
[Federal Register: June 9, 2010 (Volume 75, Number 110)]
[Notices]               
[Page 32826-32828]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09jn10-117]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62196; File No. SR-Phlx-2010-73]

 
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
to Rebates for Adding and Fees for Removing Liquidity

June 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 May 20, 2010, NASDAQ OMX PHLX, Inc. (``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 
increase the number of options to be included in the Exchange's current 
rebates for adding, and fees for removing, liquidity. In addition, the 
Exchange proposes to clarify its rebates for adding and fees for 
removing liquidity, specifically the applicability of fees to 
electronic auctions.
    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 June 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 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 [sic] The Exchange 
proposes to increase liquidity and to attract order

[[Page 32827]]

flow by increasing the number of options to be included in the 
Exchange's current rebates for adding and fees for removing liquidity.
    Specifically, the Exchange proposes to add the following twenty-
five options: Ambac Financial Group, Inc. (``ABK''), Barrick Gold 
Corporation (``ABX''), Ariad Pharmaceuticals, Inc. (``ARIA''), American 
Express Company (``AXP''), Ciena Corp. (``CIEN''), Star Scientific, 
Inc. (``CIGX''), Dendreon Corp. (``DNDN''), eBay Inc. (``EBAY''), 
Corning Inc. (``GLW''), Halliburton Company (``HAL''), iShares Dow 
Jones US Real Estate (``IYR''), Motorola, Inc., (``MOT''), NVIDIA 
Corporation (``NVDA''), ON Semiconductor Corp. (``ONNN''), Oracle Corp. 
(``ORCL''), ProShares UltraShort, QQQ (``QID''), Transocean Ltd. 
(``RIG''), Rambus, Inc. (``RMBS''), ProShares UltraShort S&P500 
(``SDS''), ProShares UltraShort 20+ Year Treasury (``TBT''), Visa, Inc. 
(``V''), Vale S.A. (``VALE''), SPDR S&P Homebuilders (``XHB''), Xerox 
Corp. (``XRX''), Yahoo! Inc. (``YHOO'') collectively (``the options''). 
The options would be subject to the rebates for adding and fees for 
removing liquidity.
    The Exchange currently assesses a per-contract transaction charge 
in various select symbols \3\ (the ``select Symbols'') on six different 
categories of market participants that submit orders and/or quotes that 
``take,'' liquidity from the Exchange: (i) Specialists, Registered 
Options Traders (``ROTs''),\4\ Streaming Quote Traders (``SQTs'') \5\ 
and Remote Streaming Quote Traders (``RSQTs''); \6\ (ii) customers; \7\ 
(iii) specialists, SQTs and RSQTs that receive Directed Orders 
(``Directed Participants'' \8\ or ``Directed Specialists, RSQTs, or 
SQTs'' \9\); (iv) Firms; (v) broker-dealers; and (vi) 
Professionals.\10\ The current per-contract transaction charge depends 
on the category of market participant submit orders and/or quotes that 
``take,'' liquidity from the Exchange.
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    \3\ The fees and rebates for adding and removing liquidity are 
applicable to executions in options overlying AA, AAPL, AIG, ALL, 
AMD, AMR, AMZN, BAC, BRCD, C, CAT, CSCO, DELL, DIA, DRYS, EK, F, 
FAS, FAZ, GDX, GE, GLD, GS, IBM, INTC, IWM, JPM, LVS, MGM, MSFT, MU, 
NEM, NOK, PALM, PFE, POT, QCOM, QQQQ, RIMM, SBUX, SIRI, SKF, SLV, 
SMH, SNDK, SPY, T, TZA, UAUA, UNG, USO, UYG, VZ, WYNN, X and XLF 
(``Symbols'').
    \4\ A ROT includes a SQT, a RSQT and a Non-SQT, which by 
definition is neither a SQT or a RSQT. See Exchange Rule 1014 (b)(i) 
and (ii).
    \5\ 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).
    \6\ 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).
    \7\ This applies to all customer orders, directed and non-
directed.
    \8\ For purposes of the fees and rebates related to adding and 
removing liquidity, 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 PHLX XL II.
    \9\ 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.
    \10\ The Exchange defines a ``professional'' as any person or 
entity that (i) is not a broker or dealer in securities, and (ii) 
places more than 390 orders in listed options per day on average 
during a calendar month for its own beneficial account(s) 
(hereinafter ``Professional''). See Exchange Rule 1000(b)(14).
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    The Exchange also currently assesses a per-contract rebate of 
transaction charges for orders or quotations that add liquidity in the 
select Symbols. The amount of the rebate depends on the category of 
participant whose order or quote was executed as part of the Phlx Best 
Bid and Offer. The Exchange proposes to add the twenty-five additional 
options to the list of select Symbols applicable to the rebates for 
adding and fees for removing liquidity.
    The Exchange also proposes to clarify its rebates for adding and 
fees for removing liquidity, specifically the applicability of fees to 
electronic auctions. Currently, the Exchange describes the 
applicability of rebates for adding liquidity and fees for removing 
liquidity, in an electronic auction, as follows: ``Customer, 
Professional, Directed Participant and Specialist, ROT, SQT and RSQT 
fees for removing liquidity will not apply to transactions resulting 
from electronic auctions. Electronic auctions include, without 
limitation, the Complex Order Live Auction (``COLA''), and Quote and 
Market Exhaust auctions. Firm and Broker-Dealer fees for removing 
liquidity will, however apply to transactions resulting from electronic 
auctions.'' The Exchange proposes to make clear that a Specialist, ROT, 
including an SQT and RSQT, would not receive a rebate for adding 
liquidity in an electronic auction.\11\ The Exchange proposes to add 
language to the Fee Schedule to clarify the applicability of rebates 
for adding liquidity in an electronic auction.
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    \11\ The Exchange is unable to calculate the rebates for 
Specialists, ROTs, including SQTs and RSQTs, in an electronic 
auction.
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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 for transactions settling on or after June 1, 2010.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \12\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \13\ 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 rebates for adding and fees for 
removing liquidity is reasonable and equitable in that it will apply to 
all categories of participants in the same manner. The fees which are 
currently applicable to each market participant will continue to apply 
to the select Symbols.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that clarifying the applicability of the 
rebates for adding liquidity in an electronic auction is reasonable 
because it clearly states when the rebate is applicable to certain 
transactions. The Exchange also believes that the clarification is 
equitable because it makes clear what fees will be assessed to 
Specialists, ROTs, including SQTs and RSQTs, in an electronic auction. 
Currently, Specialists, ROTs, including SQTs and RSQTs, do not receive 
rebates for adding liquidity in an electronic auction. The Exchange's 
proposal would add language to the Fee Schedule to state that with 
respect to electronic auctions, Specialists and ROTs would not receive 
a rebate, which language is consistent with the Exchange's current 
practice.

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

[[Page 32828]]

19(b)(3)(A)(ii) of the Act \14\ and paragraph (f)(2) of Rule 19b-4 \15\ 
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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    \14\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \15\ 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-2010-73 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-Phlx-2010-73. 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-2010-73 and should be 
submitted on or before June 30, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-13827 Filed 6-8-10; 8:45 am]
BILLING CODE 8010-01-P

