[Federal Register Volume 76, Number 63 (Friday, April 1, 2011)]
[Notices]
[Pages 18274-18276]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-7730]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64137; File No. SR-Phlx-2011-37]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX LLC Relating
to Complex Order Fees
March 28, 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 March 21, 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 Complex Order \3\ Fees in
Section I of its Fee Schedule titled Rebates and Fees for Adding and
Removing Liquidity in Select Symbols.
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\3\ A Complex Order is any order involving the simultaneous
purchase and/or sale of two or more different options series in the
same underlying security, priced at a net debit or credit based on
the relative prices of the individual components, for the same
account, for the purpose of executing a particular investment
strategy. Furthermore, a Complex Order can also be a stock-option
order, which is an order to buy or sell a stated number of units of
an underlying stock or ETF coupled with the purchase or sale of
options contract(s). See Exchange Rule 1080, Commentary .08(a)(i).
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While changes to the Fee Schedule pursuant to this proposal are
effective upon filing, the Exchange has designated these changes to be
operative on April 1, 2011.
The text of the proposed rule change is available on the Exchange's
Website 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.
[[Page 18275]]
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 Section I, Part
B of the Exchange's Fee Schedule, titled ``Complex Order'' to pay a
Customer Complex Order Rebate for Adding Liquidity of $0.25 per
contract in certain symbols, specifically options overlying: (i)
Standard and Poor's Depositary Receipts/SPDRs (``SPY''); \4\ (ii) the
PowerShares QQQ Trust (``QQQQ'')[reg]; and Apple, Inc. (AAPL), in order
to attract additional Customer order flow in those symbols.
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\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.
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Currently, the Exchange pays a $0.24 per contract Customer Complex
Order Rebate for Adding Liquidity in all Select Symbols.\5\ The
Exchange is proposing to pay a $0.25 per contract Rebate for Adding
Liquidity for Customer Complex Orders in only the following symbols:
SPY, QQQQ and AAPL. Other market participants would not be entitled to
the Rebate for Adding Liquidity.\6\ The Exchange would continue to pay
Customers a rebate of $0.24 per contract for transacting a Customer
Complex Order in all other Select Symbols, except SPY, QQQ and AAPL
which would receive the $0.25 per contract rebate.
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\5\ A list of all symbols subject to the Rebates and Fees for
Adding and Removing Liquidity are listed in Section I of the
Exchange's Fee Schedule and titled ``Select Symbols.''
\6\ The only market participant that receives a Rebate for
Adding Liquidity for Complex Orders today is a Customer.
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The Exchange does not propose to amend the fees in Section I, Part
A titled ``Single contra-side order.''
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \7\ in general, and furthers
the objectives of Section 6(b)(4) of the Act \8\ in particular, in that
it is an equitable allocation of reasonable fees and other charges
among Exchange members. The Exchange also believes that there is an
equitable allocation of reasonable rebates among Exchange members.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that it is reasonable to only pay a Rebate
for Adding Liquidity to Customers because this Customer rebate would
attract Customer order flow to the Exchange for the benefit of all
market participants. The Exchange believes that the proposal is
equitable because by paying a Rebate for Adding Liquidity to Customers,
all market participants would benefit from the increased liquidity
which increased Customer order flow would bring to the Exchange.
Further, the Exchange believes that it is reasonable to pay a
different rebate for transacting equity options in certain symbols.
NYSE Arca, Inc. (``NYSE Arca'') pays an additional $.05 per contract
credit above the stated post liquidity credit for electronic
transactions in options overlying SPY, C, BAC, QQQQ, AAPL, IWM, XLF,
GLD, EEM, GE, UNG, FAZ, DIA, GDX, and USO which are referred to as the
``premium tier.'' \9\ The Exchange is proposing to pay different
rebates for different symbols similar to the manner in which NYSE Arca
pays an additional contract credit in certain symbols.
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\9\ See NYSE Arca's Fee Schedule.
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The Exchange believes that its proposal to pay a higher rebate for
transactions in equity options in SPY, QQQQ and AAPL, as compared to
the other Select Symbols, is equitable because the Exchange would
uniformly pay the same rebates for all Customer Complex Orders in these
three symbols.
The Exchange operates in a highly competitive market comprised of
nine U.S. options exchanges in which sophisticated and knowledgeable
market participants can readily send order flow to competing exchanges
if they deem fee levels at a particular exchange to be excessive. The
Exchange believes that the Complex Order fees and rebates it assesses
must be competitive with fees and rebates assessed in place on other
exchanges. The Exchange believes that this competitive marketplace
impacts the fees and rebates present on the Exchange today and
influences the proposals set forth above.
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.\10\ 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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\10\ 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-2011-37 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-2011-37. 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
[[Page 18276]]
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 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-2011-37 and should be submitted on or before April 22, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-7730 Filed 3-31-11; 8:45 am]
BILLING CODE 8011-01-P