Document ID: SEC-2011-1300-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2011-08-31T04:00Z

[Federal Register Volume 76, Number 169 (Wednesday, August 31, 2011)]
[Notices]
[Pages 54279-54281]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-22219]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65195; File No. SR-Phlx-2011-117]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
the Active SQF Port Fee and the Order Entry Port Fee

August 25, 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 August 12, 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 Exchange's Fee Schedule to 
reflect that the Exchange will not assess a charge for the use of 
additional Active Specialized Quote Feed (``SQF'') Ports and Order 
Entry Ports in limited circumstances.
    The text of the proposed rule change is available on the Exchange's 
Web site

[[Page 54280]]

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 allow member 
organizations to utilize additional Active SQF Ports and Order Entry 
Ports in very limited circumstances, at no additional charge, to 
accommodate member organizations that are attempting to colocate or 
otherwise change their technology and require extra ports during these 
transitions.\3\ The Exchange is proposing this rule change to offset 
costs for member organizations that are transitioning technology and 
require additional ports as back-up ports only while the transition is 
occurring.
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    \3\ Members require extra ports during certain technology 
transitions to ensure that they have functioning ports if they 
experience difficulties during the transition and need to send 
messages.
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    Specifically, the Exchange would not assess the Active SQF Port Fee 
or the Order Entry Port Fee on member organizations for the use of 
additional Active SQF Ports and/or Order Entry Ports for ten (10) 
business days in the following limited circumstances where a member 
organization is: (i) Colocating to another facility; or (ii) changing 
technology. The member organization would be required to provide the 
Exchange with written notification of the date it would commence the 
transition and the number of additional Active SQF Ports and/or Order 
Entry Ports that it would require during the transition. The member 
organization would not be assessed a fee for the use of additional 
Active SQF Ports and/or Order Entry Ports for the ten business days. If 
the member organization required additional ports beyond the ten 
business day period, it would be assessed the applicable monthly fee 
for the applicable ports.\4\ The member organization would continue to 
be assessed Active SQF Port Fees and Order Entry Port Fees for the 
ports that it requested, and the Exchange provided to it, prior to the 
transition.\5\
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    \4\ Member organizations would be required to contact the 
Exchange to retain ports beyond the ten business day period as the 
Exchange intends to remove additional ports acquired at no cost once 
the ten day business day period has ended.
    \5\ A member organization is required to complete a form in the 
manner prescribed by the Exchange in order to acquire access to 
Active SQF Ports or Order Entry Ports.
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    For example, a member organization that was utilizing three Order 
Entry Ports on a monthly basis, notified the Exchange that it would be 
updating its technology and required use of four additional Order Entry 
Ports for a ten day period (from September 2, 2011, through September 
15, 2011), and completed its transition in ten business days (by 
September 15, 2011) would only be assessed the Order Entry Port Fee, as 
applicable, for three Order Entry Ports. If the same member 
organization, using the same facts, notified the Exchange that it 
required use of the four additional Order Entry Ports for more than ten 
business days (beyond September 15, 2011), the Exchange would assess 
that member organization the Order Entry Port Fee, as applicable, for 
all seven ports, the three original ports and the four additional 
ports.
    The Exchange currently has a tiered Active SQF Port Fee as follows:

------------------------------------------------------------------------
                                                                Cost per
                  Number of active SQF ports                    port per
                                                                 month
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0-4..........................................................       $350
5-18.........................................................      1,250
19-40........................................................      2,350
41 and over..................................................      3,000
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    Active SQF ports refer to ports that receive inbound quotes at any 
time within that month. SQF is an interface that enables specialists, 
Streaming Quote Traders (``SQTs'') and Remote Streaming Quote Traders 
(``RSQTs'') to connect and send quotes into Phlx XL. Active SQF Port 
Fees are capped at $500 per month for member organizations that are (i) 
Phlx Only Members; \6\ and (ii) have 50 or less SQT assignments 
affiliated with their member organization.\7\
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    \6\ For purposes of the Active SQF Port Fee, a Phlx Only Member 
is a Phlx member that is not a member or member organization of 
another national securities exchange.
    \7\ Active SQF Port Fees are capped at $40,000 per month 
(``Cap'') until December 30, 2011 for all member organizations other 
than those member organizations who meet the requirements of the 
$500 per month cap.
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    The Exchange currently assesses an Order Entry Port Fee of $500 per 
month per mnemonic.\8\ The Order Entry Port Fee is a connectivity fee 
assessed on member organizations in connection with routing orders to 
the Exchange via an external order entry port. Member organizations 
access the Exchange's network through order entry ports. A member 
organization may have more than one order entry port.
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    \8\ The Order Entry Port Fee is waived for mnemonics that are 
used exclusively for complex orders where one of the components of 
the complex order is the underlying security. The fee is assessed 
regardless of usage, and solely on the number of order entry ports 
assigned to each member organization.
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    The Exchange proposes to add text to the Fee Schedule at Section VI 
entitled ``Access Service, Cancellation, Membership, Regulatory and 
Other Fees'' to indicate that: There will be no cost for additional 
Active SQF Ports or Order Entry Ports \9\ acquired for ten business 
days in connection with a technology transition; notification is 
required to the Exchange concerning the transition; and the additional 
ports will be removed from the system at the end of the ten business 
days.
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    \9\ The additional ports refer to the ports that were acquired 
at no cost for ten business days. As previously mentioned, ports 
that were utilized by the member organization prior to the 
transition will continue to be assessed the current fees.
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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 \10\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \11\ 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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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that its proposal to not assess an Active SQF 
Port Fee or Order Entry Port Fee for ten business days where a member 
organization is transitioning technology is reasonable because the 
Exchange is seeking to accommodate member organizations by not 
assessing fees for additional ports related to the technology 
transition. The Exchange believes that ten days is ample time for 
member organizations to receive additional services at no cost. The 
Exchange believes this accommodation will assist member organizations 
in

[[Page 54281]]

effectively and efficiently transitioning technology and avoiding 
interruption to their business, which in turn benefits the market 
place.
    The Exchange believes that this proposal is equitable and not 
unfairly discriminatory because the Exchange is offering the additional 
ports at no charge to all member organizations that transition 
technology. These member organizations who would receive the additional 
ports at no costs are being offered these services because they are in 
a special circumstance, a transition of technology, and this proposal 
would prevent additional extraordinary costs related to the transition.

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.\12\ 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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    \12\ 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2011-117 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-2011-117. 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-2011-117 and should be 
submitted on or before September 21, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-22219 Filed 8-30-11; 8:45 am]
BILLING CODE 8011-01-P