[Federal Register Volume 75, Number 165 (Thursday, August 26, 2010)]
[Notices]
[Pages 52560-52562]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-21178]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62745; File No. SR-Phlx-2010-113]
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
the Cancellation Fee
August 19, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on August 17, 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 and
II 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 its Fee Schedule to modify the
current method of calculating the minimum number of orders submitted by
a member organization and subsequently cancelled that is required to
assess a Cancellation Fee on electronically delivered Customer orders,
and Professional\3\ all-or-none (``AON'') orders that are submitted by
the member.
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\3\ Rule 1000(b)(14) provides in relevant part: ``The term
``professional'' means 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).
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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 amend the manner in
which the Cancellation Fee is assessed on member organizations.
Currently, the Exchange assesses the Cancellation Fee on member
organizations that submit Customer orders and Professional AON orders
if the aggregate number of Customer orders and Professional AON orders
submitted by such members and then cancelled totals 500 orders or more
in a particular calendar month (the ``500 Order Threshold'').
The Exchange proposes to modify the calculation of the 500 Order
Threshold by creating two separate Cancellation Fee calculations, one
applicable to Customer orders and one applicable to AON orders that are
submitted by a Professional.\4\ Under the proposal, the 500 Order
Threshold would be calculated for Customer orders and Professional AON
orders separately, and would not be aggregated.\5\ The Exchange
proposes this rule change to simplify the calculation of the 500 Order
Threshold.
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\4\ Currently, a Professional is treated in the same manner as
an off-floor broker-dealer for purposes of Rules 1014(g) (except
with respect to AON orders, which will be treated like Customer
orders), 1033(e), 1064.02 (except professional orders will be
considered Customer orders subject to facilitation), and 1080.08 as
well as Options Floor Procedure Advices B-6, B-11 and F-5. Member
organizations must indicate whether orders are for professionals.
\5\ The Cancellation Fee [sic] to member organizations that
submit a minimum of 500 Customer orders in a given month, and to
Professionals that submit a minimum of 500 AON orders in a given
month. For purposes of assessing the Cancellation Fee, Customer or
Professional AON orders from the same member organization in the
same series on the same side of the market that are executed at the
same price within a 300 second period will be aggregated and counted
as one executed option order.
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The Exchange recently amended the Cancellation Fee to include
Professional AON orders in the computation of the 500 Order Threshold
for the application of the Cancellation Fee.\6\ Currently, the Exchange
assesses a Cancellation Fee of $2.10 per Customer order and $1.10 per
Professional AON order for each cancelled electronically delivered \7\
Customer order or Professional AON order that exceeds the aggregate
number of Customer and Professional AON
[[Page 52561]]
orders executed on the Exchange by that member organization in a given
month. The Cancellation Fee is not assessed in a month in which fewer
than 500 electronically delivered Customer or Professional AON orders
\8\ are cancelled.
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\6\ See SR-Phlx-2010-105.
\7\ Electronically delivered orders are delivered through the
Exchange's options trading platform known as PHLX XL II.
\8\ For purposes of assessing the Cancellation Fee, Customer or
Professional AON orders from the same member organization in the
same series on the same side of the market that are executed at the
same price within a 300 second period will be aggregated and counted
as one executed option order.
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Further, simple cancels \9\ and cancel-replacement \10\ orders are
types of orders that are counted when calculating the number of
electronically delivered orders. The following order activity is exempt
from the Cancellation Fee: (i) Pre-market cancellations; \11\ (ii)
Complex Orders \12\ that are submitted electronically; (iii) unexecuted
Immediate-or-Cancel \13\ Customer orders; and (iv) cancelled Customer
orders that improved the Exchange's prevailing bid or offer (PBBO)
market at the time the Customer orders were received by the Exchange.
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\9\ The designation ``simple cancel'' indicates that an order is
to be cancelled.
\10\ A cancel-replacement order is a contingency order
consisting of two or more parts which require the immediate
cancellation of a previously received order prior to the replacement
of a new order with new terms and conditions. If the previously
placed order is already filled partially or in its entirety the
replacement order is automatically canceled or reduced by such
number. See Exchange Rule 1066(c)(7).
\11\ See Securities Exchange Act Release Nos. 53226 (February 3,
2006), 71 FR 7602 (February 13, 2006) (SR-Phlx-2005-92); and 53670
(April 18, 2006), 71 FR 21087 (April 24, 2006) (SR-PHLX-2006-21).
See also Securities Exchange Act Release No. 60046 (June 4, 2009),
74 FR 28083 (June 12, 2009) (SR-Phlx-2009-44).
\12\ 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).
\13\ An Immediate-or-Cancel (IOC) order is a limit order that is
to be executed in whole or in part upon receipt. Any portion not so
executed shall be cancelled.
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The Exchange proposes to amend its Cancellation Fee to separately
compute a Customer Cancellation Fee and a Professional AON Cancellation
Fee. Each fee will be separately aggregated and each 500 Order
Threshold will be calculated separately. Therefore, a member
organization will not be assessed a fee on the first 500 cancelled
Customer orders which meet the criteria specified above for inclusion
in the Cancellation Fee. Similarly, a member organization will not be
assessed a fee on the first 500 cancelled Professional AON orders which
meet the criteria specified above for inclusion in the Cancellation
Fee. The Exchange is not amending the method by which the Cancellation
Fee is calculated; it is simply creating two separate 500 Order
Threshold calculations. This amendment allows member organizations
additional latitude in cancelling both Customer and Professional AON
orders before incurring a fee for such cancellation.
The Exchange is also proposing to make minor technical amendments
that are grammatical in nature to the language of the Fee Schedule,
relating to the Cancellation Fee, solely for purposes of
clarification.\14\
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\14\ E-mail from Angela Saccomandi Dunn, Assistant General
Counsel, Phlx to Ronesha A. Butler, Special Counsel, Division of
Trading and Markets dated August 19, 2010.
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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 \15\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \16\ in
particular, in that it is an equitable allocation of reasonable fees
and other charges among Exchange members and other persons using its
facilities. The Exchange believes that the proposed amendments to the
Cancellation Fee are reasonable because they will continue to ease
system congestion and allow the Exchange to recover costs associated
with excessive order cancellation activity. The Exchange believes that
by separately calculating Customer and Professional AON cancellations
for purposes of the Cancellation Fee will simplify the calculation of
this fee.
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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the amendment to the Cancellation Fee is
equitable because it will afford member organizations the opportunity
to cancel additional Customer and Professional AON orders before a fee
is incurred by the member organization. The Exchange would continue to
assess the Cancellation Fee only after the 500 Order Threshold is
reached for both Customer and Professional AON cancelled orders.
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 \17\ and Rule 19b-4(f)(2) \18\ thereunder.
At any time within 60 days of the filing of such 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.
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\17\ 15 U.S.C. 78s(b)(3)(A)(ii).
\18\ 17 CFR 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-2010-113 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-2010-113. 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,\19\ 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
[[Page 52562]]
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-2010-113 and should be
submitted on or before September 16, 2010.
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\19\ The text of the proposed rule change is available on
Exchange's Web site at http://nasdaqtrader.com/micro.aspx?id=PHLXfilings, on the Commission's Web site at http://www.sec.gov, at Phlx, and at the Commission's Public Reference Room.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-21178 Filed 8-25-10; 8:45 am]
BILLING CODE 8010-01-P