[Federal Register Volume 75, Number 200 (Monday, October 18, 2010)]
[Notices]
[Pages 63878-63880]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-26175]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63082; File No. SR-Phlx-2010-130]
Self-Regulatory Organizations; Self-Regulatory Organizations;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change by
NASDAQ OMX PHLX LLC Relating to PIXL Fees
October 13, 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 September 29, 2010, NASDAQ OMX PHLX LLC (``Phlx'' or the
``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 to amend its Fee Schedule to add pricing
applicable to members utilizing the Exchange's
[[Page 63879]]
price improvement mechanism known as Price Improvement XL or
(PIXL\SM\).
While changes to the Fee Schedule pursuant to this proposal are
effective upon filing, the Exchange has designated these changes to be
operative upon the approval and effectiveness of SR-Phlx-2010-108.\3\
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\3\ SR-Phlx-2010-108 is a proposal to adopt Rule 1080(n) to
establish a price-improvement mechanism.
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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 assess fees for
orders known as PIXL Orders \4\ and Initiating Orders \5\ according to
the following categories: Customers, Directed Participants,\6\
Specialists,\7\ Streaming Quote Traders (``SQT''),\8\ Remote Streaming
Quote Traders (``RSQT''),\9\ Firms and Broker-Dealers. All options
traded on the Exchange are eligible for PIXL.
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\4\ ``A member may electronically submit for execution an order
it represents as agent on behalf of a public customer, broker-
dealer, or any other entity (``PIXL Order'') against principal
interest or against any other order (except as provided in sub-
paragraph (n)(i)(E) below) it represents as agent (``Initiating
Order'') provided it submits the PIXL order for electronic execution
into the PIXL Auction (``Auction'') pursuant to Rule 1080. See
Exchange Rule 1080(n) as proposed in SR-Phlx-2010-108.
\5\ See footnote 4.
\6\ See Exchange Rule 1080(l), ``* * * The term `Directed
Specialist, RSQT, or SQT' means a specialist, RSQT, or SQT that
receives a Directed Order.'' A Directed Participant has a higher
quoting requirement as compared with a specialist, SQT or RSQT who
is not acting as a Directed Participant. See Exchange Rule 1014.
\7\ A Specialist is an Exchange member who is registered as an
options specialist pursuant to Rule 1020(a).
\8\ A Streaming Quote Trader is defined in Exchange Rule
1014(b)(ii)(A) as an ROT who has received permission from the
Exchange to generate and submit option quotations electronically
through AUTOM in eligible options to which such SQT is assigned.
\9\ A Remote Streaming Quote Trader is defined Exchange Rule in
1014(b)(ii)(B) as an ROT that is a member or member organization
with no physical trading floor presence who has received permission
from the Exchange to generate and submit option quotations
electronically through AUTOM in eligible options to which such RSQT
has been assigned.
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Initiating Order Trades Against the PIXL Order
The Exchange proposes to assess a fee of $0.05 per contract when an
Initiating Order executes against a PIXL Order in the symbols listed in
Section I, the Fees and Rebates for Adding and Removing Liquidity in
Select Symbols \10\ (known as ``Select Symbols''), and the symbols
defined in Section II \11\ (``Section II Symbols''). The Exchange
proposes to only assess the fees listed in Section II of the Fee
Schedule for the PIXL Order when the PIXL Order trades against the
Initiating Order in Section II Symbols and the Select Symbols. For
example, a member or member organization would be assessed $0.00 for
Customer transactions.
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\10\ The Fees and Rebates for Adding and Removing Liquidity in
Select Symbols are listed in Section I of the Fee Schedule.
\11\ An equity option includes exchange-traded fund share
(``ETF''), Holding Company Depositary Receipt (``HOLDR''), Russell
2000(R) Index (the ``Full Value Russell Index'' or ``RUT''), options
on the one-tenth value Russell 2000[supreg] Index (the ``Reduced
Value Russell Index'' or ``RMN''), options on the Nasdaq 100 Index
traded under the symbol NDX (``NDX'') and options on the one-tenth
value of the Nasdaq 100 Index traded under the symbol MNX (``MNX'').
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For the symbols assessed according to Section III \12\ of the Fee
Schedule, titled Sector Index Options Fees and U.S Dollar-Settled
Foreign Currency (``WCO'') Options Fees, the transaction fees described
in Section III would apply to both the Initiating Order and the PIXL
Order for all executions.
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\12\ The symbols assessed fees according to Section III are BKX,
FPX, HGX, OSX, SOX, UTY, and XAU (``Sector Index Options'') and U.S.
Dollar-Settled Foreign Currency Options (``WCOs'').
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PIXL Order Fees When the PIXL Order Does Not Trade Against the
Initiating Order Select Symbols
Select Symbols: Section I
With respect to executions in Select Symbols, where the PIXL Order
is not trading against the Initiating Order, the PIXL Order would be
assessed the Fee for Removing Liquidity when that order is executed
against a resting contra-side order or quote that was present upon
initial receipt of the PIXL Order. The resting contra-side order or
quote would receive the Rebate for Adding Liquidity. Additionally, the
PIXL Order would receive the Rebate for Adding Liquidity when that
order is executed against contra-side order(s) that respond to the PIXL
auction broadcast message, as well as when executed against contra-side
quotes and unrelated orders on the PHLX book that arrived after the
PIXL auction was initiated. The PIXL auction responders, contra-side
order(s) and quote(s) would be assessed the Fee for Removing Liquidity.
For the symbols assessed according to Section III of the Fee
Schedule, titled Sector Index Options Fees and U.S Dollar-Settled
Foreign Currency (``WCO'') Options Fees, the transaction fees described
in Section III would apply to both the Initiating Order and the PIXL
Order for all executions.
Equity Options: Section II
With respect to executions in Section II Equity Options,\13\ the
PIXL Order would be assessed the appropriate Equity Option Fee in
Section II of the Fee Schedule. The contra-side order or quote would be
assessed the appropriate Equity Option Fee listed on the Fee Schedule
as well. All other Equity Options Fees in Section II would apply as
appropriate, including but not limited to Payment for Order Flow.
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\13\ This includes all Symbols that are not specifically Select
Symbols as listed in Section I of the Fee Schedule.
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Finally, the Exchange is proposing to relocate the Flex Equity
Option Fees from Section IV, FLEX Equity Options, of the Fee Schedule
to Section II, Equity Options, and consolidate those fee with other
Equity Option Fees for the sake of clarity. Section IV will now contain
the proposed PIXL fees and is proposed to be titled ``PIXL Pricing.''
While changes to the Fee Schedule pursuant to this proposal are
effective upon filing, the Exchange has designated these changes to be
operative upon the approval and effectiveness of SR-Phlx-2010-108.\14\
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\14\ SR-Phlx-2010-108 is a proposal to adopt Rule 1080(n) to
establish a price-improvement mechanism.
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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. The Exchange believes that
the fee proposal
[[Page 63880]]
is both equitable and reasonable for the reasons listed hereafter.
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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(4).
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The proposed fees are consistent with the equitable price
differentials that exist today at all option exchanges. For example,
the fees and rebates assessed by the Exchange are similar, and in some
cases less than, the fees and rebates assessed by the Boston Options
Exchange Group, LLC (``BOX'') \17\ and the International Securities
Exchange (``ISE'') \18\ for orders executed in a price improvement
mechanism. For example a BOX participant could be assessed total fees
of $0.35 per contract as the price improvement period (``PIP'')
initiator and receive a rebate for their customer PIP order of $0.25
per contract (in this example the net fee charged the BOX participant
would be $0.10), whereas the PIP responder could be assessed a fee of
$0.50 per contract. This is a differential of $0.40 per contract
between two BOX participants for participating in the PIP auction,
which is equal to or less than the differentials that exist in the
Exchange's proposal. With respect to ISE, the Exchange pays a rebate
for certain PIXL executions, which is similar to the $0.15 rebate ISE
pays for its price improvement mechanism.
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\17\ See Securities and Exchange Act Release No. 62632 (August
3, 2010), 75 FR 47869 (August 3, 2010) (SR-BX-2010-049).
\18\ See the ISE schedule of fee as of August 2, 2010.
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The Exchange operates in a fiercely competitive market place in
which Exchange members and member organizations are highly
sophisticated and highly knowledgeable. As is the case, members and
member organizations readily and swiftly direct order flow or post
liquidity to competing venues if they deem fee levels at a particular
options exchange to be excessive, unfair or unreasonable. The Exchange
believes the proposal is an equitable allocation of fees and not
unfairly discriminatory for the reasons stated above.
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.\19\ 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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\19\ 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 [email protected]. Please include
File Number SR-Phlx-2010-130 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-2010-130. 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,\20\ 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, 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-2010-130 and should be submitted on or before
November 8, 2010.
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\20\ The text of the proposed rule change is available on the
Commission's Web site at http://www.sec.gov/rules/sro.shtml.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-26175 Filed 10-15-10; 8:45 am]
BILLING CODE 8011-01-P