[Federal Register Volume 75, Number 76 (Wednesday, April 21, 2010)]
[Notices]
[Pages 20871-20873]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-9115]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61905; File No. SR-Phlx-2010-55]
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
a New Category of Fees for ``Professionals''
April 14, 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 fees for a new type of participant
called ``professional.'' \3\
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\3\ See Securities Exchange Act Release No. 61802 (March 30,
2010), 75 FR 17193 (April 5, 2010) (SR-Phlx-2010-05).
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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 operative on April 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, at the Commission's Public Reference
Room, and on the Commission's Web site at http://www.sec.gov.
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 adopt a new category
of fees, ``professional.'' The Exchange believes that the proposed fees
for professional orders will allow the Exchange to remain competitive
with other options exchanges who apply fees to professional orders.
The Exchange defines a ``professional'' as 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) \4\ (hereinafter
``Professional'').
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\4\ A Professional will be treated in the same manner as an off-
floor broker-dealer for purposes of Rules 1014(g) (except with
respect to all-or-none 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.
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The Exchange proposes to add a ``Professional'' fee category to its
transaction fees for equity options, index options and foreign currency
options. The Exchange proposes to amend Categories II, III and IV of
the Fee Schedule to assess a $0.20 transaction fee on Professional
orders in all equity option classes, a $0.35 transaction fee on
Professional orders in sector index options and a $0.30 transaction fee
on Professional orders in U.S. dollar-settled foreign currency options.
[[Page 20872]]
The Exchange is also proposing that Payment For Order Flow Fees \5\
not be assessed on Professional orders and is amending Category II of
the Fee Schedule to reflect that. The Exchange would not assess a
payment for order flow fee on professional orders, because the Exchange
believes payment for order flow fees are not required to remain
competitive with other options exchanges with respect to Professional
orders.\6\
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\5\ The Exchange currently assesses $.25 per contract for
options that are executed in the penny pilot program and $.70 for
remaining equity options. These fees are assessed for trades
resulting from either Directed or non-Directed Orders that are
delivered electronically and executed on the Exchange: Assessed on
ROTs, specialists and Directed ROTs on those trades when the
specialist unit or Directed ROT elects to participate in the payment
for order flow program.
\6\ See Securities Exchange Act Release No. 61693 (March 11,
2010), 75 FR 13175 (March 18, 2010) (SR-ISE-2010-16).
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In Category V of the Fee Schedule, the Exchange is also proposing
that Cancellation Fees \7\ not be assessed on Professional orders. The
Exchange is excluding professional orders from the computation of the
Cancellation Fee, because the Exchange does not believe that these
orders raise the types of issues that the Cancellation Fee is intended
to address.\8\
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\7\ The Exchange currently assesses $2.10 per order for each
cancelled electronically delivered customer order in excess of the
number of customer orders executed on the Exchange by a member
organization in a given month. All customer orders 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 will
be aggregated and counted as one executed customer options order.
\8\ See Securities Exchange Act Release No. 60188 (June 29,
2009), 74 FR 32986 (July 9, 2009) (SR-Phlx-2009-48).
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The Exchange also proposes to add a notation to the Routing Fees in
Category IX to indicate that Professional orders will be subject to the
Routing Fees.
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 is an equitable allocation of reasonable fees
and other charges among Exchange members. The Exchange believes that
adding Professional fees to the fees applicable to the other equity
options, sector index options and foreign currency options transaction
fees is fair and reasonable, because the proposed fees are similar to
the transaction fees applicable to broker-dealers trading on Phlx \11\
as well as fees assessed by other options exchanges. For example, CBOE
assesses a $0.20 per contract fee for professional orders in equity
options,\12\ the same as the Exchange's proposed Category II fees.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4).
\11\ The options transaction charge for firms is $.25 per
contract; see Category II of the Fee Schedule.
\12\ See Securities Exchange Act Release No. 61329 (January 11,
2010), 75 FR 2901 (January 19, 2010) (SR-CBOE-2009-101).
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With regard to the sector index options fees and foreign currency
options fees proposed for Professionals, these charges are similar to
the current transaction fees assessed on the Exchange's Registered
Options Traders pursuant to Categories III and IV of the Exchange's Fee
Schedule; and therefore, the Exchange believes the proposed fee is fair
and reasonable.
The Exchange believes that excluding Professional orders from the
computation of the Cancellation Fee will continue to fairly allocate
costs among members according to system use, which is the purpose of
cancellation fees. In addition, the Exchange will not assess
specialists, SQTs, RSQTs and ROTs a payment for order flow fee on
Professional orders, in order to compete with other options exchanges.
The Exchange also proposes to specify that Routing Fees apply to
Professional orders for purposes of clarity.
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 \13\ and paragraph (f)(2) of Rule 19b-4 \14\
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.
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\13\ 15 U.S.C. 78s(b)(3)(A)(ii).
\14\ 17 CFR 240.19b-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 No. SR-Phlx-2010-55 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 No. SR-Phlx-2010-55. 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 Phlx. 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 No. SR-Phlx-2010-55 and should be
submitted on or before May 12, 2010.
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\15\ 17 CFR 200.30-3(a)(12).
[[Page 20873]]
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-9115 Filed 4-20-10; 8:45 am]
BILLING CODE 8011-01-P