Document ID: SEC-2009-1163-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, Inc.
Posted Date: 2009-08-18T04:00Z

[Federal Register: August 18, 2009 (Volume 74, Number 158)]
[Notices]
[Page 41777-41778]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18au09-90]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60477; File No. SR-Phlx-2009-67]

Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
Firm Proprietary Facilitation Orders

August 11, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of
1934,\1\ notice is hereby given that on August 5, 2009, NASDAQ OMX
PHLX, Inc. (``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 Phlx. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested parties.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to waive the Firm Proprietary Options
Transaction Charge for members executing facilitation orders \2\ when
such members are trading in their own proprietary account.
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    \2\ A facilitation occurs when a floor broker holds an options
order for a public customer and a contra-side order for the same
option series and, after providing an opportunity for all persons in
the trading crowd to participate in the transaction, executes both
orders as a facilitation cross. See Exchange Rule 1064.
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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 effective for trades settling on or after August 11,
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, Phlx 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 Phlx 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, Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to encourage firm
facilitation transactions, raise additional revenue for the Exchange
and create incentive for Member Organizations to continue to facilitate
customer order flow. Currently, the Firm Proprietary Options
Transaction Charge is $.24 per contract. This fee applies to firm
proprietary orders (``F'' account type) in equity options products. In
addition, Firm Proprietary Options Transaction Charges is capped in the
aggregate for one billing month at $75,000 per member organization
(``Monthly Firm Cap''), except for orders of joint back-office
(``JBO'') participants.\3\
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    \3\ A JBO participant is a Member, Member Organization or non-
member organization that maintains a JBO arrangement with a clearing
broker-dealer (``JBO Broker'') subject to the requirements of
Regulation T Section 220.7 of the Federal Reserve System. See also
Exchange Rule 703. JBO participant orders are excluded from the
definition of Firm Proprietary because the Exchange is unable to
differentiate orders of a JBO participant from orders of its JBO
Broker and therefore is unable to aggregate the JBO participant's
orders for purposes of the defining Firm Proprietary transactions.
JBO participant orders may employ the F-account type and qualify for
the firm proprietary charge, but would not be eligible for the
Monthly Firm Cap.
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    The Exchange is proposing to waive the $.24 Firm Proprietary
Options Transaction Charge for members executing facilitation orders
pursuant to Exchange Rule 1064 when such members are trading in their
own proprietary account.\4\ The Exchange desires to waive the Firm
Proprietary Options Transaction Charge for member transacting
proprietary trades in their own account to encourage member firms to
facilitate additional customer order flow.
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    \4\ The waiver would not apply to orders where a member is
acting as agent on behalf of a non-member.
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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 \5\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \6\ in
particular, in that it is an equitable allocation of reasonable fees
and other charges among Exchange members. The Exchange believes that
the waiver of the Firm Proprietary Options Transaction Charge is
equitable because it uniformly applies to all member organizations.
This waiver 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.\7\ For example, the Exchange assesses different
transaction fees applicable to the execution of Principal Acting as
Agent Orders (``P/A Orders'') \8\ and Principal Orders (``P Orders'')
\9\ sent to the Exchange via the Intermarket Option Linkage
(``Linkage'') under the Plan for the Purpose of Creating and Operating
an Intermarket Option Linkage (the ``Plan''). The Exchange charges
$0.45 per option

[[Page 41778]]

contract for P Orders sent to the Exchange and $.30 per contract for P/
A Orders.\10\ The Exchange believes that waiving the Firm Proprietary
Options Transaction Charge for members executing facilitation orders
pursuant to Exchange Rule 1064 when such members are trading in their
own account is consistent with rate differentials that exist in the
current fee schedule and serves to encourage members to facilitate
customer order flow.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4).
    \7\ NYSE Amex currently charges different rates to different
market participants in assessing its firm facilitation fee. See
Securities Exchange Act Release No. 60378 (July 23, 2009), 74 FR
38245 (July 31, 2009) (SR-NYSEAmex-2009-38).
    \8\ 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 1083(k)(i).
    \9\ 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
1083(k)(ii).
    \10\ See Securities Exchange Act Release No. 60210 (July 1,
2009), 74 FR 32989 (July 9, 2009) (SR-Phlx-2009-53).
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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 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

    Because the foregoing rule change established or changes a due,
fee, or other charge imposed by the Exchange, it has become effective
pursuant to Section 19(b)(3)(A) of the Act \11\ and subparagraph (f)(2)
of Rule 19b-4 \12\ 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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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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-2009-67 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 submission should refer to File Number SR-Phlx-2009-67. 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, 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 Phlx. 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 with to make available publicly. All
submissions should refer to File Number SR-Phlx-2009-67 and should be
submitted on or before September 8, 2009.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-19733 Filed 8-17-09; 8:45 am]

BILLING CODE 8010-01-P