[Federal Register Volume 76, Number 41 (Wednesday, March 2, 2011)]
[Notices]
[Pages 11551-11553]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-4688]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63957; File No. SR-Phlx-2011-20]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX LLC Relating
to Dividend and Merger Strategies
February 24, 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 February 14, 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, 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 amend its Fee Schedule to clarify the
definitions of dividend and merger strategies in Section II of its Fee
Schedule titled, ``Equity Options Fees.''
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 clarify the
definitions of dividend and merger strategies in Section II of the Fee
Schedule titled ``Equity Options Fees,'' so that the applicability of
equity option transaction charges and caps \3\ are clear to members.
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\3\ Equity options transaction charges for Specialists,
Registered Options Traders, Streaming Quote Traders, Remote
Streaming Quote Traders, Firms and Broker-Dealers are capped at
$1,000 for dividend, merger and short stock interest strategies
executed on the same trading day in the same options class when such
members are trading in their own proprietary accounts. Equity option
transaction charges for dividend, merger and short stock interest
strategies combined are capped at $25,000 per member organization
per month when such members are trading in their own proprietary
accounts.
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The Exchange provides a definition of a dividend strategy in
Section II of its Fee Schedule. The Exchange defines a dividend
strategy, along with other strategies, to provide members with
information necessary to calculate the combined fee cap on equity
option transaction charges for dividend, merger and short stock
interest strategies. The Exchange defines a dividend strategy as
follows ``* * *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.''
[[Page 11552]]
The Exchange proposes to amend this dividend strategy definition to
provide clarity with respect to the text ``prior to the date.'' The
Exchange proposes to amend the definition to state, ``transactions done
to achieve a dividend arbitrage involving the purchase, sale and
exercise of in-the-money options of the same class, executed
immediately prior to the date on which the underlying stock goes ex-
dividend.'' The Exchange believes that this language would clarify the
timing of such a dividend strategy. The Exchange is proposing to make
clear that such transactions must occur immediately prior to the date
on which the underlying stock goes ex-dividend to meet the definition
of a dividend strategy. The Exchange would interpret the proposed term
``immediately'' to mean the first business day prior to the date on
which the underlying stock goes ex-dividend.
Similarly, the Exchange provides a definition of a merger strategy
in Section II of its Fee Schedule. The Exchange defines a merger
strategy, along with other strategies, to provide members with
information necessary to calculate the combined fee cap on equity
option transaction charges for dividend, merger and short stock
interest strategies. The Exchange defines a merger strategy as follows
``* * *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.''
The Exchange proposes to amend this merger strategy definition to
provide clarity with respect to the text ``prior to the date.'' The
Exchange proposes to amend the definition to state, ``transactions done
to achieve a merger arbitrage involving the purchase, sale and exercise
of options of the same class and expiration date, executed immediately
prior to the date on which shareholders of record are required to elect
their respective form of consideration, i.e., cash or stock.'' The
Exchange believes that this language would clarify the timing of such a
merger strategy. The Exchange is proposing to make clear that such
transactions must occur immediately prior to the date on which the
shareholders of record are required to elect their respective form of
consideration to meet the definition of a merger strategy. The Exchange
would interpret the proposed term ``immediately'' to mean the first
business day prior to the date on which shareholders of record are
required to elect their respective form of consideration.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \4\ in general, and furthers
the objectives of Section 6(b)(4) of the Act \5\ 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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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that it is reasonable to amend the
definitions of dividend and merger strategies to provide members with a
definition that is clear and unambiguous. In addition, the Exchange
believes that the amended definitions would provide members clear
guidance on the applicability of the equity option transaction charges
and the available caps.
The Exchange believes that the proposed amendments are equitable
because the proposed new definitions would apply equally to all members
transacting dividend or merger strategies. The Exchange would uniformly
apply the definitions to all members who transacted such dividend and/
or merger strategies when assessing equity option transaction charges
and applying caps.
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.\6\ 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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\6\ 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-2011-20 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-2011-20. 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 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 offices 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-2011-20, and should
[[Page 11553]]
be submitted on or before March 23, 2011.
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\7\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\7\
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-4688 Filed 3-1-11; 8:45 am]
BILLING CODE 8011-01-P