Document ID: SEC-2011-0429-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2011-04-01T04:00Z

[Federal Register Volume 76, Number 63 (Friday, April 1, 2011)]
[Notices]
[Pages 18274-18276]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-7730]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64137; File No. SR-Phlx-2011-37]

Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX LLC Relating 
to Complex Order Fees

March 28, 2011.
    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 21, 2011, NASDAQ OMX PHLX LLC (``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 Complex Order \3\ Fees in 
Section I of its Fee Schedule titled Rebates and Fees for Adding and 
Removing Liquidity in Select Symbols.
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    \3\ A Complex Order is any order involving the simultaneous 
purchase and/or sale of two or more different options series in the 
same underlying security, priced at a net debit or credit based on 
the relative prices of the individual components, for the same 
account, for the purpose of executing a particular investment 
strategy. Furthermore, a Complex Order can also be a stock-option 
order, which is an order to buy or sell a stated number of units of 
an underlying stock or ETF coupled with the purchase or sale of 
options contract(s). See Exchange Rule 1080, Commentary .08(a)(i).
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    While changes to the Fee Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative on April 1, 2011.
    The text of the proposed rule change is available on the Exchange's 
Website at http://nasdaqtrader.com/micro.aspx?id=PHLXfilings, 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.

[[Page 18275]]

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 Section I, Part 
B of the Exchange's Fee Schedule, titled ``Complex Order'' to pay a 
Customer Complex Order Rebate for Adding Liquidity of $0.25 per 
contract in certain symbols, specifically options overlying: (i) 
Standard and Poor's Depositary Receipts/SPDRs (``SPY''); \4\ (ii) the 
PowerShares QQQ Trust (``QQQQ'')[reg]; and Apple, Inc. (AAPL), in order 
to attract additional Customer order flow in those symbols.
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    \4\ SPY options are based on the SPDR exchange-traded fund 
(``ETF''), which is designed to track the performance of the S&P 500 
Index.
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    Currently, the Exchange pays a $0.24 per contract Customer Complex 
Order Rebate for Adding Liquidity in all Select Symbols.\5\ The 
Exchange is proposing to pay a $0.25 per contract Rebate for Adding 
Liquidity for Customer Complex Orders in only the following symbols: 
SPY, QQQQ and AAPL. Other market participants would not be entitled to 
the Rebate for Adding Liquidity.\6\ The Exchange would continue to pay 
Customers a rebate of $0.24 per contract for transacting a Customer 
Complex Order in all other Select Symbols, except SPY, QQQ and AAPL 
which would receive the $0.25 per contract rebate.
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    \5\ A list of all symbols subject to the Rebates and Fees for 
Adding and Removing Liquidity are listed in Section I of the 
Exchange's Fee Schedule and titled ``Select Symbols.''
    \6\ The only market participant that receives a Rebate for 
Adding Liquidity for Complex Orders today is a Customer.
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    The Exchange does not propose to amend the fees in Section I, Part 
A titled ``Single contra-side order.''
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
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 also believes that there is an 
equitable allocation of reasonable rebates among Exchange members.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that it is reasonable to only pay a Rebate 
for Adding Liquidity to Customers because this Customer rebate would 
attract Customer order flow to the Exchange for the benefit of all 
market participants. The Exchange believes that the proposal is 
equitable because by paying a Rebate for Adding Liquidity to Customers, 
all market participants would benefit from the increased liquidity 
which increased Customer order flow would bring to the Exchange.
    Further, the Exchange believes that it is reasonable to pay a 
different rebate for transacting equity options in certain symbols. 
NYSE Arca, Inc. (``NYSE Arca'') pays an additional $.05 per contract 
credit above the stated post liquidity credit for electronic 
transactions in options overlying SPY, C, BAC, QQQQ, AAPL, IWM, XLF, 
GLD, EEM, GE, UNG, FAZ, DIA, GDX, and USO which are referred to as the 
``premium tier.'' \9\ The Exchange is proposing to pay different 
rebates for different symbols similar to the manner in which NYSE Arca 
pays an additional contract credit in certain symbols.
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    \9\ See NYSE Arca's Fee Schedule.
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    The Exchange believes that its proposal to pay a higher rebate for 
transactions in equity options in SPY, QQQQ and AAPL, as compared to 
the other Select Symbols, is equitable because the Exchange would 
uniformly pay the same rebates for all Customer Complex Orders in these 
three symbols.
    The Exchange operates in a highly competitive market comprised of 
nine U.S. options exchanges in which sophisticated and knowledgeable 
market participants can readily send order flow to competing exchanges 
if they deem fee levels at a particular exchange to be excessive. The 
Exchange believes that the Complex Order fees and rebates it assesses 
must be competitive with fees and rebates assessed in place on other 
exchanges. The Exchange believes that this competitive marketplace 
impacts the fees and rebates present on the Exchange today and 
influences the proposals set forth above.

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.\10\ 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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    \10\ 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-2011-37 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-2011-37. 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

[[Page 18276]]

printing 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 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-2011-37 and should be submitted on or before April 22, 2011.

    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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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-7730 Filed 3-31-11; 8:45 am]
BILLING CODE 8011-01-P