees for adding liquidity is reasonable because 
the proposal is consistent with the current Fee Schedule and industry 
fee assessments of member firms that allow for different rates to be 
charged for different order types originated by dissimilarly classified 
market participants.\14\ Additionally, the impact of the proposal upon 
the net fees paid by a particular market participant will depend on a 
number of variables, including its monthly volumes, the order types it 
uses, and the prices of its quotes and orders (i.e., its propensity to 
add or remove liquidity).
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4).
    \14\ See International Securities Exchange, LLC Schedule of 
Fees.
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    The Exchange 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 
Exchange believes that the fees it charges for options overlying the 
various Symbols remain competitive with fees charged by other venues 
and therefore continue to be reasonable and equitably allocated to 
those members that opt to direct orders to the Exchange rather than 
competing venues.

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 \15\ and paragraph (f)(2) of Rule 19b-4\16\ 
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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    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \16\ 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-2010-61 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, Station Place, 100 F Street, NE., Washington, 
DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2010-61. 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 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 publicly available. All 
submissions should refer to File Number SR-Phlx-2010-61 and should be 
submitted on or before May 21, 2010.
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    \17\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-10029 Filed 4-29-10; 8:45 am]
BILLING CODE 8011-01-P