Document ID: SEC-2010-0611-0001
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 a New Category of Fees for "Professional"
Posted Date: 2010-04-23T04:00Z

[Federal Register Volume 75, Number 78 (Friday, April 23, 2010)]
[Notices]
[Pages 21375-21376]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-9399]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61932; File No. SR-Phlx-2010-51]

Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
a New Category of Fees for ``Professional''

April 16, 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 March 31, 2010, 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 adopt fees for a new type of participant 
called ``professional.'' \3\
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    \3\ See Securities Exchange Act Release No. 61802 (March 30, 
2010) (SR-Phlx-2010-05).
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    While changes to the Exchange's Fee Schedule pursuant to this 
proposal are effective upon filing, the Exchange has designated this 
proposal to be operative on April 1, 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 purpose of the proposed rule change is to adopt a new category 
of fees, ``professional.'' The Exchange believes that the proposed fees 
for professional orders will allow the Exchange to remain competitive 
with other options exchanges who apply fees to professional orders.
    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) \4\ (hereinafter 
``Professional'').
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    \4\ A Professional will be treated in the same manner as an off-
floor broker-dealer for purposes of Rules 1014(g)(except with 
respect to all-or-none orders, which will be treated like customer 
orders), 1033(e), 1064.02 (except professional orders will be 
considered customer orders subject to facilitation), and 1080.08 as 
well as Options Floor Procedure Advices B-6, B-11 and F-5. Member 
organizations must indicate whether orders are for professionals.
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    The Exchange proposes to add a ``Professional'' fee to its fees and 
rebates for adding and removing liquidity, known as a ``maker/taker'' 
model by amending Category I of its Fee Schedule, Fees and Rebates for 
Adding and Removing Liquidity in Select Symbols, to adopt a $0.20 
rebate for adding liquidity and a $0.40 fee for removing liquidity for 
Professional orders. There are currently five categories of 
participants in Category I: (i) Specialists, Registered Options Traders 
(``ROTs''), Streaming Quote Traders (``SQTs'') \5\ and Remote Streaming 
Quote Traders (``RSQTs''); \6\ (ii) customers;\7\ (iii) specialists, 
SQTs and RSQTs that receive Directed Orders (``Directed Participants'' 
or ``Directed Specialists, RSQTs or SQTs''); \8\

[[Page 21376]]

(iv) firms; and (v) broker-dealers. The Professional category would be 
an addition to these existing categories.
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    \5\ 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).
    \6\ 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).
    \7\ This applies to all customer orders, directed and non-
directed.
    \8\ 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.
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    The current version of Category I of the Fee Schedule, with the 
addition of the proposed Professional fee, follows below.

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                                                                                            Specialist,
                                                             Customer        Directed      ROT, SQT and        Firm        Broker-dealer   Professional
                                                                            participant        RSQT
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Rebate for Adding Liquidity.............................           $0.20           $0.25           $0.23           $0.00           $0.00           $0.20
Fee for Adding Liquidity................................            0.00            0.00            0.00            0.45            0.45            0.00
Fee for Removing Liquidity..............................            0.25            0.30            0.32            0.45            0.45            0.40
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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 \9\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \10\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among Exchange members. The Exchange believes that 
adding Professional fees to the Fees and Rebates for Adding and 
Removing Liquidity in Select Symbols is fair and reasonable, because 
the proposed fees are similar to the transaction fees applicable to 
fees assessed by other options exchanges; professional orders will be 
offered a rebate of $0.20 per contract for adding liquidity and 
assessed a fee of $0.40 per contract similar to the rebates and fees 
assessed by NYSE Arca for customers and broker-dealers ($.25 and $.45, 
respectively).\11\
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
    \11\ See NYSE Arca General Options and Trading Permit (OTP) 
Fees.
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    The impact of the proposal upon the net fees paid by a particular 
market participant will depend on a number of variables, most important 
of which will be its propensity to add or remove liquidity in the 
underlying symbols. The Exchange operates in a highly competitive 
market in which market participants can readily direct order flow to 
another exchange if they deem fee levels at a particular exchange to be 
excessive. The Exchange believes that the proposed fees it charges for 
options overlying the various symbols remain competitive with fees 
charged by other exchanges and, therefore, continue to be reasonable 
and equitably allocated to those members that opt to direct orders to 
the Exchange rather than to a competing exchange.

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 \12\ and paragraph (f)(2) of Rule 19b-4 \13\ 
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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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 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-2010-51 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-2010-51. 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 the 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-2010-51 and should be 
submitted on or before May 14, 2010.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-9399 Filed 4-22-10; 8:45 am]
BILLING CODE 8011-01-P