Document ID: SEC-2012-0033-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2012-01-10T05:00Z

[Federal Register Volume 77, Number 6 (Tuesday, January 10, 2012)]
[Notices]
[Pages 1534-1536]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-186]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66099; File No. SR-Phlx-2011-184]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
the Rebates and Fees for Adding and Removing Liquidity in Select 
Symbols

January 4, 2012.
    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 22, 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 Rebates and Fees for Adding and 
Removing Liquidity in Select Symbols in Section I, Part A of the 
Exchange's Fee Schedule.
    While changes to the Fee Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative on January 3, 2012.
    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, 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 amend Section I of 
the Fee Schedule, entitled ``Rebates and Fees for Adding and Removing 
Liquidity in Select Symbols,'' at Part A, entitled ``Single contra-side 
orders,'' to amend the Professional \3\ Rebate for Adding Liquidity in 
order to treat a Professional similar to other non-customer market 
participants for purposes of the rebate.
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    \3\ 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) 
(hereinafter ``Professional'').
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    Currently, Section I of the Fee Schedule, which applies to certain 
select symbols,\4\ is comprised of a Part A, single contra-side order 
fees, and a Part B, Complex Order fees.\5\ There are currently several 
categories of market participants: Customers, Directed Participants,\6\ 
Specialists,\7\ Registered

[[Page 1535]]

Options Traders,\8\ SQTs,\9\ RSQTs,\10\ Broker-Dealers, Firms and 
Professionals. Currently, the Exchange pays the following Rebates for 
Adding Liquidity:
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    \4\ Select symbols shall be defined as options overlying the 
following symbols: AA, AAPL, ABX, AIG, ALL, AMD, AMR, AMZN, AXP, 
BAC, BRCD, C, CAT, CIEN, CSCO, DELL, DIA, DRYS, EBAY, EK, F, FAS, 
FAZ, FXI, GDX, GE, GLD, GLW, GS, HAL, IBM, INTC, IWM, JPM, LVS, MGM, 
MSFT, MU, NEM, NOK, NVDA, ORCL, PFE, PG, POT, QCOM, QQQ, RIG, RIMM, 
RMBS, SBUX, SDS, SIRI, SKF, SLV, SLW, SMH, SNDK, SPY, T, TBT, TZA, 
UAL, UNG, USO, UUP, UYG, V, VALE, VXX, VZ, WYNN, X, XLF, XOM, XOP, 
XRX and YHOO (``Select Symbols''). These symbols are Multiply-
Listed.
    \5\ The Rebates and Fees for Adding and Removing Liquidity in 
Select Symbols will continue to apply only to electronic orders.
    \6\ A Directed Participant is a Specialist, SQT, or RSQT that 
executes a customer order that is directed to them by an Order Flow 
Provider and is executed electronically on PHLX XL II.
    \7\ A Specialist is an Exchange member who is registered as an 
options specialist pursuant to Rule 1020(a).
    \8\ 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).
    \9\ An SQT is defined in Exchange Rule 1014(b)(ii)(A) as an ROT 
who has received permission from the Exchange to generate and submit 
option quotations electronically in options to which such SQT is 
assigned.
    \10\ An RSQT is defined in Exchange Rule in 1014(b)(ii)(B) as 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. An RSQT may only submit such 
quotations electronically from off the floor of the Exchange.

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                                                                Directed       Specialist, ROT,
                                             Customer         participant        SQT and RSQT           Firm          Broker-Dealer       Professional
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Rebate for Adding Liquidity...........             $0.26              $0.23              $0.23              $0.00              $0.00              $0.26
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    The Exchange proposes to decrease the Professional Rebate for 
Adding Liquidity from $0.26 per contract to $0.23 per contract. The 
Exchange is not proposing to amend any other rebates or fees in Section 
I.
    While changes to the Fee Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative on January 3, 2012.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \11\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \12\ 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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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that its proposal to decrease the Rebate for 
Adding Liquidity for Professionals is reasonable because a Professional 
would be paid the same rebates as other market makers.\13\ Currently, a 
Customer and Professional are paid the highest Rebate for Adding 
Liquidity available for Single contra-side orders. The Exchange 
believes that paying a Customer a higher rebate, as compared to market 
participants, incentivizes Broker-Dealers to route Customer orders to 
the Exchange, which in turn should increase liquidity and benefit all 
market participants. The Exchange recently increased the Rebate for 
Adding Liquidity for Professionals,\14\ while it also increased the 
Professional Fee for Removing Liquidity for Single contra-side orders, 
to a rate equal to Firms and Broker-Dealers. The Exchange believes that 
it is reasonable to now decrease the Professional Rebate for Adding 
Liquidity to the same rate that is paid to market makers, thereby 
paying Customers the highest rebate. The Exchange believes that 
Professionals would still benefit from a rebate, which is not offered 
to Firms and Broker-Dealers, while also being assessed the same rates 
as Firms and Broker-Dealers to remove liquidity. A Professional would 
be paid the same rebate as is currently offered to all other non-
Customer market participants receiving a Rebate for Adding Liquidity 
for Single contra-side orders. With respect to the Fee for Removing 
Liquidity in Single contra-side orders, Directed Participants, 
Specialists, ROTs, SQTs and RSQTs, are assessed lower fees because they 
have quoting obligations,\15\ unlike Firms, Broker-Dealers and 
Professionals.
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    \13\ The Exchange market maker category includes Specialists 
(see Rule 1020) and Registered Options Traders (Rule 1014(b)(i) and 
(ii), which includes Streaming Quote Traders or SQTs (see Rule 
1014(b)(ii)(A)) and Remote Streaming Quote Traders or RSQTs (see 
Rule 1014(b)(ii)(B)). This would also include Directed Participants. 
The term ``Directed Participant'' applies to transactions for the 
account of a Specialist, Streaming Quote Trader or Remote Streaming 
Quote Trader resulting from a Customer order that is (1) directed to 
it by an order flow provider, and (2) executed by it electronically 
on Phlx XL II.
    \14\ See Securities Exchange Act Release No. 65940 (December 12, 
2011), 76 FR 78322 (December 16, 2011) (SR-Phlx-2011-162).
    \15\ See Exchange Rule 1014 titled ``Obligations and 
Restrictions Applicable to Specialists and Registered Options 
Traders.''
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    The Exchange believes it is equitable and not unfairly 
discriminatory to pay a Professional a Rebate for Adding Liquidity 
similar to market makers because the Professional is still advantaged 
by a rebate as compared to Firms and Broker-Dealers. Section I Fees for 
Removing Liquidity in both Single contra-side orders and Complex Orders 
align Professionals with Firms and Broker-Dealers.\16\ All 
Professionals would be equally eligible to receive the Rebate for 
Adding Liquidity. In addition, the Exchange's Rebates for Adding 
Liquidity are within the range of fees assessed by the International 
Securities Exchange, LLC (``ISE'').\17\
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    \16\ See Section I of the Fee Schedule at Parts A and B.
    \17\ See ISE's Fee Schedule (a Professional is assessed the same 
fees and paid the same rebates similar to a Firm for simple orders 
and complex orders).
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    The Exchange operates in a highly competitive market in which 
market participants can readily direct order flow to competing venues 
if they deem fee levels at a particular venue to be excessive. The 
Exchange believes that the fees it charges and rebates it pays for 
options overlying the various Select Symbols remain competitive with 
fees and rebates charged/paid by other venues and therefore continue to 
be reasonable and equitably allocated to those members that opt to 
direct orders to the Exchange rather than competing venues.

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.\18\ 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

[[Page 1536]]

takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.
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    \18\ 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. 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 email to rule-comments@sec.gov. Please include 
File No. SR-Phlx-2011-184 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-2011-184. This 
file number should be included on the subject line if email 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-2011-184 and should be 
submitted on or before January 31, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Kevin M. O'Neill,
Deputy Secretary.
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    \19\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2012-186 Filed 1-9-12; 8:45 am]
BILLING CODE 8011-01-P