[Federal Register Volume 75, Number 130 (Thursday, July 8, 2010)]
[Notices]
[Pages 39301-39303]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-16534]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 62403; File No. SR-Phlx-2010-80]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX, Inc. Relating
to the Options Floor Broker Subsidy
June 30, 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 June 25, 2010 NASDAQ OMX PHLX, Inc. (``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: (i) The threshold volume
requirements related to the Options Floor Broker Subsidy; and (ii) the
Per Contract Average Daily Volume Subsidy Payment. The Exchange also
proposes correcting a typographical error.
While changes to the Exchange's Fee Schedule pursuant to this
proposal are effective upon filing, the Exchange has designated this
proposal to be effective for trades settling on or after July 1, 2010.
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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to decrease the
threshold volume requirements related to the Options Floor Broker
Subsidy and amend the per contract average daily volume subsidy payment
fees. The Exchange believes that by eliminating certain threshold
requirements additional members may be attracted to the Options Floor
Broker Subsidy. Also, the Exchange believes that the proposed rate
changes could provide enhanced benefits to current and future member
organizations who participate in the Options Floor Broker Subsidy
because the Exchange is increasing the per contract rate on the Tier II
and Tier III levels. The Exchange still continues to afford the members
[sic] organizations who transact volume in Tier I a benefit as well.
Amending the Thresholds
The Exchange currently pays an Options Floor Broker Subsidy to
member organizations with Exchange registered floor brokers for
eligible contracts that are entered into the Exchange's Floor Broker
Management System (``FBMS'').\3\ To qualify for the per contract
subsidy, a member organization with Exchange registered floor brokers
must have: (1) More than an average of 100,000 executed contracts per
day in the applicable month; and (2) at least 40,000 executed contracts
or more per day for at least eight trading days during that same
month.\4\ Only the floor broker volume from orders entered into FBMS
and subsequently executed on the Exchange are counted. The 100,000
contract and 40,000 contract thresholds, as described above, are
calculated per member organization floor brokerage unit. In the event
that two or more member organizations with Exchange registered floor
brokers each entered one side of a transaction into FBMS, then the
executed contracts is [sic] divided among each qualifying member
organization that participates in that transaction.\5\
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\3\ FBMS is designed to enable floor brokers and/or their
employees to enter, route, and report transactions stemming from
options orders received on the Exchange. FBMS also is designed to
establish an electronic audit trail for options orders represented
and executed by floor brokers on the Exchange. See Exchange Rule
1080, commentary .06.
\4\ For purposes of calculating the 100,000 and 40,000
thresholds, customer-to-customer transactions, customer-to-non-
customer transactions, and non-customer-to-non-customer transactions
would be included.
\5\ When computing the threshold amounts, the Exchange would
first count all customer-to-customer transactions and then all other
customer-to-non-customer transactions. See also Securities Exchange
Act Release No. 57253 (February 1, 2008), 73 FR 7352 (February 7,
2008) (SR-Phlx-2008-08) (adopting a tiered per contract floor broker
options subsidy payable to member organization with Exchange
registered floor brokers).
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The Exchange proposes amending the threshold volume requirements
related to the Option Floor Broker Subsidy so that in order to qualify
for the per contract subsidy a member organization
[[Page 39302]]
with Exchange registered floor brokers would only require more than an
average of 100,000 executed contracts per day in the applicable month.
The Exchange is proposing to delete the second threshold requirement,
``* * * at least 40,000 executed contracts or more per day for at least
eight trading days during that same month.''
Customer-to-customer transactions would continue to count towards
reaching the 100,000 contract thresholds, but a per contract subsidy
would not be paid on any customer-to-customer transactions. Dividend,
merger and short stock interest strategies would continue to be
excluded from all threshold volume calculations, and no per contract
subsidy would be paid on these transactions. The per contract subsidy
would be paid based on the average daily contract volume for that
month, which are customer-to-non-customer transactions and are in
excess of 100,000 contracts. Payments would be made at the stated rate
for each tier for those contracts that fall within that tier. These
contracts may include customer-to-customer transactions for the
purposes of reaching a tier, but as stated above, a per contract
subsidy would not be paid on these executions.
In connection with amending the threshold volume requirements, the
Exchange also proposes amending the corresponding eligible contract
requirements to reflect the elimination of the second threshold.
Amending the Subsidy Payment
Additionally, the Exchange is proposing to amend the per contract
average daily volume subsidy payment fees. Currently, in order to be
eligible for the Options Floor Broker Subsidy, the member organization
must have an average daily volume in a particular calendar month as
follows:
Per Contract Average Daily Volume Subsidy Payment
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Tier I Tier II Tier III
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100,001 to 200,000.............. 200,001 to 300,000 300,001 and
greater.
$0.04 per contract.............. $0.05 per contract $0.06 per
contract.
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The Exchange proposes amending the per contract fees as follows:
Per Contract Average Daily Volume Subsidy Payment
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Tier I Tier II Tier III
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100,001 to 200,000.............. 200,001 to 300,000 300,001 and
greater.
$0.02 per contract.............. $0.08 per contract $0.09 per
contract.
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The Exchange is also proposing to correct a typographical error in
the Fee Schedule. Specifically, the spelling of the word facilitation
is being corrected.
While changes to the Exchange's Fee Schedule pursuant to this
proposal are effective upon filing, the Exchange has designated this
proposal to be effective for trades settling on or after July 1, 2010.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \6\ in general, and furthers
the objectives of Section 6(b)(4) of the Act \7\ in particular, in that
it is an equitable allocation of reasonable fees and other charges
among Exchange members. The Exchange believes that the proposed
amendments to the Options Floor Broker Subsidy are equitable, fair and
reasonable because member organizations with Exchange registered floor
brokers are provided an equal opportunity to receive a subsidy and any
member organization is free to establish floor brokerage operations on
the floor of the Exchange, and, as such, would be eligible to receive
the Options Floor Broker Subsidy. Further, the Exchange believes that
the changes to the subsidy payments are reasonable because the Exchange
is continuing to offer to all members the ability to earn the Options
Floor Broker Subsidy. Additionally, the Exchange is eliminating one of
the two threshold volume requirements to receive the Options Floor
Broker Subsidy and thereby creating additional opportunity for members
to avail themselves of the subsidy. In summary, the Exchange is
decreasing the payment for Tier I volumes and increasing the payments
for Tier II and III volumes to create greater incentives and
opportunities for member organizations with Exchange registered floor
brokerage operations to earn additional payments for attracting
additional order flow to the Exchange.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(4).
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While the Exchange is decreasing the payments for Tier I volumes
from $0.04 to $0.02, the Exchange believes this is reasonable because:
(1) The Exchange is still continuing to pay members a subsidy for their
volume; and (ii) the Exchange previously had a similar gap in its
subsidy payment amounts.\8\ The Exchange does not believe that this
subsidy is unreasonable or discriminatory because any floor broker is
capable of meeting the volume criteria.
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\8\ See Securities Exchange Act Release No. 57253 (February 1,
2008), 73 FR 7352 (February 7, 2008) (SR-Phlx-2008-08).
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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 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 \9\ and paragraph (f)(2) of Rule 19b-4 \10\
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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\9\ 15 U.S.C. 78s(b)(3)(A)(ii).
\10\ 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 [email protected]. Please include
File Number SR-Phlx-2010-80 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 39303]]
All submissions should refer to File Number SR-Phlx-2010-80. 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,\11\ 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. 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-2010-80 and should be submitted on or before July
29, 2010.
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\11\ The text of the proposed rule change is available on the
Commission's Web site at http://www.sec.gov.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-16534 Filed 7-7-10; 8:45 am]
BILLING CODE 8010-01-P