[Federal Register Volume 76, Number 13 (Thursday, January 20, 2011)]
[Notices]
[Pages 3682-3684]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-1081]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63712; File No. SR-Phlx-2011-01]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
a Fee Cap on Dividend, Merger and Short Stock Interest Strategies
January 12, 2011.
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 January 3, 2011, NASDAQ OMX PHLX LLC (``Phlx'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the combined fee cap on equity
option transaction charges on dividend,\3\ merger,\4\ and short stock
interest \5\ strategies.
---------------------------------------------------------------------------
\3\ For purposes of this proposal, the Exchange defines a
``dividend strategy'' as transactions done to achieve a dividend
arbitrage involving the purchase, sale and exercise of in-the-money
options of the same class, executed prior to the date on which the
underlying stock goes ex-dividend. See e.g., Securities Exchange Act
Release No. 54174 (July 19, 2006), 71 FR 42156 (July 25, 2006) (SR-
Phlx-2006-40).
\4\ For purposes of this proposal, the Exchange defines a
``merger strategy'' as transactions done to achieve a merger
arbitrage involving the purchase, sale and exercise of options of
the same class and expiration date, executed prior to the date on
which shareholders of record are required to elect their respective
form of consideration, i.e., cash or stock.
\5\ For purposes of this proposal, the Exchange defines a
``short stock interest strategy'' as transactions done to achieve a
short stock interest arbitrage involving the purchase, sale and
exercise of in-the-money options of the same class.
---------------------------------------------------------------------------
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.
[[Page 3683]]
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 amend the combined
fee cap on equity option transaction charges for dividend, merger and
short stock interest strategies (``Cap''). The Exchange believes that
offering a Cap for members and member organizations would equalize the
utilization of the Cap while continuing to attract additional liquidity
and order flow to the Exchange and allow the Exchange to remain
competitive with other options exchanges in connection with these types
of options strategies.
Currently, the Exchange has a $25,000 Cap per member organization
\6\ per month when such members \7\ are trading for their own
proprietary account. The Exchange proposes to establish a different Cap
for members and assess the greater of the two Caps, a member or member
organization Cap. The Exchange proposes to allow a member an alternate
$10,000 per month Cap per member.
---------------------------------------------------------------------------
\6\ See NASDAQ OMX PHLX Rule 1(o) which states that a ``member
organization'' shall mean a corporation, partnership (general or
limited), limited liability partnership, limited liability company,
business trust or similar organization, transacting business as a
broker or a dealer in securities and which has the status of a
member organization by virtue of (i) admission to membership given
to it by the Membership Department pursuant to the provisions of
Rules 900.1 or 900.2 or the By-Laws or (ii) the transitional rules
adopted by the Exchange pursuant to Section 12-12 of the By-Laws.
References to officer or partner, when used in the context of a
member organization, shall include any person holding a similar
position in any organization other than a corporation or partnership
that has the status of a member organization.
\7\ See NASDAQ OMX PHLX Rule 1(n) which states that a ``member''
shall mean a permit holder which has not been terminated in
accordance with the By-Laws and Rules of the Exchange.
---------------------------------------------------------------------------
By way of example, if a member organization had five members who
were transacting equity options, specifically dividends, mergers and
short stock interest strategies, at the end of the month the Exchange
would assess the greater of $50,000 per month ($10,000 per member) or
$25,000 per month. In this case the member organization would be
assessed up to the Cap of $50,000. If on the other hand a member
organization had one member who was transacting equity options,
specifically dividends, mergers and short stock interest strategies, at
the end of the month the Exchange would assess up to the Cap of $25,000
per month.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \8\ in general, and furthers
the objectives of Section 6(b)(4) of the Act \9\ in particular, in that
it is an equitable allocation of reasonable fees and other charges
among Exchange members and other persons using its facilities. The
Exchange believes that the Cap is reasonable and relates to the volume
transacted by a member organization. The Exchange believes this fee
structure allows the Exchange to assess fees and apply the Cap more
equitably as between smaller and larger member organizations at the
Exchange.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f(b).
\9\ 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) of the Act \10\ and paragraph (f)(2) of Rule 19b-4
thereunder,\11\ because it establishes a due, fee, or other charge
imposed by the Exchange.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
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.
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-2011-01 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-2011-01. 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 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
[[Page 3684]]
should refer to File Number SR-Phlx-2011-01 and should be submitted on
or before February 10, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
---------------------------------------------------------------------------
\12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-1081 Filed 1-19-11; 8:45 am]
BILLING CODE 8011-01-P