November 9, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
and Rule 19b-4 thereunder,
Start Printed Page 71103notice is hereby given that on November 1, 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.
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange proposes to amend its Fee Schedule to adopt a rebate related to electronic Qualified Contingent Cross orders (“eQCC Orders”).
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, on the Commission's Web site at http://www.sec.gov, 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 Statutory Basis for, the Proposed Rule Change
The purpose of the proposed rule change is to amend Section II of the Exchange's Fee Schedule entitled “Equity Options Fees” 
to adopt a $0.05 per contract rebate to encourage members to submit a greater number of eQCC Orders. The proposed $0.05 per contract rebate will be paid to members entering electronically executed eQCC Orders.
The Exchange believes that this rebate will further incentivize market participants to execute eQCC Orders on the Exchange in Multiply Listed Securities.
The rebate will not apply to Floor Qualified Contingent Cross Orders (“Floor QCC Orders”).
QCC Transaction Fees for a Specialist,
Registered Options Trader,
Firm and Broker-Dealer are $0.20 per contract.
The Exchange also proposes to amend Section I of the Fee Schedule entitled “Rebates and Fees for Adding and Removing Liquidity in Select Symbols” to include a reference to the proposed rebate.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule is consistent with Section 6(b) of the Act 
in general, and furthers the objectives of Section 6(b)(4) of the Act 
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.
The Exchange believes that it is reasonable to incentivize members to transact eQCC Orders in Multiply Listed securities 
by paying a $0.05 per contract rebate to all members entering such orders. The Exchange believes that paying a rebate of $0.05 will sufficiently incentivize its members to send eQCC Orders to the Exchange. Furthermore, the $0.05 rebate is within the range of rebates paid by other exchanges and balances the Exchange's desire to incentivize its members to send order flow to the Exchange while considering the costs attributable to offering such rebates. The Exchange also believes that the $0.05 rebate is reasonable because every eQCC Order is entitled to the rebate and therefore all members are equally eligible to receive the rebate without limitation.
The Exchange is not proposing to pay this rebate for Floor QCC Orders. A Start Printed Page 71104member conducting a floor brokerage business has a different business model as compared to members conducting an electronic business.
The Exchange believes that it is reasonable to pay a rebate for only eQCC Orders in an attempt to incentivize members to transact eQCC Orders that are processed electronically. In addition, floor brokers, who are the only members that are eligible to enter Floor QCC Orders,
which are done through the Exchange's Floor Broker Management System (“FBMS”), are also eligible to receive an Options Floor Broker Subsidy on Floor QCC volume and other executed volume.
The Exchange believes that because any floor broker is capable of meeting the volume criteria for the subsidy offered by the Exchange, it is reasonable to offer the proposed rebate only to eQCC Orders, which are submitted electronically from off the floor.
The Exchange believes that utilizing a different rebate structure for eQCC and Floor QCC Orders is reasonable because of the different business models, described herein, that apply to a floor as compared to an electronic business. Furthermore, in assessing whether to offer rebates, the Exchange experiences different competitive pressures from other exchanges with respect to eQCC Orders. The Exchange does not experience the same competitive pressure with rebates for Floor QCC Orders. The Exchange also believes that paying a different rebate for eQCC and Floor QCC Orders is equitable and not unfairly discriminatory because other exchanges distinguish between delivery methods for certain market participants and pay different rebates depending on the method of delivery. This type of distinction is not novel and has long existed within the industry.
The Exchange believes that it is equitable and not unfairly discriminatory to pay a $0.05 rebate for executed eQCC Orders to the executing member because all market participants, with the exception of floor brokers, as described above, that enter orders on an agency basis are uniformly eligible for the proposed rebate. Additionally, the proposed rebate is within the range of tiered rebates offered by the International Securities Exchange, LLC (“ISE”).
The Exchange believes that it is equitable and not unfairly discriminatory to pay the $0.05 rebate for Multiply-Listed options as compared to Singly-Listed options because all market participants are eligible to transact Multiply-Listed options.
The Exchange operates in a highly competitive market comprised of nine U.S. options exchanges in which sophisticated and knowledgeable market participants readily can, and do, send order flow to competing exchanges if they deem fee levels at a particular exchange to be excessive. The Exchange believes that the proposed rebate for eQCC Orders must be competitive with rebates offered on other options exchanges. The Exchange believes that this competitive marketplace impacts the 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.
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.
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:
- 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-2011-148. 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 Number SR-Phlx-2011-148 and should be submitted on or before December 7, 2011.
Start Printed Page 71105
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Kevin M. O'Neill,
[FR Doc. 2011-29509 Filed 11-15-11; 8:45 am]
BILLING CODE 8011-01-P