
[Federal Register Volume 76, Number 173 (Wednesday, September 7, 2011)]
[Notices]
[Pages 55438-55440]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-22777]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65233; File No. SR-Phlx-2011-122]


Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Modify 
Fees for NASDAQ OMX PSX

August 31, 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 August 25, 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 modify the fees applicable to trading on 
the NASDAQ OMX PSX system (``PSX''). The text of the proposed rule 
change is available on the Exchange's Web site at http://nasdaqomxphlx.cchwallstreet.com/NASDAQOMXPHLX/Filings/, 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 55439]]

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to modify order execution fees applicable 
to use of PSX for trading stocks priced at $1 or more. Currently, PSX 
charges $0.0025 per share executed for orders that access liquidity. 
Consistent with PSX's goal of encouraging display of larger order 
sizes, the Exchange currently offers a rebate of $0.0024 per share 
executed for Displayed Orders with an original order size of 2,000 or 
more shares, but only $0.0022 for Displayed Orders with an original 
order size of less than 2,000.\3\ The rebate for Non-Displayed Orders 
is $0.0010 per share executed.
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    \3\ The higher credit applies to an order as it is decremented 
by partial executions, but does not apply in circumstances where an 
order for 2,000 shares or more is entered and then reduced in size 
by the entering Participant, such that the order is subsequently in 
the System for less than 2,000 shares. Moreover, changes to orders 
that result from system operations other than execution and 
decrementation are deemed to result in new orders. For example, a 
Pegged Order is considered a new order each time its price changes. 
Thus, if a Participant entered a 2,400 share order that posted to 
the PSX book, the order was executed for 1,000 shares, and the 
remainder of the order was then executed for 1,400, both of the 
executions would receive the higher credit. However, if a PSX 
Participant entered a 2,400 share order and subsequently modified 
the order down to 1,500 shares, the lower credit would apply. 
Finally, if a Participant entered a 2,400 share buy order pegged to 
the national best bid, the order executed for 1,000 shares, and the 
order then repriced due to a change in the national best bid, the 
1,000 share execution would receive the higher 0.0024 credit but a 
subsequent execution of the repriced order would receive the lower 
credit because it would be treated as a new order with a size below 
2,000 shares.
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    Effective September 1, 2011, the fee for accessing liquidity will 
increase to $0.0027 per share executed; the rebate for providing 
displayed liquidity with an original order size of 2,000 or more shares 
will increase to $0.0026 per share executed; and the rebate for 
Displayed Orders with an original order size of less than 2,000 will 
increase to $0.0024 per share executed. Consistent with PSX's goal of 
encouraging greater display of liquidity, the rebate for Non-Displayed 
Orders that provide liquidity will remain $0.0010 per share executed. 
By increasing its rebate for displayed liquidity, the Exchange hopes to 
attract more liquidity to PSX.
    The Exchange is also correcting two typographical errors in the 
Order Execution provision of Section VIII of the fee schedule. These 
corrections do not impact any fees assessed by the Exchange.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\4\ in general, and with 
Section 6(b)(4) of the Act,\5\ in particular, in that it provides for 
the equitable allocation of reasonable dues, fees and other charges 
among members and issuers and other persons using any facility or 
system which the Exchange operates or controls. The impact of the price 
changes upon the net fees paid by a particular market participant will 
depend upon a number of variables, including the prices of the market 
participant's quotes and orders relative to the national best bid and 
offer (i.e., its propensity to add or remove liquidity), its usage of 
Non-Displayed orders, and the size of the orders that it enters. 
Although the change will result in an increase of the fee charged to 
access liquidity on PSX, the Exchange believes that the proposed fee to 
access liquidity is reasonable because it is consistent with Rule 
610(c) under Regulation NMS,\6\ which found that fees not in excess of 
$0.0030 per share executed would promote the objective of equal 
regulation and preventing excessive fees. As the Commission determined 
in that matter, competition is best able to determine whether a 
strategy of charging fees set at lower levels, or of charging a higher 
fee and paying a higher rebate, will be successful.\7\ Moreover, the 
increase in fees to access liquidity will be offset by an increase in 
the rebate for providing displayed liquidity.
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(4).
    \6\ 17 CFR 242.610(c).
    \7\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 
FR 37496, 37596 (June 29, 2005).
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    The Exchange believes that the proposal reflects an equitable 
allocation of fees, as all similarly situated member organizations will 
be subject to the same fee structure, and access to the Exchange's 
market is offered on fair and non-discriminatory terms. The Exchange 
further believes that it is equitable to pay a higher rebate with 
respect to displayed liquidity, because the Exchange expects that the 
higher rebate will promote its goal of promoting market transparency 
through a market structure that provides higher execution priority to 
orders based on their size and display status.
    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily favor competing venues if they 
deem fee levels at a particular venue to be excessive. The Exchange 
believes that its fees continue to be reasonable and equitably 
allocated to members on the basis of whether they opt to direct orders 
to the Exchange and thereby make use of its order execution services.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended. 
Because the market for order execution and routing is extremely 
competitive, members may readily favor the Exchange's competitors in 
making order routing decisions to the extent that they deem PSX's fees 
to be excessive.

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.\8\ 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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    \8\ 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 rule-comments@sec.gov. Please include 
File Number SR-Phlx-2011-122 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary,

[[Page 55440]]

Securities and Exchange Commission, 100 F Street, NE., Washington, DC 
20549-1090.

All submissions should refer to File Number SR-Phlx-2011-122. 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 the filing also will be available for 
inspection and copying at the principal office of the Exchange.\9\ 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-2011-122 and should be 
submitted on or before September 28, 2011.

    \9\ The text of the proposed rule change is available on the 
Commission's Web site at http://www.sec.gov.
    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-22777 Filed 9-6-11; 8:45 am]
BILLING CODE 8011-01-P


