[Federal Register Volume 75, Number 218 (Friday, November 12, 2010)]
[Notices]
[Pages 69486-69488]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-28454]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63252; File No. SR-Phlx-2010-150]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
Amendments to the Fee Schedule
November 5, 2010.
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 October 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 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 to amend its Fee Schedule to: (i) Delete a symbol from
the list of ``Select Symbols'' included in the ``Rebates and Fees for
Adding and Removing Liquidity in Select Symbols'' section of the Fee
Schedule; (ii) change the symbol of a Select Symbol to reflect a recent
corporate action; (iii) add the KBW Bank Index (``BKX'') to the list of
symbols in the Equity Options Fees and assess an Options Surcharge on
BKX; (iv) delete the Cancellation Fee for electronically delivered
customer orders from Section I of the Fee Schedule; and (v) amend the
fees for electronic auctions and opening process.
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 November 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.
[[Page 69487]]
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 Exchange's
Fee Schedule, specifically Section I, Rebates and Fees for Adding and
Removing Liquidity In Select Symbols, and Section II, Equity Options
Fees.
Section I
BIDU and UAUA
The Exchange is proposing to amend Section I of the Fee Schedule to
remove the symbol for Baidu Inc. (``BIDU'') from the list of Select
Symbols subject to the Rebates and Fees for Adding and Removing
Liquidity. The Exchange also proposes to change the symbol for UAL
Corporation from ``UAUA'' to ``UAL'' to reflect a recent corporate
action.\3\
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\3\ On October 1, 2010, UAL Corporation announced that as a
result of a merger between UAL Corporation and Continental Airlines,
Inc. that it would change its name and underlying symbol. UAL
Corporation is now known as United Continental Holding, Inc.
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Cancellation Fee
Currently, the Exchange assesses a Cancellation Fee on
electronically delivered customer and Professional AON orders that are
submitted by a member. The Exchange assesses $2.10 per order for each
cancelled electronically delivered customer order and $1.10 per order
for each cancelled electronically delivered AON order submitted by a
Professional in excess of the number of customer or AON orders
submitted by a Professional executed on the Exchange by a member
organization in a given month.\4\ A Cancellation Fee is not assessed in
a month in which fewer than 500 electronically delivered customer or
AON orders submitted by a Professional, respectively, are cancelled.\5\
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\4\ All customer and AON orders submitted by a Professional from
the same member organization that are executed in the same series on
the same side of the market at the same price within a 300 second
period are aggregated and counted as one executed customer or AON
option order submitted by a Professional.
\5\ A Cancellation Fee does not apply to pre-market
cancellations, Complex Orders that are submitted electronically,
unexecuted Immediate-or-Cancel (IOC) customer orders or 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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The Exchange is proposing to amend the Cancellation Fee in Section
I so that the Cancellation Fee would not apply to customer orders in
the Select Symbols.\6\ The Cancellation Fee would continue to apply to
Professional All-or-None (``AON'') orders in the Select Symbols. The
Cancellation Fee for both customer and Professional AON orders would
continue to apply for all other symbols.
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\6\ The Select Symbols are listed in Section I of the Fee
Schedule.
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The Exchange believes the Cancellation Fee is no longer required
for customers in the Select Symbols to cover the cost of system
utilization due to planned capacity investments. In addition, the
requirement to mark Professional orders has also alleviated some of the
capacity issues that resulted from customer cancel orders.\7\ The
Exchange believes that by removing the Cancellation Fee for customer
orders in the Select Symbols only will encourage trading in those
Select Symbols. The Exchange intends to evaluate the customer
Cancellation Fee for non-Select Symbols as well to determine if the
volume from cancelled customer orders contributes to the system
congestion.
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\7\ See Securities Exchange Act Release No. 61802 (April 5,
2010), 75 FR 17193 (March 30, 2010) (SR-Phlx-2010-05).
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Electronic Auction and Opening Process
The Exchange proposes to amend and clarify its Fee Schedule with
respect to electronic auctions. Currently, complex orders executed
electronically in the Exchange's Complex Order Live Auction (``COLA'')
\8\ are assessed the Fees set forth in Part B of the Fee Schedule.
Orders other than complex orders executed in electronic auctions (such
as the Exchange's Quote Exhaust and Market Exhaust Auctions) \9\, and
in the Exchange's opening process, are currently assessed the fees set
forth in Part A of the Fee Schedule. The Exchange is proposing to
assess all orders executed in any of the Exchange's electronic
auctions, and the opening process, the fees set forth in Part B of the
Fee Schedule.
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\8\ COLA is the automated Complex Order Live Auction process. A
COLA may take place upon identification of the existence of a COLA-
eligible order either: (1) Following a COOP, or (2) during normal
trading if the Phlx XL II system receives a Complex Order that
improves the cPBBO. See Exchange Rule 1080. In May 2009 the Exchange
enhanced the system and adopted corresponding rules referring to the
system as ``Phlx XL II.'' See Securities Exchange Act Release No.
59995 (May 28, 2009), 74 FR 26750 (June 3, 2009) (SR-Phlx-2009-32).
The Exchange intends to submit a separate technical proposed rule
change that would change all references to the system from ``Phlx XL
II'' to ``PHLX XL.''
\9\ Market Exhaust occurs when there are no Phlx XL II
participant (specialist, SQT or RSQT) quotations in the Exchange's
disseminated market for a particular series and an initiating order
in the series is received. In such a circumstance, the Phlx XL II
system, using Market Exhaust, will initiate a Market Exhaust auction
for the initiating order. Under Market Exhaust, any order volume
that is routed to away markets will be marked as an Intermarket
Sweep Order or ``ISO.'' See Exchange Rule 1082. In May 2009 the
Exchange enhanced the system and adopted corresponding rules
referring to the system as ``Phlx XL II.'' See Securities Exchange
Act Release No. 59995 (May 28, 2009), 74 FR 26750 (June 3, 2009)
(SR-Phlx-2009-32). The Exchange intends to submit a separate
technical proposed rule change that would change all references to
the system from ``Phlx XL II'' to ``PHLX XL.''
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BKX
The Exchange is proposing to add BKX to the list of symbols that
are subject to: (i) The fees set forth in Section II, and (ii) the
options surcharge.\10\ The Exchange proposes to assess a $.10 per
contract Option Surcharge on Specialists \11\, Registered Option
Traders \12\, Streaming Quote Trader \13\, Remote Streaming Quote
Trader \14\, Broker-Dealers and Firms. The Exchange believes that the
addition of BKX will encourage order flow to the Exchange.
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\10\ This footnote contained an inaccuracy and was deleted. See
E-mail from Angela Saccomandi Dunn, Assistant General Counsel, Phlx
to Ronesha A. Butler, Special Counsel, Division of Trading and
Markets (``Division''), Commission dated November 2, 2010.
\11\ A Specialist is an Exchange member who is registered as an
options specialist pursuant to Rule 1020(a).
\12\ A Registered Option Trader or ROT is defined in Exchange
Rule 1014(b) as a regular member or a foreign currency options
participant of the Exchange located on the trading floor who has
received permission from the Exchange to trade in options for his
own account. A ROT includes a SQT, a RSQT and a Non-SQT, which by
definition is neither a SQT or a RSQT. See Exchange Rule 1014 (b)(i)
and (ii).
\13\ A Streaming Quote Trader or SQT 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.
\14\ A Remote Streaming Quote Trader or RSQT 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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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 November 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 \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.
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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(4).
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The removal of one symbol from the Fee Schedule regarding Rebates
and
[[Page 69488]]
Fees for Adding and Removing Liquidity will apply to all categories of
participants in the same manner. Also, the amendment to the UAUA symbol
is for ease of reference in identifying symbols.
The Exchange believes that the proposed amendments to the customer
Cancellation Fee, with respect to Select Symbols, are reasonable
because they are no longer required to recover costs associated with
excessive order cancellation activity. The Exchange believes that the
proposed rule change will enable the Exchange to determine the impact,
if any, on system capacity when there is no fee to cancel certain order
types. The Exchange believes that there should not be increased system
congestion as a result of removing the customer Cancellation Fee in the
Select Symbols. The Exchange will assess the impact to the system after
the removal of the fee to determine if the number of cancellation does
not once again increase. The Exchange removed the customer Cancellation
Fee only in Select Symbols to make such a determination.
The Exchange believes that the Cancellation Fee is still necessary
with respect to Professional AON orders because those orders are
treated as customer orders for purposes of priority. Member
organizations must indicate whether orders are for Professionals. The
Exchange believes that this requirement to mark an order as
Professional has shifted the source of the system congestion from the
customer orders to the Professional AON orders. By continuing to assess
a Cancellation Fee for Professional AON orders in all symbols will
continue to ease system congestion and allow the Exchange to recover
costs associated with excessive order cancellation activity.
The Exchange's proposal to assess all electronic auctions and the
opening process the fees in Part B will simplify the Fee Schedule so
that all participants will equally be assessed the complex order fees.
The fees in Part B are reasonable because they are equal to or lower
than the fees currently assessed on the various market participants.
Customers will receive a higher rebate as a result of amending the
fees.\17\
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\17\ The Commission notes that firms and broker-dealers will
also receive rebates under the proposed Fee Schedule.
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The Exchange believes that assessing a $.10 Options Surcharge on
BKX and adding BKX to Section II, Equity Options, is equitable since it
is similar to option surcharges \18\ assessed by the International
Securities Exchange, LLC (``ISE'') \19\ and NYSEArca, Inc. (``NYSE
Arca'') \20\.
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\18\ The Exchange revised the text to more accurately describe
which Phlx fees were similar to ISE and NYSE Arca fees. See E-mail
from Angela Saccomandi Dunn, Assistant General Counsel, Phlx to
Ronesha A. Butler, Special Counsel, Division, Commission dated
November 2, 2010.
\19\ See ISE's Schedule of Fees.
\20\ See NYSE Arca's Fee Schedule.
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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.\21\ 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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\21\ 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-2010-150 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-2010-150. 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,\22\ 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 website
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-2010-150 and should be submitted on or before December 3, 2010.
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\22\ 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.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-28454 Filed 11-10-10; 8:45 am]
BILLING CODE 8011-01-P