Document ID: SEC-2011-1612-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2011-10-20T04:00Z

[Federal Register Volume 76, Number 203 (Thursday, October 20, 2011)]
[Notices]
[Pages 65225-65228]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-27200]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65576; File No. SR-Phlx-2011-133]

 Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating To 
the RSQT Fee

October 14, 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 October 3, 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 the Remote Streaming Quote Trader 
(``RSQT'') \3\ Fee in Section VI of the Exchange's Fee Schedule 
entitled ``Access Service, Cancellation, Membership, Regulatory and 
Other Fees.''
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    \3\ A Registered Options Trader (``ROT'') includes a Streaming 
Quote Trader (``SQT''), a Remote Streaming Quote Trader (``RSQT'') 
and a Non-SQT ROT, which by definition is neither a SQT or a RSQT. A 
ROT is defined in Exchange Rule 1014(b) as a regular member or a 
foreign currency options participant of the Exchange located on the 
trading floor who has received permission from the Exchange to trade 
in options for his own account. See Exchange Rule 1014 (b)(i) and 
(ii).
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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 November 1, 2011.
    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, on the Commission's Web site at 
http://www.sec.gov/ 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

[[Page 65226]]

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the RSQT Fee in Section VI of the 
Exchange's Fee Schedule, entitled ``Access Service, Cancellation, 
Membership, Regulatory and Other Fees,'' in order to simplify its RSQT 
Fee and automate its billing of this fee.
    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 in 
options to which such RSQT has been assigned.\4\ An RSQT may only 
submit such quotations electronically from off the floor of the 
Exchange.\5\ An RSQT shall not submit option quotations in eligible 
options to which such RSQT is assigned to the extent that the RSQT is 
also approved as a Remote Specialist in the same options.\6\
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    \4\ A qualified RSQT may function as a Remote Specialist upon 
Exchange approval.
    \5\ See Exchange Rule 1014(b)(ii)(B). No person who is either 
directly or indirectly affiliated with an RSQT shall submit 
quotations as a specialist, SQT, RSQT or non-SQT ROT in options in 
which such affiliated RSQT is assigned. An RSQT may only trade in a 
market making capacity in classes of options in which he is assigned 
or approved as a Remote Specialist.
    \6\ See Exchange Rules 1014(b) and 507 for qualifications 
relating to assignments.
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    Currently, the Exchange assesses its RSQT Fee in seven categories 
as follows:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
RSQT Category I........................  $1700.00 per calendar month.
                                         RSQT is Eligible to trade:
                                            1 issue selected
                                         from the top 5 national volume
                                         leaders.
                                            1 issue selected
                                         from the 6th to 10th national
                                         volume leaders.
                                            3 issues selected
                                         from the 11th to 25th national
                                         volume leaders.
                                            4 issues selected
                                         from the 26th to 50th national
                                         volume leaders.
                                            1 index issue.
                                            190 other issues.
RSQT Category II.......................  $3200.00 per calendar month.
                                         RSQT is Eligible to trade:
                                            2 issues selected
                                         from the top 5 national volume
                                         leaders.
                                            2 issues selected
                                         from the 6th to 10th national
                                         volume leaders.
                                            6 issues selected
                                         from the 11th to 25th national
                                         volume leaders.
                                            8 issues selected
                                         from the 26th to 50th national
                                         volume leaders.
                                            2 index issues.
                                            380 other issues.
RSQT Category III......................  $4700.00 per calendar month.
                                         RSQT is Eligible to trade:
                                            3 issues selected
                                         from the top 5 national volume
                                         leaders.
                                            3 issues selected
                                         from the 6th to 10th national
                                         volume leaders.
                                            9 issues selected
                                         from the 11th to 25th national
                                         volume leaders.
                                            12 issues selected
                                         from the 26th to 50th national
                                         volume leaders.
                                            3 index issues.
                                            570 other issues.
RSQT Category IV.......................  $6200.00 per calendar month.
                                         RSQT is Eligible to trade:
                                            4 issues selected
                                         from the top 5 national volume
                                         leaders.
                                            4 issues selected
                                         from the 6th to 10th national
                                         volume leaders.
                                            12 issues selected
                                         from the 11th to 25th national
                                         volume leaders.
                                            16 issues selected
                                         from the 26th to 50th national
                                         volume leaders.
                                            5 index issues.
                                            759 other issues.
RSQT Category V........................  $7700.00 per calendar month.
                                         RSQT is Eligible to trade:
                                            5 issues selected
                                         from the top 5 national volume
                                         leaders.
                                            5 issues selected
                                         from the 6th to 10th national
                                         volume leaders.
                                            15 issues selected
                                         from the 11th to 25th national
                                         volume leaders.
                                            20 issues selected
                                         from the 26th to 50th national
                                         volume leaders.
                                            7 index issues.
                                            948 other issues.
RSQT Category VI.......................  $9200.00 per calendar month.
                                         RSQT is Eligible to trade:
                                            5 issues selected
                                         from the top 5 national volume
                                         leaders.
                                            5 issues selected
                                         from the 6th to 10th national
                                         volume leaders.
                                            15 issues selected
                                         from the 11th to 25th national
                                         volume leaders.
                                            25 issues selected
                                         from the 26th to 50th national
                                         volume leaders.
                                            9 index issues.
                                            1141 other issues.
RSQT Category VII......................  $10,700.00 per calendar month.
                                           RSQT is eligible to trade all
                                         equity option and index option
                                         issues.
------------------------------------------------------------------------

[[Page 65227]]

    Currently, each RSQT is assessed an RSQT Fee based on the number 
and type of option issues (as described above) in which an RSQT is 
assigned. The national volume leader calculations are performed by the 
Exchange.\7\ Each additional category is a progressively higher fee for 
an RSQT to submit quotations from off the floor of the Exchange in a 
progressively greater number of options in each aforementioned national 
volume grouping and in a greater number of index options. Accordingly, 
in order to submit electronic quotations from off the floor of the 
Exchange in all options traded on the Exchange, an RSQT would be 
required to pay fees applicable to a Category VII RSQT. The RSQT Fee is 
assessed based on the highest RSQT category level in which the RSQT was 
qualified to trade at any time during a particular calendar month.\8\
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    \7\ The Exchange calculates the national volume for equity 
options and options overlying Exchange-Traded Fund Shares every six 
months, effective from January 1 through June 30, and again from 
July 1 through December 31. The January-June national volume 
rankings are based on the total national volume for a particular 
option traded during the previous month of October, as determined by 
The Options Clearing Corporation (``OCC''); the July-December 
national volume rankings will be based on the total national volume 
for a particular option traded during the previous month of May, as 
determined by the OCC. See Securities Exchange Act Release No. 51428 
(March 24, 2005), 70 FR 16325 (March 30, 2005) (SR-Phlx-2005-12).
    \8\ For example, if an RSQT is eligible to trade at any time in 
a given calendar month as a Category I RSQT, and sometime during 
that calendar month becomes qualified and eligible to trade as a 
Category II RSQT, the RSQT will be assessed the fee applicable to a 
Category II RSQT, regardless of when such RSQT became eligible to 
trade at the Category II level, and regardless of whether or not, 
during that calendar month, the RSQT resumed eligibility as a 
Category I RSQT.
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    The Exchange proposes to eliminate the current RSQT Fee and instead 
adopt a new RSQT Fee based solely on the number of options assigned to 
a particular RSQT. The Exchange proposes to adopt the following monthly 
RSQT Fee based on the corresponding number of option class 
assignments:\9\
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    \9\ For purposes of this filing, the term ``issues'' and 
``classes'' have the same meaning.

------------------------------------------------------------------------
   Number of option class assignments                RSQT fee
------------------------------------------------------------------------
Less than 100 classes..................  $5,000 per month.
More than 100 classes and less than 999  $8,000 per month.
 classes.
1000 or more classes...................  $11,000 per month.
------------------------------------------------------------------------

    In calculating the RSQT Fee, the Exchange will calculate the number 
of option class assignments for equity options including exchange-
traded funds (``ETFs''), exchange-traded notes (``ETNs'') \10\ and 
HOLDRS.\11\ The Exchange will not include and therefore not assess a 
fee for currencies or indexes in calculating the number of option class 
assignments.
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    \10\ ETNs are also known as ``Index-Linked Securities,'' which 
are designed for investors who desire to participate in a specific 
market segment by providing exposure to one or more identifiable 
underlying securities, commodities, currencies, derivative 
instruments or market indexes of the foregoing. Index-Linked 
Securities are the non-convertible debt of an issuer that have a 
term of at least one (1) year but not greater than thirty (30) 
years. Despite the fact that Index-Linked Securities are linked to 
an underlying index, each trade as a single, exchange-listed 
security. Accordingly, rules pertaining to the listing and trading 
of standard equity options apply to Index-Linked Securities.
    \11\ HOLDRS are Holding Company Depository Receipts.
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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 November 1, 2011.
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 and other persons using its 
facilities.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed amendments to the RSQT Fee 
are reasonable because the Exchange is creating a simple method for 
calculating the RSQT Fee. The proposal will calculate the RSQT Fee on 
the number of option assignments as compared to the national volume for 
equity options and options overlying Exchange-Traded Fund Shares. This 
new calculation will enable RSQTs to easily determine the amount of 
option class assignments and therefore the RSQT Fee on a monthly basis 
without the need for a more comprehensive calculation. The Exchange 
believes that this revised form of calculating the RSQT Fee will be 
more transparent to members, create a simple calculation of the fee 
based solely on the number of option class assignments and allow for 
ease of automation of this fee.
    The Exchange believes that the proposed RSQT Fee is equitable and 
not unfairly discriminatory because the proposed fee is more 
representative of system usage by RSQTs and costs to the Exchange. 
While several factors determine a particular RSQT's Fee in any given 
month, a comparison of the current RSQT Fee and the proposal which is 
based solely on option assignments is not a fair determination of the 
impact of this fee proposal. The Exchange believes that a majority of 
RSQTs will experience an increase or decrease in the RSQT Fee of 
approximately $300-$1800 a month based on this proposal. The Exchange 
has not increased this fee since it was established in 2005 and 
believes that the proposed fee is a fair representation of the 
Exchange's technology costs and the increased amount of system usage 
attributable to each RSQT.

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.\14\ 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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    \14\ 15 U.S.C. 78s(b)(3)(A)(ii).

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[[Page 65228]]

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 No. SR-Phlx-2011-133 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 No. SR-Phlx-2011-133. 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 available publicly. All 
submissions should refer to File No. SR-Phlx-2011-133 and should be 
submitted on or before November 10, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-27200 Filed 10-19-11; 8:45 am]
BILLING CODE 8011-01-P