Document ID: SEC-2009-1453-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Discontinuation of the Specialist Fee Credit Pilot Program
Posted Date: 2009-10-09T04:00Z

[Federal Register: October 9, 2009 (Volume 74, Number 195)]
[Notices]               
[Page 52282-52283]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09oc09-118]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60771; File No. SR-Phlx-2009-85]

 
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
the Discontinuation of the Specialist Fee Credit Pilot Program

October 2, 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 September 24, 2009, 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. 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 discontinue its current pilot program 
relating to specialist fee credits for linkage orders.
    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 on September 28, 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 discontinue the 
current pilot program related to a specialist fee credit for linkage is 
because the pilot is no longer necessary. On June 17, 2008, the 
Exchange filed an executed copy of the Options Order Protection and 
Locked/Crossed Market Plan (``Plan''), joining all other approved 
options markets in adopting the Plan.\3\ The Plan requires each options 
exchange to adopt rules implementing various requirements specified in 
the Plan.\4\ The Plan replaces the Plan for the Purpose of Creating and 
Operating an Intermarket Option Linkage (``Linkage Plan'').\5\ That 
Plan requires its participant exchanges to operate a stand-alone system 
or ``Linkage'' for sending order-flow between exchanges to limit trade-
throughs.\6\ The Options Clearing Corporation (``OCC'') operates the 
Linkage system (the ``System'').\7\ The Exchange adopted various new 
rules in connection with the Plan to avoid trade-throughs and locked 
markets, among other things.\8\ The Exchange currently offers private 
routing as opposed to utilizing the Linkage Plan for routing. In light 
of this change, the Exchange proposes to terminate the specialist 
option transaction charge credit pilot program for trades executed via 
Intermarket Options Linkage (``Linkage'') as the credit will no longer 
be necessary since the specialists will no longer utilize Linkage to 
route trades.
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    \3\ See Securities Exchange Act Release Nos. 60405 (July 20, 
2009) (National Market System Plan Relating to Options Order 
Protection and Locked/Crossed Markets).
    \4\ See Securities Exchange Act Release No. 60363 (July 22, 
2009), 74 FR 37270 (July 28, 2009) (SR-Phlx-2009-61). Linkage was 
governed by the Options Linkage Authority under the conditions set 
forth under the Plan for the Purpose of Creating and Operating an 
Intermarket Option Linkage approved by the Commission. The 
registered U.S. options markets are linked together on a real-time 
basis through a network capable of transporting orders and messages 
to and from each market.
    \5\ See footnote 4.
    \6\ See footnote 4.
    \7\ See footnote 4.
    \8\ See footnote 4.
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    The current pilot, which is set to expire on July 31, 2010,\9\ 
relates to: (1) An option transaction charge credit of $0.21 per 
contract for Exchange specialist units \10\ that incur options 
transaction charges when a customer order is delivered electronically 
via Phlx XL \11\ or via the Exchange's Options Floor Broker Management 
Systems (``FBMS'') \12\ and then is executed via the Linkage as a 
Principal Acting as Agent Order (``P/A Order'') \13\; and (2) the Floor 
Broker Linkage P/A fee and Options Specialist Unit Credit, which 
charges floor brokers an amount equal to the transaction fee(s) 
assessed on options specialist units by another exchange in connection 
with customer orders that are delivered to the limit book via FBMS and 
executed via Linkage as P/A Orders. The Exchange provides to options 
specialists units a credit in an amount equal to the transaction fee(s) 
assessed on them by another exchange in connection with executing 
customer orders that are delivered to the limit order book via FBMS and 
executed via Linkage as P/A Orders. The current pilot program has been 
in effect for several years.\14\
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    \9\ See Securities Exchange Act Release No. 60209 (July 1, 
2009), 74 FR 33006 (July 9, 2009) (SR-Phlx-2009-55).
    \10\ The Exchange uses the terms ``specialists'' and 
``specialists units'' interchangeably herein.
    \11\ See Exchange Rule 1080.
    \12\ 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 trails for options orders represented 
and executed by Floor Brokers on the Exchange, such that the audit 
trail provides an accurate, time-sequenced record of electronic and 
other orders, quotations and transactions on the Exchange, beginning 
with the receipt of an order by the Exchange, and further 
documenting the life of the order through the process of execution, 
partial execution, or cancellation of that order. See Exchange Rule 
1080, Commentary .06.
    \13\ A P/A Order is an order for the principal account of a 
specialist (or equivalent entity on another participant exchange 
that is authorized to represent Public Customer orders), reflecting 
the terms of a related unexecuted Public Customer order for which 
the specialist is acting as agent. See Exchange Rule 1088, a 
temporary linkage rule.
    \14\ See Securities Exchange Act Release Nos. 58234 (July 25, 
2008), 73 FR 45263 (August 4, 2008) (SR-Phlx-2008-55); 56101 (July 
19, 2007), 72 FR 40920 (July 25, 2007) (SR-Phlx-2009-50 [sic]); 
54257 (August 1, 2006), 71 FR 45089 (August 8, 2006) (SR-Phlx-2006-
46); 53761 (May 5, 2006), 71 FR 27768 (May 12, 2006) (SR-Phlx-2006-
20).
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    The pilot program which relates to transaction fees applicable to 
the execution of P/A Orders and Principal

[[Page 52283]]

Orders (``P Orders'') \15\ sent to the Exchange via Linkage pursuant to 
the Linkage Plan \16\ will remain in effect until such time as all 
participant exchanges to the Linkage Plan no longer send Linkage P or 
P/A orders via the Linkage Plan. At such time the Exchange intends to 
file a proposed rule change with the Commission to request the 
discontinuation of that pilot as well.\17\
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    \15\ A principal Order is an order for the principal account of 
an Eligible Market Maker and is not a P/A Order. See Exchange Rule 
1088.
    \16\ See Securities Exchange Act Release No. 59891 (May 8, 
2009), 74 FR 22990 (May 15, 2009) (SR-Phlx-2009-24).
    \17\ Currently, the Exchange has a temporary linkage rule, 
Exchange Rule 1088, which provides that the Exchange will continue 
to accept P and P/A Orders from options exchanges that continue to 
use such orders to address trade-throughs via the existing linkage 
for a temporary period. See Securities Exchange Act Release No. 
60363 (July 22, 2009), 74 FR 37270 (July 28, 2009) (SR-Phlx-2009-
61). See also Exchange Rule 1088.
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2. Statutory Basis
    The Exchange believes that its proposal to amend its schedule of 
fees is consistent with Section 6(b) of the Act \18\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \19\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among Exchange members. In particular, the Exchange 
believes that the pilot program is no longer necessary because the 
specialists no longer utilize Linkage to route trades.
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    \18\ 15 U.S.C. 78f(b).
    \19\ 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 that is not necessary or appropriate 
in furtherance of the purposes of the Exchange 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 proposed rule change is effective upon filing 
pursuant to Section 19(b)(3)(A)(ii) of the Act \20\ and Rule 19b-
4(f)(2) thereunder,\21\ because it establishes or changes a due, fee, 
or other charge applicable only to a member imposed by the Exchange. 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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    \20\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \21\ 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-2009-85 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-2009-85. 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 will 
also 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-
2009-85 and should be submitted on or before October 30, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-24352 Filed 10-8-09; 8:45 am]

BILLING CODE 8011-01-P