[Federal Register Volume 76, Number 76 (Wednesday, April 20, 2011)]
[Notices]
[Pages 22158-22160]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-9478]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64300; File No. SR-Phlx-2011-52]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX LLC Relating
to Rebates and Fees for Customer Complex Orders
April 14, 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 April 8, 2011, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'')
filed with the Securities and Exchange Commission (``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.
---------------------------------------------------------------------------
\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 its Complex Order \3\ Fees in
Section I of its Fee Schedule titled ``Rebates and Fees for Adding and
Removing Liquidity in Select Symbols.''
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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 11, 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, 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 amend Section I, Part
B of the Exchange's Fee Schedule, titled ``Complex Order'' to: (i) Pay
a Customer Complex Order Rebate for Adding Liquidity of $0.25 per
contract for options overlying the iShares Russell 2000 Index
(``IWM''); and (ii) waive the Customer Complex Order Fee for Removing
Liquidity for options overlying Standard and Poor's Depositary
Receipts/SPDRs (``SPY'') \4\; the PowerShares QQQ Trust
(``QQQ'')[supreg]; and Apple, Inc. (``AAPL'') [sic]. The Exchange is
proposing these amendments to the Fee Schedule in order to continue to
attract additional Customer order flow.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
Complex Order Rebate for Adding Liquidity
Currently, the Exchange pays the following Complex Order Rebates
for Adding Liquidity in the Select Symbols:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Specialist,
Customer Directed ROT, SQT and Firm Broker-dealer Professional
participant RSQT
--------------------------------------------------------------------------------------------------------------------------------------------------------
Rebate for Adding Liquidity in all Select Symbols except $0.24 $0.00 $0.00 $0.00 $0.00 $0.00
SPY, QQQ and AAPL......................................
Rebate for Adding Liquidity for SPY, QQQ and AAPL....... 0.25 0.00 0.00 0.00 0.00 0.00
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 22159]]
With respect to Complex Orders, the Exchange pays Customers a rate
of $0.25 per contract in specific Select Symbols, namely SPY, QQQ and
AAPL. The Exchange currently pays a Complex Order Customer Rebate of
$0.24 per contract for transactions that add liquidity in IWM (``IWM
Rebate'').\5\ The Exchange is proposing to change the IWM Customer
Complex Order Rebate for Adding Liquidity from $0.24 to $0.25 per
contract. The Exchange would continue to pay all other Select Symbols,
except SPY, QQQ and AAPL, a Customer Complex Order Rebate for Adding
Liquidity of $0.24 per contract. Other, non-Customer market
participants would not be paid a Complex Order Rebate for Adding
Liquidity.\6\ The Exchange believes that this increased rebate for
Customers transacting Complex Orders in options overlying IWM will
attract additional Customer order flow to the Exchange in IWM.
---------------------------------------------------------------------------
\5\ The Exchange currently also pays a $0.24 per contract
Customer Complex Order Rebate for Adding Liquidity in all Select
Symbols except SPY, QQQ and AAPL.
\6\ The only market participant that receives a Rebate for
Adding Liquidity for Complex Orders today is a Customer.
---------------------------------------------------------------------------
Complex Order Fee for Removing Liquidity
Currently, the Exchange assesses the following Complex Orders Fees
for Removing Liquidity in the Select Symbols:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Specialist,
Customer Directed ROT, SQT and Firm Broker-dealer Professional
participant RSQT
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fee for Removing Liquidity.............................. $0.25 $0.25 $0.27 $0.28 $0.35 $0.28
--------------------------------------------------------------------------------------------------------------------------------------------------------
With respect to Complex Orders, the Exchange currently assesses
Customers a Fee for Removing Liquidity of $0.25 per contract in all
Select Symbols. The Exchange is proposing to waive the Customer Complex
Order Fee for Removing Liquidity for options overlying SPY, QQQ, IWM
and AAPL. All other Select Symbols would continue to be subject to a
Customer Complex Order Fee for Removing Liquidity of $0.25 per
contract. The Exchange is not proposing to waive the Complex Order Fee
for Removing Liquidity for any other market participant.\7\ The
Exchange believes that this waiver of the Customer Complex Order Fee
for Removing Liquidity for options overlying SPY, QQQ, IWM and AAPL
will attract additional Customer order flow to the Exchange in those
Select Symbols.
---------------------------------------------------------------------------
\7\ The other non-Customer market participants would continue to
be assessed a Complex Order Fee for Removing Liquidity as noted
above.
---------------------------------------------------------------------------
The Exchange does not propose to amend the fees in Section I, Part
A titled ``Single contra-side order.'' 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 11,
2011.
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. The Exchange also believes that there is an
equitable allocation of reasonable rebates among Exchange members.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The Exchange believes that it is reasonable to pay an increased
Complex Order Rebate for Adding Liquidity to Customers in options
overlying IWM and waive the Complex Order Fee for Removing Liquidity
for Customers in options overlying SPY, QQQ, IWM and AAPL, because both
the proposed Customer rebate and waiver of the fee should attract
additional Customer order flow to the Exchange for the benefit of all
market participants. The Exchange believes that the proposal is
equitable because by paying an increased Complex Order Rebate for
Adding Liquidity to Customers transacting options overlying IWM and
waiving the Customer Fee for Removing Liquidity in options overlying
SPY, QQQ, IWM and AAPL, all market participants should benefit from the
increased liquidity which increased Customer order flow should bring to
the Exchange. In addition, the aforementioned proposals are equitable
because the Exchange would uniformly pay and waive the rebate and fee,
respectively, for all Customer Complex Orders in the applicable
symbols.
Also, the Exchange believes that it is reasonable to assess a
different Fee for Removing Liquidity in certain symbols. For example,
Chicago Board Options Exchange, Incorporated (``CBOE'') assesses
Customers different fees for transacting QQQ [sic] and SPY as compared
to other equity options.\10\
---------------------------------------------------------------------------
\10\ See CBOE's Fees Schedule.
---------------------------------------------------------------------------
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
options 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.\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
[[Page 22160]]
whether the proposed rule should be approved or disapproved.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------
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-2011-52 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-2011-52. 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 website 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 should refer to File Number SR-Phlx-2011-52 and should be
submitted on or before May 11, 2011.
---------------------------------------------------------------------------
\12\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-9478 Filed 4-19-11; 8:45 am]
BILLING CODE 8011-01-P