[Federal Register Volume 75, Number 73 (Friday, April 16, 2010)]
[Notices]
[Pages 20021-20023]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-8684]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61863; File No. SR-Phlx-2010-54]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX, Inc. Relating
to Fees for Participation in NASDAQ OMX PSX
April 7, 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 March 31, 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. 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 adopt a new access fee applicable to
Exchange members approved for participation in PSX, to waive this fee
for a six month period, and to waive certain Exchange membership fees
for new members seeking to participate solely in PSX.
The text of the proposed rule change is available on the Exchange's
Web site at http://nasdaqomxphlx.cchwallstreet.com/NASDAQOMXPHLX/Filings, 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
In October 2008, the Exchange ceased operation of its cash equities
trading platform, XLE\3\, and since has solely operated an options
market. The Exchange plans to launch PSX, a new cash equities market to
be operated by the Exchange, in the second quarter of 2010, at a time
following effectiveness of necessary filings with the Securities and
Exchange Commission (``Commission'').
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\3\ See Securities Exchange Act Release No. 58613 (September 22,
2008), 73 FR 57181 (October 1, 2008) (SR-Phlx-2008-65).
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Membership Fees
Under the Exchange's current fee schedule, a broker-dealer applying
for Exchange membership (``Applicant'') is assessed a non-refundable
application fee of $350.00, which must be provided to the Exchange
concurrent with the membership application. An applicant that is
subsequently approved for Exchange membership is assessed an initiation
fee of $1,500.00 and in return receives an A-1 trading permit,\4\ which
allows the approved Applicant to use the trading facilities of the
Exchange. In addition to these two one-time fees, members are assessed
a permit fee of $1,000.00 per month.\5\
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\4\ See Rule 908.
\5\ A member participating in the Exchange's options market is
also assessed an account fee of $50 per month for each account
number assigned to the member in addition to the account number
provided with the permit. Account numbers are assigned by the
Exchange to options participants as a means to identify the member
in options market transactions. Members may request additional
account numbers for various business purposes. The additional
account fee will not be applicable to PSX participants as MPIDs will
be used to identify member firms' participation, not account
numbers.
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As a consequence of the Exchange's pending operation of both a cash
equities and options market, an Applicant will have the option of
applying to participate in one or both of the markets. The Exchange is
proposing to waive the application, initiation, and permit fees for
Applicants applying to participate in PSX. The proposed fee waivers
would apply to new Exchange members applying to participate solely in
PSX. The proposed fee waiver does not apply to an Applicant seeking
approval to participate solely in the options market, or to an
Applicant seeking to participate in both markets. In these cases, the
application, initiation, and permit fees, as they relate to options,
would apply. An Exchange member approved to participate in PSX would
not be assessed an application fee should it subsequently determine to
participate in the Exchange's options market, but would be charged the
one-time initiation fee and would thereafter be charged the monthly
account fee and permit fee.\6\
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\6\ PHLX notes that the majority of time and expense incurred in
reviewing an application is realized in the initial membership
application process. As a consequence, a PSX participant that
submits a subsequent application to participate on the Exchange's
options market would result in little additional expense to the
Exchange. In addition, the Exchange believes that many of the new
PSX market participants will be current Exchange options market
participants and therefore will have paid an application fee to
participate on that market. Coupled with the fact that the current
application fee set at a low level, the Exchange believes that the
fee waiver will result in a non-material loss in application fee
revenues.
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Because the Exchange proposes to waive the application, initiation,
and permit fees as an incentive to attract market participants to the
PSX, it seeks to implement the fee waivers immediately so that
Applicants seeking to participate in PSX may begin submitting
applications to the Exchange prior to the market's commencement of
operations.
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Access Services Fees
Access to PSX will be provided through the OUCH, FIX, and RASH
access protocols, with drop copies provided through the DROP protocol.
Connections to PSX will be available through extranets, direct
connection, and Internet-based virtual private networks. Prior to the
launch of the PSX, the Exchange will make the PSX trading platform
available for testing purposes, but will not charge for testing or for
access ports used for testing. After the first full six months during
which PSX operates, the Exchange will assess a fee of $400 per month
for each port pair, with an additional $200 per month charged for each
Internet port that requires additional bandwidth.\7\ The Exchange
believes these fees are reasonable as they are identical to the fees
charged by NASDAQ OMX BX (``BX'') for comparable access to its cash
equities market.\8\ The Exchange expects that the proposed fees will
eventually cover the costs associated with establishing the service,
responding to customer requests, configuring Exchange systems,
programming to user specifications, and administering the service,
among other things, and may provide the Exchange with a profit. Similar
to the membership fees discussed above, however, the Exchange will
waive access services fees until the end of the sixth calendar month of
PSX's operation as an incentive to attract market participants to the
PSX. Prior to launch, however, access ports will be available for
testing purposes.
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\7\ See the NASDAQ OMX PHLX Fee Schedule, proposed Item XII.
\8\ See BX Rule 7015.
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2. Statutory Basis
The Exchange believes that its proposal to amend its schedule of
fees is consistent with Section 6(b) of the Act \9\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \10\ in
particular, in that it provides for an equitable allocation of
reasonable fees and other charges among Exchange members. The Exchange
makes all services and products subject to its fees available on a non-
discriminatory basis to similarly situated recipients. The proposed new
access fees are structured in a manner comparable to corresponding fees
of BX already in effect, and are set at levels equal to these
comparable fees. Moreover, the proposed access fees are set at levels
that are uniform for all members. The proposed waivers of both the
access fees and certain membership fees are designed to encourage
broader participation in the proposed new market, and are appropriate
in light of the lack of certainty with respect to the start date of the
new market as well as the speed with which liquidity will develop on
it.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4).
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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
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended.
Despite its long history of operating a cash equities market, the
Exchange will effectively be entering the competitive markets for
equities trading as a start-up venture, having shuttered its cash
equities market in the fourth quarter of 2008. Accordingly, its fees
must be set at a level that will promote competition in the markets, or
potential users of its services will simply continue to obtain services
from the Exchange's multiple competitors. In waiving certain fees
associated with membership in the new market, the Exchange believes
that market participants will be attracted to the market, which will
help ensure market depth and liquidity. In its discretion, the Exchange
may determine to eliminate the proposed membership fee waivers, in part
or altogether, through a subsequent rule change.
The Exchange is also proposing a new fee for access to the new
market and to waive this fee for a limited period to attract market
participants. The fee is based on the fees assessed by BX for access to
its market. Accordingly, the Exchange believes that the proposed new
access fee is fairly priced based on its similarity to the fee assessed
for access to BX. As a consequence, the Exchange believes that the
proposed fee will not unduly place a burden on competition. The
Exchange notes that, if it sets fees at inappropriately high levels,
market participants will avoid using the Exchange.
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 proposed rule change establishes or changes a due,
fee, or other charge applicable only to a member pursuant to Section
19(b)(3)(A)(ii) of the Act \11\ and Rule 19b-4(f)(2) \12\ thereunder.
Accordingly, the proposal will take effect upon filing with the
Commission.
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\11\ 15 U.S.C. 78s(b)(3)(A)(ii).
\12\ 17 CFR 240.19b-4(f)(2).
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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.
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-2010-54 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-2010-54. 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
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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-2010-54 and should be submitted on
or before May 7, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-8684 Filed 4-15-10; 8:45 am]
BILLING CODE 8011-01-P