
[Federal Register Volume 77, Number 50 (Wednesday, March 14, 2012)]
[Notices]
[Pages 15166-15167]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-6184]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66543; File No. SR-Phlx-2012-25]


 Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Modify 
Fees Applicable to the Trading of NMS Stocks Through NASDAQ OMX PSX

March 8, 2012.
    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 February 27, 2012, 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://nasdaqtrader.com/micro.aspx?id=PHLXRulefilings, 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 the 
Statutory Basis for, the Proposed Rule Change

    Phlx is amending its fee and credit schedule for transaction 
executions on PSX. Specifically, Phlx is introducing reduced fees for 
accessing liquidity in securities listed on the New York Stock Exchange 
(``Tape A Securities''), along with correspondingly reduced rebates for 
liquidity provision in Tape A Securities.\3\ Currently, PSX charges 
$0.0027 per share executed to members accessing liquidity in any 
security traded by the Exchange. Under the proposed rule change, the 
fee will be reduced to $0.0019 per share executed for Tape A 
Securities. However, to keep the Exchange's rebates for liquidity 
provision in line with the reduced fee to access liquidity, the 
Exchange will also make reductions in the rebates for Tape A 
Securities. Currently, the liquidity provider rebate is $0.0026 per 
share executed with respect to orders with an original displayed size 
of 2,000 or more shares, and is also $0.0026 with respect to liquidity 
provided by minimum life orders.\4\ Under the proposed rule change, 
this rebate will be reduced to $0.0018 per share executed for Tape A 
Securities. The rebate for orders with an original displayed size of 
less than 2,000 shares is currently $0.0024 per share executed, and 
will be reduced to $0.0016 per share executed for Tape A Securities. 
The rebate for non-displayed orders is currently $0.0010 per share 
executed, and will be reduced to $0.0005 per share executed for Tape A 
Securities.
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    \3\ The changes apply to executions priced at $1 or more. Fees 
and rebates applicable to executions of securities priced below $1 
remain unchanged.
    \4\ Minimum life orders are orders that may not be cancelled for 
a period of 100 milliseconds following entry.
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    The change is designed to encourage greater use of PSX for the 
purpose of trading Tape A Securities. Specifically, although PSX has 
market participants that post liquidity in Tape A Securities with 
regularity, Phlx believes that the extent to which market participants 
direct liquidity-seeking orders to PSX may be limited by its current 
fees. Accordingly, Phlx believes that a reduction in the fee to access 
liquidity will encourage more market participants to seek available 
liquidity at PSX. Moreover, Phlx further believes that any disincentive 
to post liquidity caused by a reduction in the rebates for Tape A 
Securities will be offset by a heightened expectation of prompt 
execution created by the reduced fee for liquidity-accessing orders.
2. Statutory Basis
    Phlx believes that the proposed rule change is consistent with the 
provisions of Section 6 of the Act,\5\ in general, and with Sections 
6(b)(4) and (5) of the Act,\6\ 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 Phlx operates or controls, and is not designed to permit 
unfair discrimination between customers, issuers, brokers or dealers. 
All similarly situated members are subject to the same fee structure, 
and access to Phlx is offered on fair and non-discriminatory terms.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(4) and (5).
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    The proposed new fee and rebate structure for members that use Phlx 
to trade Tape A Securities is reasonable because it will result in a 
reduction of fees for members that access liquidity, which in turn will 
benefit members that post liquidity by providing greater certainty of 
execution for their posted orders. Phlx believes that this increased 
certainty of execution will continue to encourage members to post 
liquidity at PSX, notwithstanding the associated reduction in liquidity 
provider rebates. Moreover, because the fee charged to access liquidity 
funds the payment of a rebate to liquidity providers, Phlx does not 
believe that it would be reasonable to require an exchange that opts to 
reduce access fees to maintain pre-existing higher rebates.
    Moreover, the proposed change is consistent with an equitable 
allocation of fees because it is designed to promote a more active 
market for Tape A Securities on PSX, thereby benefitting all members 
that seek to trade such securities through the Exchange. Specifically, 
the change is equitable to members that seek to access liquidity 
because it will reduce the fees that they pay, and equitable to members 
that provide liquidity because it will increase the likelihood of 
posted orders executing. Similarly, to the extent that the proposed 
change is successful in encouraging greater use of PSX for trading Tape 
A Securities, it will enhance market quality for all market 
participants. Finally, Phlx believes that the change is not unfairly 
discriminatory because the price reduction offered is available to all 
members that access liquidity in Tape A Securities. Similar pricing 
incentives that focus on securities listed on particular listing venues 
are not

[[Page 15167]]

uncommon,\7\ and provide means by which venues such as Phlx may compete 
more effectively with listing venues such as NYSE.
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    \7\ See, e.g., Securities Exchange Act Release No. 66322 
(February 3, 2012), 77 FR 6831 (February 9, 2012) (SR-NASDAQ-2012-
020) (pricing incentives focused on securities listed on exchanges 
other than The NASDAQ Stock Market or NYSE).
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    Finally, Phlx 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. In such an 
environment, Phlx must continually adjust its fees to remain 
competitive with other exchanges and with alternative trading systems 
that have been exempted from compliance with the statutory standards 
applicable to exchanges. Phlx believes that the proposed rule change 
reflects this competitive environment because it is designed to create 
pricing incentives for trading Tape A Securities through PSX.

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

    Phlx 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 is extremely competitive, members may readily opt 
to disfavor Phlx's execution services if they believe that alternatives 
offer them better value. The proposed change is designed to enhance 
competition by using pricing incentives to encourage trading of Tape A 
Securities through PSX.

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 email to rule-comments@sec.gov. Please include 
File No. SR-Phlx-2012-25 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 No. SR-Phlx-2012-25. This file 
number should be included on the subject line if email 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 available publicly. All 
submissions should refer to File No. SR-Phlx-2012-25 and should be 
submitted on or before April 4, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-6184 Filed 3-13-12; 8:45 am]
BILLING CODE 8011-01-P


