Document ID: SEC-2011-1067-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2011-07-26T04:00Z

[Federal Register Volume 76, Number 143 (Tuesday, July 26, 2011)]
[Notices]
[Pages 44640-44642]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-18822]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64938; File No. SR-Phlx-2011-93]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
a Service Fee on QCC Orders and Floor QCC Orders

July 20, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\, and Rule 19b-4\2\ thereunder, notice is hereby given 
that, on July 11, 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 Fee Schedule to adopt a Service 
Fee of $0.05 per side for Qualified Contingent Cross (``QCC'') Orders 
(electronic) \3\ and Floor QCC Orders.\4\
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    \3\ A QCC Order is comprised of an order to buy or sell at least 
1000 contracts that is identified as being part of a qualified 
contingent trade, as that term is defined in Rule 1080(o)(3), 
coupled with a contra-side order to buy or sell an equal number of 
contracts. The QCC Order must be executed at a price at or between 
the National Best Bid and Offer and be rejected if a Customer order 
is resting on the Exchange book at the same price. A QCC Order shall 
only be submitted electronically from off the floor to the PHLX XL 
II System. See Rule 1080(o). See also Securities Exchange Act 
Release No. 64249 (April 7, 2011), 76 FR 20773 (April 13, 2011) (SR-
Phlx-2011-47) (a rule change to establish a QCC Order to facilitate 
the execution of stock/option Qualified Contingent Trades (``QCTs'') 
that satisfy the requirements of the trade through exemption in 
connection with Rule 611(d) of the Regulation NMS).
    \4\ A Floor QCC Order must: (i) Be for at least 1,000 contracts, 
(ii) meet the six requirements of Rule 1080(o)(3) which are modeled 
on the QCT Exemption, (iii) be executed at a price at or between the 
National Best Bid and Offer (``NBBO''); and (iv) be rejected if a 
Customer order is resting on the Exchange book at the same price. In 
order to satisfy the 1,000-contract requirement, a Floor QCC Order 
must be for 1,000 contracts and could not be, for example, two 500-
contract orders or two 500-contract legs. See Rule 1064(e). See also 
Securities Exchange Act Release No. 64688 (June 16, 2011), 76 FR 
36606 (June 22, 2011) (SR-Phlx-2011-56) (a rule change to establish 
a qualified contingent cross order for execution on the floor of the 
Exchange).

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[[Page 44641]]

    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqtrader.com/micro.aspx?id=PHLXRulefilings, 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 Service Fee 
for both QCC Orders (electronic) and Floor QCC Orders once a Firm 
reaches the Firm Related Equity Option Cap (``Cap''), which is 
described below. The Exchange proposes this Service Fee recognizing 
that the qualified contingent cross capability is a premium service 
offered by the Exchange. This Service Fee is proposed to recoup costs 
incurred by the Exchange to offer this capability including trade 
matching and processing, post trade allocation, submission for clearing 
and customer service activities related to trading activity on the 
Exchange.
    Firms are subject to a $75,000 Cap. Firm equity option transaction 
charges and QCC Transaction Fees, in the aggregate, for one billing 
month may not exceed the Cap per member organization when such members 
are trading in their own proprietary account. The Firm equity options 
transaction charges are waived for members executing facilitation 
orders pursuant to Exchange Rule 1064 when such members are trading in 
their own proprietary account.\5\
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    \5\ In addition, Firms that (i) Are on the contra-side of an 
electronically-delivered and executed Customer complex order; and 
(ii) have reached the Cap will be assessed a $0.05 per contract fee. 
See Section II of the Exchange's Fee Schedule.
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    The Exchange proposes to adopt a Service Fee of $0.05 per side once 
a Firm has reached the Cap. This $0.05 per side Service Fee will apply 
to every contract side of a QCC Order (electronic) and Floor QCC Order 
that is executed once a Firm has reached the Cap in a particular 
calendar month. A Firm that does not reach the Cap in a particular 
calendar month will not be assessed the Service Fee in that month. The 
Exchange proposes to add text to Section II of the Fee Schedule 
entitled ``Equity Options Fees'' to describe the Service Fee. The 
Exchange also proposes to add a clarifying sentence to Section II of 
the Fee Schedule to clarify that QCC Transaction Fees are included in 
the monthly calculation of the Cap.\6\
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    \6\ See Securities Exchange Act Release No. 64520 (May 19, 
2011), 76 FR 30223 (May 24, 2011) (SR-Phlx-2011-66) (a rule change 
to adopt fees applicable to a Qualified Contingent Cross Order) and 
SR-Phlx-2011-84 (an immediately effective proposed rule change to 
adopt fees applicable to a Floor Qualified Contingent Cross order). 
QCC Transaction Fees are defined in Section II of the Fee Schedule 
as applicable to QCC Orders, as defined in Exchange Rule 1080(o), 
and Floor QCC Orders, as defined in 1064(e).
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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 and other persons using its facilities.
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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 the proposed Service Fee is reasonable 
because Firms have the ability to cap fees and even with the added 
Service Fee, Firms should generally pay less once they reach the Cap 
because they will not pay the normally applicable transaction fees. 
This Service Fee would reduce the discrepancy that exists today between 
Firms and other market participants. For example, Firms who reach the 
Cap in a particular month would pay the Service Fee instead of other 
normally applicable transaction fees as a result of reaching the Cap. 
As stated in the filing, the Service Fee does not apply to Firms who 
did not reach the Cap. Also, the Exchange believes that the Service Fee 
is reasonable because the fee would allow the Exchange to defray costs 
incurred in providing the qualified contingent cross capability in the 
form of QCC Orders (electronic) and Floor QCC Orders. Specifically, the 
Exchange is providing trade matching and processing, post trade 
allocation, submission for clearing and customer service activities 
related to trading activity on the Exchange. The Exchange also believes 
that the Service Fee is reasonable because it is comparable to a fee 
assessed by the International Securities Exchange, LLC (``ISE''). ISE 
assesses a $0.05 per side service fee for qualified contingent cross 
volume once a member reaches the monthly fee cap.\9\
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    \9\ See ISE's Schedule of Fees. See also Securities Exchange Act 
Release No. 64270 (April 8, 2011), 76 FR 20754 (April 13, 2011) (SR-
ISE-2011-13).
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    The Exchange believes that the proposed Service Fee is equitable 
and not unfairly discriminatory because it would be uniformly applied 
to Firms in the same way that the Cap is uniformly available to these 
Firms.

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.

[[Page 44642]]

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-2011-93 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-2011-93. 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-2011-93 and should be 
submitted on or August 16, 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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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-18822 Filed 7-25-11; 8:45 am]
BILLING CODE 8011-01-P