[Federal Register Volume 76, Number 64 (Monday, April 4, 2011)]
[Notices]
[Pages 18587-18589]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-7814]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64141; File No. SR-Phlx-2011-32]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX LLC Relating
to Inactive Nominees and Dividend and Merger Strategy Definitions
March 29, 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 24, 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 the Exchange's Fee Schedule to apply
the Trading Floor Personnel Registration Fee to Inactive Nominees.\3\
In addition, the Exchange is proposing to amend the dividend and merger
strategy text in the Exchange's Fee Schedule to add specificity to
those definitions.
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\3\ The term ``inactive nominee'' means a natural person
associated with and designated as such by a member organization and
who has been approved for such status and is registered as such with
the Membership Department. An inactive nominee shall have no rights
or privileges under a permit unless and until said inactive nominee
becomes admitted as a member of the Exchange pursuant to the By-Laws
and Rules of the Exchange. An inactive nominee merely stands ready
to exercise rights under a permit upon notice by the member
organization to the Membership Department on an expedited basis. See
Exchange Rule 1(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
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 amend the Exchange's
Fee Schedule to provide that an Inactive Nominee must pay the Trading
Floor Personnel Registration Fee in order to recover certain
administrative expenses associated with Inactive Nominees. An Inactive
Nominee's status requires additional administration because the
Inactive Nominee is also deemed a clerk for the purpose of Exchange
Rule 1090.
Pursuant to By-Law Article X, Section 12-10, to be eligible as an
Inactive Nominee, an individual must be approved as eligible to hold a
permit in accordance with the Exchange's By-Laws and Rules. An Inactive
Nominee does not have any rights or privileges of a permit holder
unless and until the Inactive Nominee becomes an effective permit
holder and all applicable Exchange fees are paid.\4\
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\4\ An Inactive Nominee is currently required to pay $500 every
6 months for the privilege of maintaining an Inactive Nominee
Status. See the Inactive Nominee Fee on the Exchange's Fee Schedule.
See also Exchange By-Law Article X, Section 12-10.
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The Inactive Nominee allows a member to have additional flexibility
in obtaining coverage on the trading floor. An Inactive Nominee stands
ready to assume a membership upon notice by the member requesting that
a specific permit be transferred intra-firm on an expedited and
temporary basis. This transfer allows an Inactive Nominee to become an
effective member of the
[[Page 18588]]
Exchange.\5\ By way of example, an Inactive Nominee would be activated
in the event of an emergency due to illness or other factors. This
would allow a member organization to have a full staff available to
conduct business on the Exchange trading floor.
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\5\ The Inactive Nominee is required to notify the Membership
Department in writing prior to the trading day on which they will
act in place of a member. The Exchange requires an Inactive Nominee
on the Exchange's trading floor to wear a badge which is provided by
the Exchange and contains identifying information. The Inactive
Nominee cannot simultaneously act as a member and a clerk on the
same day.
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An Inactive Nominee is also deemed a clerk for purposes of Exchange
Rule 1090.\6\ Rule 1090 was enacted to identify categories of persons
that are not members of the Exchange and who are not eligible to effect
transactions, but are located on the Exchange's trading floor. In order
for Rule 1090 to apply to all categories of registered persons located
on the Exchange's Options Floor that are generally not eligible to
effect transactions, Inactive Nominees are deemed to be Clerks for
purposes of that Rule.\7\
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\6\ The term ``Clerk '' means any registered on-floor person
employed by or associated with a member, member organization,
participant, or participant organization who is not a member and is
not eligible to effect transactions on the Options Floor as a
Specialist, Registered Options Trader, or Floor Broker. See Exchange
Rule 1090. For purposes of Rule 1090, an Inactive Nominee shall be
deemed a Clerk.
\7\ See Securities Exchange Act Release No. 46505 (September 17,
2002), 67 FR 60273 (September 25, 2002) (SR-Phlx-2001-104).
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Currently, the Exchange assesses a $100 per month Trading Floor
Personnel Registration Fee. This fee is imposed on member/participant
organizations for individuals who are employed by such member/
participant organizations and who work on the Exchange's trading floor,
such as clerks, interns, stock execution clerks that handle equity
orders that are part of an options contingency order and other
associated persons, but who are not registered as members or
participants. The Exchange currently does not impose the Trading Floor
Personnel Registration Fee on Inactive Nominees because an Inactive
Nominee is required to register as a member.
The Exchange is proposing to eliminate the following qualifying
language applicable to the Trading Floor Personnel Fee ``* * * but who
are not registered as members or participants.'' In addition, the
Exchange is proposing to add the following clarifying language ``[t]his
fee is not imposed on permit holders.'' The Exchange also proposes to
add a parenthetical to indicate that for purposes of the Trading Floor
Personnel Registration Fee a Clerk includes an Inactive Nominee. This
would add Inactive Nominees to the list of individuals who are employed
on the Exchange's trading floor and are subject to the Trading Floor
Personnel Registration Fee. The only participants that would not be
subject to the fee would be permit holders.
Additionally, the Exchange is proposing to amend the definitions of
dividend and merger strategies in Section II of the Fee Schedule titled
``Equity Options Fees.'' The Exchange recently amended the definitions
of dividend and merger strategy to provide clarity with respect to the
text ``prior to the date.'' \8\ The Exchange added the word
``immediately'' to both definitions to make clear that the timing of
the trigger event must occur the first business day prior to the
trigger event. For example, with respect to 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. With respect to 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. In order that the meaning
of immediately is clear, the Exchange is proposing to replace the words
``immediately'' with ``the first business day'' in both the dividend
and merger strategy definitions in Section II of the Fee Schedule.
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\8\ See SR-Phlx-2011-20.
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2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
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 and other persons using its facilities.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that applying the Trading Floor Personnel
Registration Fee to Inactive Nominees is reasonable because Inactive
Nominees are not subject to the permit fees which permit holders are
required to pay to maintain their membership. Permit holders are
required to pay a monthly Permit Fee in order to transact business at
the Exchange. Similar to clerks, interns and stock execution clerks,
Inactive Nominees do not pay a permit fee.
The Exchange believes that applying the Trading Floor Personnel
Registration Fee to Inactive Nominees is equitable because it would
uniformly apply to all inactive nominees and overall the fee would
apply to all individuals that do not maintain a permit.
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.\11\ 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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\11\ 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.
[[Page 18589]]
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-2011-32 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-2011-32. 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-2011-32, and should be submitted on or before April 25, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-7814 Filed 4-1-11; 8:45 am]
BILLING CODE 8011-01-P