
[Federal Register: April 7, 2010 (Volume 75, Number 66)]
[Notices]               
[Page 17803-17805]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07ap10-110]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61822; File No. SR-Phlx-2010-47]

 
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
to Amendment of the Fee Schedule

April 1, 2010.
    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 22, 2010, NASDAQ OMX PHLX, Inc. (``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. Phlx has designated this 
proposal as one establishing or changing a member due, fee, or other 
charge imposed under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 
19b-4(f)(2) thereunder,\4\ which renders the proposal effective upon 
filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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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: (i) 
Increase the number of options to be included in the Exchange's current 
schedule of transaction fees and rebates for adding and removing 
liquidity; (ii) increase the Sector Index Options Fees assessed on 
Registered Options Traders (on-floor) and Specialists from $.30 to $.35 
and (iii) make other clarifying technical amendments to the Fee 
Schedule.
    While changes to the Fee Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative for transactions settling on or after April 1, 2010.
    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

[[Page 17804]]

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 Exchange proposes to increase liquidity and to attract order 
flow by increasing the number of options to be included in the 
Exchange's current schedule of transaction fees and rebates for adding 
and removing liquidity.
    Specifically, the Exchange proposes to add the following options: 
Alcoa, Inc. (``AA''); American International Group, Inc. (``AIG''); 
Advanced Micro Devices, Inc. (``AMD''); AMR Corporation (``AMR''); 
Caterpillar, Inc. (``CAT''); Cisco Systems, Inc. (``CSCO''); Ford Motor 
Company (``F''); Direxion Daily Financial Bull 3X Shares (``FAS''); 
Direxion Daily Financial Bear 3X Shares (``FAZ''); SPDR Gold Trust 
(``GLD''); Intel Corporation (``INTC''); JPMorgan Chase & Co. 
(``JPM''), Las Vegas Sands Corp. (``LVS''); MGM Mirage (``MGM''); 
Micron Technology, Inc. (``MU''); Newmont Mining Corporation (``NEM''); 
Palm, Inc. (``PALM''); Pfizer, Inc. (``PFE''); ''); Potash Corp./
Saskatchewan, Inc. (``POT''); SanDisk Corporation (``SNDK''); AT&T, 
Inc. (``T''); UAL Corporation (``UAUA''); Verizon Communications, Inc. 
(``VZ''), and United States Steel Corporation (``X'') collectively 
(``the options''). The options would be subject to the fees and rebates 
for adding and removing liquidity.
    Currently, the Exchange assesses a per-contract transaction charge 
in multiple options \5\ on five different categories of market 
participants that submit orders and/or quotes that remove, or ``take,'' 
liquidity from the Exchange. The per-contract transaction charge 
depends on the category of market participant submitting an order or 
quote to the Exchange that removes liquidity.\6\
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    \5\ The options that are currently assessed the fees and rebates 
for adding and removing liquidity are: Standard and Poor's 
Depositary Receipts/SPDRs (``SPY''); the PowerShares QQQ Trust 
(``QQQQ'')[reg]; Ishares Russell 2000 (``IWM''); Citigroup, Inc. 
(``C''); Apple, Inc. (``AAPL''); Allstate Corp., (``ALL''); 
Amazon.com, Inc. (``AMZN''); Bank of America Corporation (``BAC''); 
Dell, Inc. (``DELL''); Diamonds Trust Series 1 (``DIA''); DryShips, 
Inc. (``DRYS'';, Eastman Kodak, Co. (``EK''); Market Vectors Gold 
Miners ETF (``GDX''); General Electric Company (``GE''); Goldman 
Sachs Group, Inc. (``GS''); Microsoft Corporation (``MSFT''); 
Qualcomm, Inc. (``QCOM''); Research In Motion Ltd. (``RIMM''); 
Starbucks Corp. (``SBUX''); UltraShort Financials ProShares 
(``SKF''); iShares Silver Trust (``SLV''); Semiconductor HOLDRs 
(``SMH''); United States Natural Gas (``UNG''); United States Oil 
Fund LP Units (``USO'';, Ultra Financials ProShares (``UYG''); 
WynnResorts Ltd. (``WYNN''); and Financial Select Sector SPDR 
(``XLF'').
    \6\ See Securities Exchange Act Release No. 61684 (March 10, 
2010), 75 FR 13189 (March 18, 2010) (SR-Phlx-2010-33).
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    The market participants are as follows: (i) Specialists, Registered 
Options Traders (``ROTs''), Streaming Quote Traders (``SQTs'') \7\ and 
Remote Streaming Quote Traders (``RSQTs''); \8\ (ii) customers; \9\ 
(iii) specialists, SQTs and RSQTs that receive Directed Orders 
(``Directed Participants'' \10\ or ``Directed Specialists, RSQTs, or 
SQTs'' \11\); (iv) Firms; and (v) broker-dealers.
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    \7\ An SQT is an Exchange Registered Options Trader (``ROT'') 
who has received permission from the Exchange to generate and submit 
option quotations electronically through an electronic interface 
with AUTOM via an Exchange approved proprietary electronic quoting 
device in eligible options to which such SQT is assigned. See 
Exchange Rule 1014(b)(ii)(A).
    \8\ An RSQT is an ROT that is a member or member organization 
with no physical trading floor presence who has received permission 
from the Exchange to generate and submit option quotations 
electronically through AUTOM in eligible options to which such RSQT 
has been assigned. An RSQT may only submit such quotations 
electronically from off the floor of the Exchange. See Exchange Rule 
1014(b)(ii)(B).
    \9\ This applies to all customer orders, directed and non-
directed.
    \10\ For purposes of this fee, a Directed Participant is a 
Specialist, SQT, or RSQT that executes a customer order that is 
directed to them by an Order Flow Provider and is executed 
electronically on the Exchange's electronic trading platform for 
options, PHLX XL II.
    \11\ See Exchange Rule 1080(l), ``* * * The term `Directed 
Specialist, RSQT, or SQT' means a specialist, RSQT, or SQT that 
receives a Directed Order.'' A Directed Participant has a higher 
quoting requirement as compared with a specialist, SQT or RSQT who 
is not acting as a Directed Participant. See Exchange Rule 1014.
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    The per-contract transaction charges are assessed on participants 
who submit proprietary quotes and/or orders that remove liquidity from 
the Exchange's market in options listed on the Fee Schedule. The 
Exchange also assesses a transaction charge to Firms and broker-dealers 
that add liquidity.
    Additionally, the Exchange has in place a per-contract rebate 
relating to transaction charges for orders or quotations that add 
liquidity to the Exchange's market in options listed on the fee 
schedule. The amount of the rebate depends on the category of 
participant whose order or quote was executed as part of the Phlx 
disseminated Best Bid and/or Offer.
    The Exchange proposes to increase the options transactions charge 
assessed on Registered Options Traders (on-floor) and Specialists in 
Sector Index Options from $.30 to $.35. The Exchange believes that the 
increases are necessary for the Exchange to continue to offset certain 
costs associated with maintaining the Sector Index Options.
    The Exchange also proposes to amend the Fee Schedule to make 
technical amendments. Specifically, the Exchange proposes to amend a 
reference in the Payment For Order Flow Fees. Currently, the Payment 
For Order Flow Fee Schedule states that ``QQQQ and other options that 
are trading in the Penny Pilot Program will be assessed a $.25 per 
contract fee''. The Exchange recently filed a proposed rule change to 
create transaction fees and rebates for adding and removing 
liquidity.\12\ In that filing, the Exchanged stated that Payment for 
Order Flow fees will not be collected on transactions for transaction 
fees and rebates for adding and removing liquidity in certain named 
symbols. The PowerShares QQQ Trust (``QQQQ'')[supreg] is among the 
named symbols to which the transaction fees and rebates for adding and 
removing liquidity in certain named symbols are applied. Therefore, the 
Exchange proposes to remove the language referencing QQQQ from the 
Payment for Order Flow section of the Fee Schedule as that language was 
inadvertently not removed at the time of filing the aforementioned rule 
change.
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    \12\ See Securities Exchange Act Release No. 61684 (March 10, 
2010), 75 FR 13189 (March 18, 2010) (SR-Phlx-2010-33).
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    Additionally, the Exchange recently filed a proposed rule change, 
which among other things, amended endnote 5 to create a reference to 
the Monthly Firm Cap.\13\ That cap is actually referred to as the Firm 
Related Equity Option Cap in the Equity Options Fees portion of the Fee 
Schedule where the amount of such cap is defined. The Exchange proposes 
to amend the Fee Schedule to conform the text in endnote 5 to the 
remainder of the Fee Schedule by removing the term ``Monthly Firm Cap'' 
in endnote 5 and replacing the text with the following corrected text 
``Firm Related Equity Option Cap''.
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    \13\ See Securities Exchange Act Release No. 61685 (March 10, 
2010), 75 FR 13187 (March 18, 2010) (SR-Phlx-2010-39).
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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 \14\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \15\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among Exchange members. The Exchange believes that 
the addition of the options to the fees and rebates for adding and 
removing liquidity is equitable in that it will apply to all categories 
of participants in the same

[[Page 17805]]

manner. The Exchange also believes that increasing the sector index 
options fees for Registered Options Traders (on-floor) and Specialists 
is equitable in that it is in the range of other sector index option 
options transaction sector index fees.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(4).
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    Additionally, the Exchange believes that the clarifying technical 
amendments will provide further clarity to the Fee Schedule.

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 \16\ and paragraph (f)(2) of Rule 19b-4 \17\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission may summarily abrogate 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.
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    \16\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \17\ 17 CFR 240.19b-4(f)(2).
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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 rule-comments@sec.gov. Please include 
File Number SR-Phlx-2010-47 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, Station Place, 100 F Street, NE., Washington, 
DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2010-47. 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 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 publicly available. All 
submissions should refer to File Number SR-Phlx-2010-47 and should be 
submitted on or before April 28, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-7845 Filed 4-6-10; 8:45 am]
BILLING CODE 8011-01-P

