Document ID: SEC-2010-1935-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2010-12-15T05:00Z

[Federal Register Volume 75, Number 240 (Wednesday, December 15, 2010)]
[Notices]
[Pages 78286-78288]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-31457]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63495; File No. SR-Phlx-2010-171]

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

December 9, 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 December 6, 2010, NASDAQ OMX PHLX LLC (``Phlx'' or the ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the self-regulatory organization. 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, pursuant to Section 19(b)(1) of the Act \3\ and Rule 
19b-4

[[Page 78287]]

thereunder,\4\ proposes to amend Exchange Rule 3202, Application of 
Other Rules of the Exchange, to add Exchange Rule 909, Collection of 
Exchange Fees and Other Claims, to the list of Rules which are 
applicable to PSX Participants.
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    \3\ 15 U.S.C. 78s(b)(1).
    \4\ 17 CFR 240.19b-4.
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nasdaqtrader.com/micro.aspx?id=PHLXRulefilings, 
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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to require PSX 
Participants to provide a clearing account number for an account at the 
National Securities Clearing Corporation (``NSCC'') for purposes of 
permitting the Exchange to debit any undisputed or final fees, fines, 
charges and/or other monetary sanctions or other monies due and owing 
to the Exchange or other charges related to Rule 924. Currently, the 
Exchange requires all members of the Exchange trading options to 
provide such an NSCC account number. The Exchange believes that the 
proposed debiting process for PSX Participants would create an 
efficient method of collecting undisputed or final fees, fines, charges 
and/or other monetary sanctions or monies due and owing to the Exchange 
from those PSX Participants.\5\ Further, this proposal would provide a 
cost savings to the Exchange in that it would alleviate administrative 
processes related to the collection of monies owed to the Exchange for 
PSX Participants as it does today for members trading options. 
Collection matters divert staff resources away from the Exchange's 
regulatory and business purposes. In addition, the debiting process 
would prevent PSX Participant accounts from becoming overdue.
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    \5\ The Exchange will not debit accounts for fees that are 
unusually large or for special circumstances, unless such debiting 
is requested by the member.
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    The Exchange proposes to require PSX Participants and applicants to 
provide a clearing account number for an account at NSCC in order to 
permit the Exchange to debit any undisputed or final fees, fines, 
charges and/or monetary sanctions or other monies due and owing to the 
Exchange or other charges related to Rule 924.\6\ The Exchange would 
send a monthly invoice \7\ to each PSX Participant on approximately the 
3rd-10th business day of the following month. The Exchange would also 
send a file to NSCC each month on approximately the 23rd of the 
following month to initiate the debit of the appropriate amount stated 
on the PSX Participant's invoice for the prior month. Because the PSX 
Participant would receive an invoice well before any monies are debited 
(normally within two weeks), the PSX Participant would have adequate 
time to contact the staff with any questions concerning their invoice.
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    \6\ Exchange Rule 924 entitled, Obligations of Members and 
Member Organizations to the Exchange, states, among other things, 
that members and member organizations shall be liable for such fees, 
fines, dues, penalties and other amounts imposed by the Exchange.
    \7\ The monthly invoice will indicate that the amount on the 
invoice will be debited from the designated NSCC account. Each 
month, the Exchange will send a file to the member's clearing firm 
which will indicate the amounts to be debited from each member. If a 
member is ``self-clearing'', no such file would be sent as the 
member would receive the invoice, as noted above, which would 
indicate the amount to be debited.
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    If a PSX Participant disagrees with the invoice, the Exchange would 
not commence the debit until the dispute is resolved. Specifically, the 
Exchange will not include the disputed amount in the debit if the 
member has disputed the amount in writing to the Exchange's designated 
staff by the 15th of the month, or the following business day if the 
15th is not a business day, and the amount in dispute is at least 
$10,000 or greater. Once NSCC receives the file from the Exchange, NSCC 
would proceed to debit the amounts indicated from the clearing members' 
account. In the instance where the PSX Participant clears through an 
Exchange clearing member, the estimated transactions fees owed to the 
Exchange are typically debited by the clearing member on a daily basis 
in order to ensure adequate funds have been escrowed. The Exchange 
would debit any monies owed including undisputed or final fees,\8\ 
fines, charges and/or monetary sanctions or monies due and owed to the 
Exchange.\9\ The Exchange believes that the debit process would 
eliminate the risk of unpaid invoices because of the large amounts of 
capital held at NSCC by members.
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    \8\ Exchange fees are noted on the Exchange Fee Schedule.
    \9\ This includes, among other things, fines which result from: 
violation of Rule 60, Order and Decorum; violations of the Minor 
Rule Plan pursuant to Rule 970; monetary sanctions imposed by the 
Business Conduct Committee relating to a Letter of Caution; and 
monetary sanctions imposed by a Hearing Panel in connection with 
Disciplinary Violations. With respect to disciplinary sanctions that 
are imposed by either the Business Conduct Committee or a Hearing 
Panel, the Exchange would not debit any monies until such action is 
final. The Exchange would not consider an action final until all 
appeal periods have run and/or all appeal timeframes are exhausted. 
With respect to non-disciplinary actions, the Exchange would 
similarly not take action to debit a member account until all appeal 
periods have run and/or all appeal timeframes are exhausted. Any 
uncontested disciplinary or non-disciplinary actions will be 
debited, and the amount due will appear on the members invoice prior 
to the actual NSCC debit.
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    The Exchange proposes to add Rule 909 to the list of Exchange Rules 
which are applicable to PSX Participants. The Exchange proposes this 
rule change become operative upon ten (10) days written notice to PSX 
Participants, upon the publication of this rule change in the federal 
register.\10\
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    \10\ The Exchange would also notify members by phone and through 
Equity Trader Alerts of this proposal prior to the approval of the 
proposal to prepare members for this rule change.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \11\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \12\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest, by providing PSX Participants with an efficient process to 
pay undisputed or final fees, fines, charges and/or monetary sanctions 
or monies dues and owing to the Exchange. The Exchange believes that 
this process of debiting NSCC accounts would ease the PSX Participant's 
administrative burden in paying monthly invoices, avoid overdue 
balances and provide same day collection from all PSX Participants, who 
owe monies to the Exchange, which results in equitable treatment.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).

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[[Page 78288]]

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in 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 proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to Section 19(b)(3)(A) of the Exchange Act \13\ and Rule 19b-
4(f)(6) \14\ thereunder.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing.\15\ 
However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest.\16\ The Exchange has requested that 
the Commission waive the 30-day operative delay. The Exchange has 
requested that the Commission waive the 30-day operative delay and 
designate the proposed rule change to become operative upon ten days 
written notice to PSX Participants, upon this proposal's publication in 
the Federal Register. \17\ The Exchange proposes to uniformly apply 
Exchange Rule 909 to all members of NASDAQ OMX PHLX, options and 
equities. The Exchange currently requires members who transact options 
to comply with Rule 909 and provide the Exchange with an NSCC number 
for the purpose of direct debiting. The Exchange believes that 
expanding this Rule to apply to members transacting equities, PSX 
Participants, would allow the Exchange to alleviate administrative 
processes related to the collection of monies. The Exchange desires to 
provide PSX Participants adequate time to transition to direct debit 
and therefore requests the Commission waive the 30-day operative delay. 
Based on the foregoing, the Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest and hereby designates the proposal operative upon ten 
days written notice to PSX Participants, upon this proposal's 
publication in the Federal Register.\18\
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    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ Id.
    \17\ The Exchange has stated that it will notify members by 
phone and through Equity Trader Alerts to prepare members for this 
rule change.
    \18\ For the purposes only of waiving the 30-day operative 
delay, the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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.

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-2010-171 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-2010-171. 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 website (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 website 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 Number SR-Phlx-2010-171 and should be submitted on 
or before January 5, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-31457 Filed 12-14-10; 8:45 am]
BILLING CODE 8011-01-P