Document ID: SEC-2009-0092-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, Inc.
Posted Date: 2009-01-22T05:00Z

[Federal Register: January 22, 2009 (Volume 74, Number 13)]
[Notices]               
[Page 4063-4065]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22ja09-83]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59247; File No. SR-Phlx-2008-87]

 
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Amending the 
Phlx Fee Schedule

January 14, 2009.
    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 31, 2008, NASDAQ OMX PHLX, Inc. (``Phlx'' or ``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 substantially prepared by the Exchange. 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).
    \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 Summary of Equity Option, and 
MNX, NDX, RUT and RMN Charges; Summary of Index Option Charges; and 
Summary of U.S Dollar-Settled Foreign Currency Option Charges fee 
schedules. Specifically, the Exchange proposes to assess an option 
transaction charge of $0.08 per contract side for specialists and 
Registered Options Traders (``ROTs''), including Streaming Quote 
Traders (``SQTs'') \3\ and Remote Streaming Quote Traders (``RSQTs'') 
\4\ on contracts that are executed electronically as part of a Complex 
Order \5\ in equity options on the Exchange's electronic trading 
platform for options, Phlx XL.\6\ Market participants other than 
specialists and ROTs would be assessed the applicable current equity 
options transaction charge.
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    \3\ An SQT is an Exchange Registered Options Trader (``ROT'') 
who has received permission from the Exchange to generate and submit 
option quotations electronically through an electronic interface 
with AUTOM via an Exchange approved proprietary electronic quoting 
device in eligible options to which such SQT is assigned. See 
Exchange Rule 1014(b)(ii)(A).
    \4\ An RSQT is an ROT and participant in the Exchange's 
electronic trading system, ``Phlx XL'' who has received permission 
from the Exchange to trade in options for his own account, and to 
generate and submit option quotations electronically from off the 
floor of the Exchange through AUTOM in eligible options to which 
such RSQT has been assigned. See Exchange Rule 1014(b)(ii)(B).
    \5\ A Complex Order is composed of two or more option components 
and is priced as a single order (a ``Complex Order Strategy'') on a 
net debit or net credit basis. See Exchange Rule 1080, Commentary 
.08. For a complete description of the Exchange's Complex Order 
System, see Securities Exchange Act Release No. 58361 (August 14, 
2008), 73 FR 49529 (August 21, 2008) (SR-Phlx-2008-50).
    \6\ See Securities Exchange Act Release No. 50100 (July 27, 
2004), 69 FR 46612 (August 3, 2004) (SR-Phlx-2003-59).
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    The Exchange proposes to assess any applicable option transaction 
charges to participants, including specialists and ROTs, on contracts 
in Index Options and U.S. Dollar-Settled Foreign Currency Options that 
are executed electronically as part of a Complex Order.\7\
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    \7\ This proposal and the Exhibits attached hereto include 
amendments to the Exchange's fee schedule that were submitted on 
December 30, 2008 as part of SR-Phlx-2008-86. Beginning with 
transactions settling on or after January 2, 2009, the Exchange will 
assess an option transaction charge of $0.22 per contract for ROTs, 
$0.24 per contract for Firms that submit proprietary orders, and 
$0.14 for Firm facilitation orders. The Commission notes that the 
preceding sentence refers to the ``Summary of Equity Option, and 
MNX, NDX, RUT and RMN Charges'' on the fee schedule as amended by 
File No. Phlx-2008-86.
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    This proposal is effective upon filing and will be implemented for 
transactions settling on or after January 2, 2009.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nasdaqtrader.com/micro.aspx?id=PHLXRulefilings.

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 provide an incentive 
for specialists and ROTs to provide liquidity in Complex Orders sent to 
the Exchange for execution, and to enhance Exchange revenues, by 
assessing an equity option transaction charge of $0.08 per contract 
side for specialists and ROTs instead of the current applicable charges 
that apply to simple option transactions in equity options.\8\ 
Respecting Complex Orders in equity options for other market 
participants, the equity option transaction charges in effect on the 
Exchange for simple orders would be assessed.
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    \8\ The Commission notes that prior to this filing, Phlx did not 
assess transaction charges for Complex Orders.
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    Respecting Complex Orders in index and foreign currency options, 
the index option and foreign currency option

[[Page 4064]]

transaction charges in effect on the Exchange for simple orders would 
be assessed on all participants.
    Pursuant to this proposal, the Exchange intends to amend the 
Exchange's: (i) Summary of Equity Option, and MNX, NDX, RUT and RMN 
Charges; (ii) Summary of Index Option Charges; and (iii) Summary of U.S 
Dollar-Settled Foreign Currency Option Charges.
    Currently, the Exchange does not assess transaction charges for 
Complex Orders. The Exchange believes that the $0.08 transaction charge 
for Complex Orders in equity options (as opposed to the transaction 
charges for simple orders) should provide incentives for specialists 
and ROTs to provide liquidity in the Exchange's markets for Complex 
Orders in equity options.
Summary of Equity Option, and MNX, NDX, RUT and RMN Charges
    Currently, the Exchange assesses various option transaction charges 
for equity options, depending on such factors as the category of 
person(s) submitting orders for execution (e.g., customers, 
specialists, broker-dealers, ROTs and Firms are all charged 
differently, on a per contract basis, ranging from $0.00 per contract 
to $0.45 per contract) and the manner in which the order is delivered 
to the Exchange. For example, broker-dealer orders submitted 
electronically to the Exchange's systems are charged $0.45 per 
contract, whereas broker-dealer orders submitted through means other 
than the Exchange's electronic system are charged $0.25 per contract. 
Customers submitting orders in equity options are generally not charged 
transaction fees \9\ whereas ROTs and Firms are charged.
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    \9\ Customers are charged $0.12 per contract for executions in 
MNX and NDX options. The Commission notes that the Phlx fee schedule 
also provides for a $0.12 per contract charge for customer 
executions in RUT and RMN. See Securities Exchange Act Release No. 
59243 (January 13, 2009) (File No. Phlx-2008-86) (adding those 
charges to the fee schedule).
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    The Exchange proposes to amend the fee schedule to assess 
specialists and ROTs an option transaction charge of $0.08 per contract 
side on contracts in equity and MNX, NDX, RUT and RMN options that are 
executed electronically as part of a Complex Order. Participants other 
than specialists and ROTs would be assessed the regular equity option 
transaction charge applicable to simple equity option orders.
Summary of Index Option Charges
    The Exchange assesses an option transaction charge for index option 
transactions other than transactions involving Complex Orders, as 
described in the Exchange's Summary of Index Option Charges. The 
Exchange proposes to amend its Summary of Index Option Charges to 
assess any applicable option transaction charges to participants, 
including specialists and ROTs, on contracts in index options that are 
executed electronically as part of a Complex Order. For clarity, the 
Exchange proposes to amend its Summary of Index Option Charges to state 
specifically that Registered Option Traders (on-floor) and specialists 
will be assessed $0.24 per contract side on contracts that are executed 
electronically as part of a Complex Order.
Summary of U.S. Dollar-Settled Foreign Currency Option Charges
    The Exchange currently assesses an option transaction charge for 
transactions in options overlying U.S. dollar-settled foreign 
currencies, as described in the Exchange's Summary of U.S Dollar-
Settled Foreign Currency Option Charges. The Exchange proposes to amend 
its Summary of U.S Dollar-Settled Foreign Currency Option Charges 
schedule to assess any option transaction charges on contracts in U.S 
dollar-settled foreign currency options that are executed 
electronically as part of a Complex Order. For clarity, the Exchange 
proposes to amend its Summary of U.S Dollar-Settled Foreign Currency 
Option Charges schedule to state specifically that Registered Option 
Traders (on-floor) and specialists will be assessed $0.24 per contract 
side on contracts that are executed electronically as part of a Complex 
Order.
    The Exchange currently provides a discount for ROTs (on-floor) and 
specialists that exceed 4.5 million contracts in a given month (the 
``Volume Threshold'') by assessing $0.01 per contract on contract 
volume above the Volume Threshold instead of the applicable options 
transaction charge described in the Summary of Equity Option, and MNX, 
NDX, RUT and RMN Charges. Complex Order volume is not used in 
calculating the Volume Threshold.\10\
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    \10\ See Securities Exchange Act Release No. 58420 (August 25, 
2008), 73 FR 51035 (August 29, 2008) (SR-Phlx-2008-62).
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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 \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. Specifically, the Exchange 
believes that this proposal is equitable because it would apply evenly 
to specialists and ROTs transacting with Complex Orders sent to the 
Exchange for execution.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
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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 that is 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 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 \13\ and paragraph (f)(2) of Rule 19b-4 \14\ 
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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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 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-2008-87 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.

[[Page 4065]]

All submissions should refer to File Number SR-Phlx-2008-87. 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 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-2008-87 and should be 
submitted on or before February 12, 2009.

    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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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-1232 Filed 1-21-09; 8:45 am]

BILLING CODE 8011-01-P