[Federal Register Volume 75, Number 48 (Friday, March 12, 2010)]
[Notices]
[Pages 11967-11970]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-5317]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61665; File No. SR-Phlx-2010-25]
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change, as Modified
by Amendment No. 2, Relating to Reestablishing Certain Fees
March 5, 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 February 22, 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. On March 3, 2010, the Exchange filed Amendment No. 1 to the
proposed rule change, and on March 4, 2010, the Exchange withdrew
Amendment No. 1 to the proposed rule change. On March 4, 2010, the
Exchange filed Amendment No. 2 to the proposed rule change.\3\ The
Commission is publishing this notice to solicit comments on the
proposed rule change, as modified by Amendment No. 2, from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Amendment No. 2 updates the text of the proposed fee
schedule to indicate certain text from a separate prior filing that
was abrogated. See Securities Exchange Act Release No. 61547
(February 19, 2010), 75 FR 8762 (February 25, 2010) (concerning SR-
Phlx-2009-104).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to: (i) Decrease options transaction charges
for ROTs to $.21 per contract; (ii) eliminate the $.05 per contract fee
for Standard and Poor's Depositary Receipts/SPDRs (``SPY'') \4\ equity
options that are directed to specialists, Streaming Quote Traders
(``SQTs'') \5\ and Remote Streaming Quote Traders (``RSQTs'') \6\ by a
member or member organization and are executed electronically as well
and the Directed Specialists, SQTs and RSQTs charge of $0.01 per
contract fee for Complex Orders in equity options that are directed to
them by an Order Flow Provider and executed electronically; (iii)
eliminate the monthly 4.5 million contracts (the ``Volume Threshold'')
for ROTs and specialists; (iv) establish a $750,000 monthly cap on
equity options transactions executed by ROTs or specialists (``Monthly
Cap''); (v) increase the Firm equity option transaction charge from
$.24 to $.25 and increase the Firm Related Equity Option Cap from
$75,000 to $85,000; (vi) increase Index Options transaction charges
from $.24 to $.30; (vii) eliminate the SQT and RSQT permit credits;
(viii) eliminate the permit fee structure and instead implement a
$1,000 permit fee, regardless of classification; (ix) eliminate the
Other Permit Holders fee category; (x) increase the Trading Floor
Personnel Registration Fee from $50 to $100; (xi) increase the Order
Entry Port from $250 to $500 and only charge per mnemonic instead of
per mnemonic per port; (xii) amend the SQF Port Fee to assess a $500
per month per SQF port in lieu of the existing structure of $250 for
the first five ports and $1000 for additional port thereafter and also
rename the SQF Port Fee as the ``Active SQF Port Fee''; (xiii)
eliminate the $0.02 per contract SQF Port Fee credit; (xiv) eliminate
references to Pilot FCOs; and (xv) eliminate and amend corresponding
endnotes related to amendments indicated herein and make other
clarifying amendments.
---------------------------------------------------------------------------
\4\ SPY options are based on the SPDR exchange-traded fund
(``ETF''), which is designed to track the performance of the S&P 500
Index.
\5\ An SQT is an Exchange Registered Options Trader (``ROT'')
who has received permission from the Exchange to generate and submit
option quotations electronically through an electronic interface
with AUTOM via an Exchange approved proprietary electronic quoting
device in eligible options to which such SQT is assigned. See
Exchange Rule 1014(b)(ii)(A).
\6\ An RSQT is 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. An RSQT may only submit such quotations
electronically from off the floor of the Exchange. See Exchange Rule
1014(b)(ii)(B).
---------------------------------------------------------------------------
The Exchange previously filed a proposed rule change that contained
most of the fees mentioned herein.\7\ This proposed rule change, SR-
Phlx-2009-104, was subsequently abrogated by the Commission on February
19, 2010.\8\ With respect to SR-Phlx-2009-104, the following fee was at
issue and is abrogated pursuant to the Abrogation Order: a $.05 per
contract fee for equity options that are directed to specialists, $.05
per contract fee for SPY equity options that are directed to
specialists, SQTs, and RSQTs by a member or member organization and are
executed electronically. The purpose of this filing
[[Page 11968]]
is to reestablish the remainder of the fees contained in SR-Phlx-2009-
104.
---------------------------------------------------------------------------
\7\ See Securities Exchange Act Release No. 61337 (January 12,
2010), 75 FR 2905 (January 19, 2010) (SR-Phlx-2009-104).
\8\ See Securities Exchange Release No. 61547 (February 19,
2010) (``Abrogation Order'').
---------------------------------------------------------------------------
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 update the Exchange's
fee schedules by adopting new fees, amending existing fees and deleting
fees and text that are no longer deemed necessary. The Exchange
previously filed a proposed rule change that contained most of the fees
mentioned herein.\9\ This proposed rule change, SR-Phlx-2009-104, was
subsequently abrogated by the Commission on February 19, 2010.\10\ With
respect to SR-Phlx-2009-104, the following fee was at issue and is
abrogated pursuant to the Abrogation Order: A $.05 per contract fee for
equity options that are directed to specialists, $.05 per contract fee
for SPY equity options that are directed to specialists, SQTs, and
RSQTs by a member or member organization and are executed
electronically. The purpose of this filing is to reestablish the
remainder of the fees contained in SR-Phlx-2009-104.
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 61337 (January 12,
2010), 75 FR 2905 (January 19, 2010) (SR-Phlx-2009-104).
\10\ See Securities Exchange Release No. 61547 (February 19,
2010) (``Abrogation Order'').
---------------------------------------------------------------------------
Equity Options, Sector Index Options Fees and U.S. Dollar-Settled
Foreign Currency Option Fees
The Exchange proposes to amend the options transaction charge of
$.22 for ROTs and decrease that fee to $.21 per contract side, similar
to the rate charged to specialists. Also, the Exchange proposes to
eliminate a $.05 per contract fee for SPY equity options and the
similar charge of $0.01 per contract fee for Complex Orders in equity
options that are directed to specialists, SQTs and RSQTs by a member or
member organization and are executed electronically in lieu of the
existing Registered Options Trader (on-floor) and specialist equity
options transaction fees.\11\ With the elimination of this fee,
specialists, SQTs and RSQTs that receive directed orders in SPY equity
options will instead be assessed the above referenced $.21 per contract
side for ROTs and specialists. The Exchange believes the $.05 per
contract fee for SPY equity options that are directed to specialists,
SQTs and RSQTs by a member or member organization and are executed
electronically is no longer necessary to remain competitive for SPY
options order flow.
---------------------------------------------------------------------------
\11\ See Securities and Exchange Release Act No. 60587 (August
28, 2009), 74 FR 46290 (September 8, 2009) (SR-Phlx-2009-73).
---------------------------------------------------------------------------
The Exchange provides a discount for ROTs (on-floor) and
specialists that exceed 4.5 million contracts in a given month (the
``Volume Threshold'') by assessing $ 0.01 per contract on contract
volume above the Volume Threshold instead of the applicable options
transaction charges. The Exchange proposes to eliminate the Volume
Threshold and instead establish a monthly cap for ROTs and specialists
of $750,000.\12\ The Exchange believes that by eliminating the 4.5
million contracts Volume Threshold and instead proposing a Monthly Cap,
a greater number of members will benefit from the Monthly Cap.
---------------------------------------------------------------------------
\12\ The Exchange previously amended the Monthly Cap to $750,000
and also amended the calculation of the Monthly Cap by aggregating
the trading activity of separate ROTs and specialist member
organizations if there is at least 75% common ownership between the
member organizations as reflected on each member organizations' Form
BD, Schedule A as of February 1, 2010. See Securities and Exchange
Release No. 61558 (February 22, 2010) (SR-Phlx-2010-16).
---------------------------------------------------------------------------
The Exchange also proposes to increase the Firm equity options
transaction charge from $.24 to $.25 and increase the Firm Related
Equity Option Cap from $75,000 to $85,000. Additionally, the Exchange
proposes to increase the Sector Index Options Fees for ROTs,
specialists and Firm from $.24 to $.30. The Exchange believes that
these increases will be offset by other fee amendments that are
proposed herein.
In connection with these above-referenced proposals the Exchange
proposes to delete endnotes A, B, D and 1 and amend endnote 5 in
connection with the proposed amendments specified herein. Endnotes A,
B, D and 1 are no longer necessary in light of the proposed amendments
herein. Endnote 5 is being amended to correspond with the proposed
amendments. The Exchange proposes to delete endnote 5 from the Sector
Index Options Fees, specifically the Firm Proprietary fee, as that
reference was inadvertently not removed at the time the Exchange filed
a proposed rule change eliminating the options transaction charge
associated with the sector index options in the $75,000 Firm-Related
Equity Option and Index Option Cap calculation.\13\ Also, the Exchange
proposes to delete endnote 5 from the U.S. Dollar-Settled Foreign
Currency Options Fees, specifically, the Firm Proprietary fee, as that
reference was inadvertently not removed at the time the Exchange filed
a proposed rule change redefining the firm proprietary order to exclude
U.S. Dollar-Settled Foreign Currency Option Fees from the Firm-Related
Cap.\14\
---------------------------------------------------------------------------
\13\ See Securities Exchange Act Release No. 59545 (March 9,
2009), 74 FR 11158 (March 16, 2009) (SR-Phlx-2009-20).
\14\ See Securities Exchange Act Release No. 59393 (February 11,
2009), 74 FR 7721 (February 19, 2009) (SR-Phlx-2009-12).
---------------------------------------------------------------------------
Permit Fees and Credits
The Exchange proposes to eliminate the permit credit associated
with SQT and RSQT fees. A member organization is eligible to receive a
monthly credit against the SQT fee for the number of actual permits
issued to the member organization that are utilized by the SQT.
Similarly, the RSQT member organizations' fees are subject to credits
based on the number of permits applicable to such member organization,
subject to the maximum allowable permit credit applicable to each RQST
category. The Exchange is proposing to eliminate these credits. In
connection with eliminating these credits the Exchange proposes to
amend endnote 35 and eliminate endnote 40 to reflect the elimination of
the credits. This proposal to eliminate the credit is consistent with
the Exchange's proposal to eliminate the existing permit fee structure
wherein permit holders are categorized differently and assessed
differently based on type of permit holder and number of permits held
and instead propose one permit fee of $1,000 for all permit holders.
The Exchange would therefore propose removing all other categories and
the tiered structure associated with the number of permits held and
instead assess only one fee per permit holder. The Exchange believes
that while some members may be
[[Page 11969]]
assessed a higher fee, for example an Order Flow Provider will now be
assessed $1,000 as opposed to $500, and others will be assessed a lower
fee, Floor Brokers, Specialists, ROTs, Off-Floor Traders or Market
Makers will be assessed $1,000 instead of $1,200 for the first permit
and $1,000 thereafter, overall members will be assessed equally for a
permit and no distinction will be made by category or number of
permits. The Exchange believes that this fee structure is more
equitable and therefore the credit associated with SQT and RSQTs is no
longer required. The Exchange believes that this proposal to institute
a single permit fee is simpler and treats all members alike, regardless
of classification.
Additionally, the Exchange proposes to eliminate the ``Other Permit
Holder'' category. The Other Permit Holder category was adopted for
billing purposes to address the limited situation where permit holders
did not fall under one of the existing permit fee categories. Status as
an Other Permit Holder requires that a permit holder or the member
organization for which they solely qualify has no transaction activity
for the applicable monthly billing period. Should a permit holder
actively transact business during a particular month, the highest
applicable monthly permit fee will apply to such permit holder and the
member organization for that monthly period. The ``other'' status only
applies to permit holders who solely qualify their member organization,
or in other words there is just one permit holder in that member
organization. If there is more than one permit holder in a member
organization and that permit holder does not fit within any of the
existing permit fee categories, then this ``other'' category does not
apply. Such permit holder or the member organization they solely
qualify for must apply for such ``other'' status in writing to the
Membership Department.\15\
---------------------------------------------------------------------------
\15\ See Securities Exchange Act Release No. 59641 (March 27,
2009), 74 FR 15024 (April 2, 2009) (SR-Phlx-2009-26).
---------------------------------------------------------------------------
The Exchange believes that this classification is no longer
necessary and all members should be required to pay the same permit fee
regardless of classification.\16\ Likewise the Exchange proposes to
eliminate endnote 45(b), which endnote references the Other Permit
Holder fee.
---------------------------------------------------------------------------
\16\ There are currently no members who are assessed the Other
Permit Holder fee.
---------------------------------------------------------------------------
Other Access Service, Cancellation, Membership, Regulatory and Other
Fees
The Exchange proposes to increase the Trading Floor Personnel
Registration Fee from $50 to $100. This fee is imposed on member/
participant organizations for individuals who are employed by such
member/participant organizations and who work on the Exchange's trading
floor, such as clerks, interns, stock execution clerks that handle
equity orders that are part of an options contingency order and other
associated persons, but who are not registered as members or
participants. The Exchange is increasing this fee to keep pace with
rising regulatory costs associated with its obligations to conduct
oversight on on-floor trading activities. In connection with this
proposal the Exchange proposes to amend endnote 55 to conform the
language of the endnote to this proposed fee increase.
The Exchange proposes to amend its port fees. The Exchange assesses
a monthly fee of $250.00 for the Order Entry Port Fee.\17\ The $250
monthly Order Entry Port Fee is assessed per member organization order
entry mnemonic\18\. The Exchange assesses the $250 monthly Order Flow
Port Fee on members regardless of whether the order entry mnemonic is
active\19\ during the billing month. The fee is assessed regardless of
usage, and solely on the number of order entry ports assigned to each
member organization. The Exchange proposes to increase the fee from
$250 to $500 per month per mnemonic. Also, the Exchange proposed to
modify the manner in which members are assessed the Order Entry Port
Fee to assess the fee per mnemonic instead of per mnemonic and per the
number of order entry ports. The Exchange proposes to amend the Fee
Schedule to note that the fee is assessed per mnemonic.
---------------------------------------------------------------------------
\17\ The Order Entry Port Fee is a connectivity fee assessed on
members in connection with routing orders to the Exchange via an
external order entry port. Members access the Exchange's network
through order entry ports. A member organization may have more than
one order entry port.
\18\ Order entry mnemonics are codes that identify member
organization order entry ports.
\19\ An order entry mnemonic is considered active if a member
organization sends at least one order to the Exchange using that
order entry mnemonic during the applicable billing month. See
Securities Exchange Act Release No. 58728 (October 3, 2008), 73 FR
59695 (October 9, 2008) (SR-Phlx-2008-70).
---------------------------------------------------------------------------
Additionally, the Exchange proposes to amend the SQF Port Fee to
change the name to the ``Active SQF Port Fee'' and also amend the fee
structure to eliminate the tiered structure and instead propose a
monthly fee of $500 per port. ``SQF'' stands for specialized quote feed
and is a proprietary quoting system that allows specialists, streaming
quote traders and remote streaming quote traders to connect and send
quotes into Phlx XL II, bypassing the Exchange's Auto-Quote System.\20\
The SQF port fee is assessed in connection with sending quotes to the
Exchange. The SQF port fee is assessed as follows: for the first 5
active SQF ports, a member organization would be charged $250 per port
per month and, for each additional active SQF port (over the first 5
active SQF ports), the member organization would be charged $1,000 per
port per month. Additionally, the same member organization would be
credited $0.02 per side for every option contract executed on the
Exchange in that same month (excluding executions resulting from
dividend, merger and short stock interest strategies) up to the amount
of the SQF port fees when the member organization or one of its
employees is designated as a specialist, SQT or RSQT and the
transaction is billed according to the specialist or ROT transaction
and/or comparison rates.\21\ The SQF port fee and corresponding credit
are applied per member organization.\22\
---------------------------------------------------------------------------
\20\ See Exchange Rule 1080, Commentary .01(b).
\21\ The Exchange is proposing to eliminate the SQT and RSQT
credits as proposed herein.
\22\ SQTs and RSQTs are assessed fees pursuant to the ROT rates
as SQTs and RSQTs are deemed to be ROTs. See Exchange Rule
1014(b)(ii)(A) and (B).
---------------------------------------------------------------------------
In connection with this proposal a corresponding amendment is
proposed to endnote 65 to clarify the endnote. The Exchange believes
that by billing the Order Entry Port Fee per mnemonic instead of per
mnemonic per port, member assessments will be reduced. The proposal to
amend the SQF port fee is meant to simplify the fee structure. The
Exchange believes that these increases in fees are necessary to keep
pace with escalating technology costs.
Other Amendments
The Exchange proposes to eliminate endnote E which relates to a
Pilot Program which is set to expire December 31, 2009 (``Pilot''). The
Pilot is applicable to specialists and ROTs trading certain U.S.
dollar-settled foreign currency options (``FCOs''), specifically the
Mexican peso, Swedish krona, South African rand or the New Zealand
dollar (``Pilot FCOs''). The Pilot Program allows the Exchange to waive
the applicable specialist and ROT option transaction fees for
specialists and ROTs trading Pilot FCOs.\23\ The Exchange pays a $1,700
monthly stipend (``Monthly Stipend'') per currency to each member
organization
[[Page 11970]]
acting as a specialist.\24\ As the Pilot is set to expire, the Exchange
proposes to eliminate endnote E which makes reference to the Pilot.
---------------------------------------------------------------------------
\23\ FCOs are currently traded on the Exchange under the name
PHLX World Currency Options[supreg] (``WCOs'').
\24\ See Securities Exchange Act Release No. 60392 (July 28,
2009), 74 FR 38477 (August 3, 2009) (SR-Phlx-2009-57).
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \25\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \26\ in
particular, in that it is an equitable allocation of reasonable fees
and other charges among Exchange members. Specifically, the Exchange
believes that this proposal is equitable because it would apply evenly
to ROTs and specialists transacting equity options contracts sent to
the Exchange for execution, in that any SQT or RSQT or specialist may
act as a Directed Participant and receive the $.21 per contract equity
options transaction fee. The Exchange believes that by eliminating the
Volume Threshold and instead proposing a Monthly Cap of $750,000 that
members will benefit from such a cap and this would decrease fee
assessments to member organizations and incentivize them to transact
more business on the Exchange. This also applies to the decrease from
$.22 to $.21 for ROTs in options transaction charges. The Exchange is
also increasing certain fees including the Firm fee, the Sector Index
options fees and the Trading Floor Personnel Registration fee and also
increasing the Firm Related Equity Option Cap. The Exchange believes
that other fee changes, which benefit members, will offset, to a
certain degree, these proposed increases. Specifically, the Trading
Floor Personnel Registration fee is tied to increase costs of
regulating floor members. The proposed amendments to the permit fees
will simplify the permit fee structure and assess one fee on all permit
holders. The elimination of the Other Permit category should not impact
members as this category is no longer applicable. Also, the proposed
permit fee is equitable in that all members will be required to pay the
same permit fee under the new structure. The elimination of the permit
fee credit is encompassed in the overall proposal to amend the fee
structure related to permit fees. The Exchange believes that the permit
fee credit is no longer necessary under this new permit fee proposal.
The proposed amendments to the Port fees should allow the Exchange to
keep pace with increasing technology costs. Finally, other amendments
are conforming and clarifying amendments to reflect the proposed
amendments discussed herein with respect to the explanatory endnotes.
---------------------------------------------------------------------------
\25\ 15 U.S.C. 78f(b).
\26\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
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 \27\ and paragraph (f)(2) of Rule 19b-4 \28\
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.
---------------------------------------------------------------------------
\27\ 15 U.S.C. 78s(b)(3)(A)(ii).
\28\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
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-2010-25 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-2010-25. 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 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-2010-25 and should be submitted on
or before April 2, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
---------------------------------------------------------------------------
\29\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-5317 Filed 3-11-10; 8:45 am]
BILLING CODE 8011-01-P