[Federal Register Volume 75, Number 141 (Friday, July 23, 2010)]
[Notices]
[Pages 43219-43221]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-18036]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62518; File No. SR-Phlx-2010-90]
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
Complex Orders
July 16, 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 28, 2010, 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 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 [sic] amend its Section II equity options
fees to: (i) Pay a $0.05 per contract side rebate to members for
certain Customer complex orders \3\; and (ii) assess a $0.05 fee to
Firms on the contra-side of a Customer complex order that have reached
the maximum on the Firm Related Equity Option Cap.
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\3\ A complex order is a spread, straddle, combination, ratio or
collar order, all of which consist of more than one component,
priced like a single order at a net debit or credit based on the
prices of the individual components. See Exchange Rule 1080.08
Commentary .08(a)(i). In 2008, the Exchange automated the handling
of complex orders on its electronic trading platform for options,
PHLX XL. See Securities Exchange Act Release No. 58361 (August 14,
2008), 73 FR 49529 (August 21, 2008) (SR-Phlx-2008-50). Since that
time, the Exchange has enhanced its options trading platform, now
known as Phlx XL II. See Securities Exchange Act Release No. 59995
(May 28, 2009), 74 FR 26750 (June 3, 2009) (SR-Phlx-2009-32).
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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
[[Page 43220]]
for trades settling on or after July 1, 2010.
The text of the proposed rule change is available on Phlx's Web
site at http://www.nasdaqtrader.com, on the Commission's Web site at
http://www.sec.gov, at Phlx, 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 attract additional
complex order business, specifically by amending the equity options
fees to pay a $0.05 rebate per contract to members for Customer complex
orders in equity options that are electronically \4\ executed against a
non-Customer contra-side \5\ complex order or a non-Customer contra-
side individual order or quote. Currently, members are assessed the
equity options fees in Section II of the Fee Schedule for executing
Customer complex orders that are electronically executed against non-
Customer contra-side complex orders.\6\ Now, instead of assessing a fee
of $0.00 per contract, the Exchange is proposing to pay a $0.05 rebate.
Similarly, the Exchange also proposes to pay a $0.05 rebate to members
for Customer complex orders where the complex order is executed against
or ``legged'' against individual non-Customer contra-side orders or
quotes.
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\4\ Complex Orders executed on the floor of the Exchange and not
electronically executed are not subject to the $0.05 per contract
rebate described in this proposal.
\5\ This would be a complex order that is contra to an order
from a specialist, Registered Options Trader (as defined in Exchange
Rule 1014(b)(i) and (ii)), Streaming Quote Trader (as defined in
Exchange Rule 1014(b)(ii)(A)), Remote Streaming Quote Specialist (as
defined in Exchange Rule 1014(b)((ii)(B)), Professional (as defined
in Exchange Rule 1000(b)(14)), Broker-Dealer or Firm. A complex
order strategy means any Complex Order involving any option series
which is priced at a net debit or credit (based on the relative
prices of each component). The Exchange will calculate both a bid
price and an offer price for each Complex Order Strategy based on
the current PBBO (as defined below) [sic] for each component of the
Complex Order and the bid/ask differential for each component. See
Exchange Rule 1080, Commentary .08(a)(ii).
\6\ The proposed rebate and fee do not apply to any of the
symbols listed in Section 1, titled ``Rebates for Adding and Fees
for Removing Liquidity in Select Symbols.''
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The Exchange would continue to assess other market participants the
current equity options fees. The payment for order flow fees will
continue to apply to complex order transactions. The Exchange believes
that paying rebates for executing such Customer complex orders as
described herein will increase the volume of complex orders that are
executed on Phlx XL II.
The Exchange also proposes to assess a $0.05 per contract fee to
Firms that: (i) Are on the contra-side of a Customer complex order; and
(ii) have reached the maximum of the Firm Related Equity Option Cap.
Currently, the Exchange has in place a Firm Related Equity Option Cap
of $75,000. Firms are subject to this Firm Related Equity Option Cap
per member organization for equity option transactions, in the
aggregate, for one billing month.\7\ The Exchange believes that
assessing such a fee to Firms for transacting Customer complex orders,
once that Firm has reached the maximum of the Firm Related Equity
Option Cap, will help defray the cost of paying the $0.05 per contract
rebate to Customers. For example, when a Firm exceeds the $75,000 Firm
Related Equity Option Cap, a $0.05 per contract fee will be added to
the Firm Related Equity Option Cap, over those trades that were counted
in reaching the $75,000, when a Firm is contra to a Customer Complex
Order. The Exchange proposes to amend the current language in the Fee
Schedule, relating to equity option fees, concerning the Firm Related
Equity Option Cap, to reflect the proposal and also amend the language
to provide more clarity to the $75,000 cap.
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\7\ The exception to this is for orders of joint back-office
participants. The equity options transaction charges are waived for
firms executing facilitation orders pursuant to Exchange Rule 1064
when such members are trading in their own proprietary account.
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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 \8\ in general, and furthers
the objectives of Section 6(b)(4) of the Act \9\ in particular, in that
it is an equitable allocation of reasonable fees and other charges
among Exchange members.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that paying a rebate to members for
electronically-delivered complex orders is equitable because it is
similar to rebates currently being paid by the International Stock
Exchange LLC (``ISE'') for select symbols.\10\ By offering the $0.05
per contract rebate, the Exchange hopes to encourage more customer
complex orders to be executed via Phlx XL. The $0.05 per contract
rebate is reasonable because it is similar to rebates paid by other
exchanges for customer orders.\11\
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\10\ See ISE's Schedule of Fees.
\11\ See Securities Exchange Release Act. 59478 (February 27,
2009), 74 FR 9857 (March 6, 2009) (SR-NYSEALTR-2009-19).
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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) of the Act \12\ and Rule 19b-4(f)(2) \13\ thereunder. At any
time within 60 days of the filing of such 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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\12\ 15 U.S.C. 78s(b)(3).
\13\ 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:
[[Page 43221]]
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-2010-90 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-2010-90. 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 such filing will also 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-2010-90 and should be
submitted on or before August 13, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-18036 Filed 7-22-10; 8:45 am]
BILLING CODE 8011-01-P