This PDF is the current document as it appeared on Public Inspection on 09/14/2012 at 08:45 am.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)  , and Rule 19-4  thereunder, notice is hereby given that, on August 31, 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.
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange proposes to adopt certain Routing Fees to recoup costs incurred by the Exchange when routing to the NASDAQ Options Market LLC (“NOM”).
While the changes proposed herein are effective upon filing, the Exchange has designated these changes to be operative on September 4, 2012.
The text of the proposed rule change is available on the Exchange's Web site at http://www.nasdaqtrader.com/micro.aspx?id=PHLXfilings, 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 Statutory Basis for, the Proposed Rule Change
The purpose of this filing is to recoup costs that the Exchange incurs for routing and executing certain orders in equity options to NOM, specifically, options on Facebook, Inc. (“FB”), Google Inc. (“GOOG”) and Groupon, Inc. (“GRPN”).
The Exchange's Pricing Schedule at Section V currently includes the following Routing Fees for routing Customer, Professional, Firm, Broker-Dealer, Market Maker  and Specialist  orders to away markets.
|Exchange||Customer||Professional||Firm/broker- dealer/specialist/market maker|
|CBOE orders greater than 99 contracts in RUT, RMN, NDX, MNX, ETFs, ETNs and HOLDRs||0.29||0.31||0.55|
|ISE Select Symbols 13||0.31||0.39||0.55|
|NYSE ARCA (Penny Pilot)||0.55||0.55||0.55|
|NYSE ARCA (Standard)||0.11||0.11||0.55|
|13 These fees are applicable to orders routed to ISE that are subject to Rebates and Fees for Adding and Removing Liquidity in Select Symbols. See ISE's Schedule of Fees for the complete list of symbols that are subject to these fees.|
The Exchange is proposing to adopt NOM Routing Fees when routing options overlying FB, GOOG and GRPN to NOM to account for the new NOM fees for removing liquidity and other routing costs incurred by the Exchange when routing to NOM in FB, GOOG and GRPN, as follows:
|Exchange||Customer||Professional||Firm/broker- dealer/specialist/market maker|
|NOM—FB, GOOG and GRPN||$0.86||$0.91||$0.91|
NOM recently filed an immediately effective rule change to adopt Fees for Removing Liquidity applicable to FB, GOOG and GRPN which will become operative on September 4, 2012. NOM will assess the applicable Fees for Removing Liquidity to Phlx market participants, Customers, Professionals, Firms, Broker-Dealers, Market Makers or Specialists, when orders are routed from Phlx to NOM. The Exchange is seeking to adopt new Routing Fees to account for these new fees and other routing costs incurred by the Exchange when routing options overlying FB, GOOG or GRPN to NOM.
In May 2009, the Exchange adopted Rule 1080(m)(iii)(A) to establish Nasdaq Options Services LLC (“NOS”), a member of the Exchange, as the Exchange's exclusive order router. NOS is utilized by the Exchange's fully automated options trading system, PHLX XL®, solely to route orders in options listed and open for trading on the PHLX XL system to destination markets. Each time NOS routes to away markets NOS is charged a $0.06 clearing fee and, in the case of certain exchanges, a transaction fee is also charged in certain symbols, which fees are passed through to the Exchange. The Exchange currently recoups clearing and transaction charges incurred by the Exchange as well as certain other costs incurred by the Exchange when routing to away markets, such as administrative and technical costs associated with operating NOS, membership fees at away markets, and technical costs associated with routing options. The Exchange proposes to title the new fees “NOM—FB, GOOG and GRPN.”
As with all fees, the Exchange may adjust these Routing Fees in response to competitive conditions by filing a new proposed rule change.
2. Statutory Basis
The Exchange believes that its proposal to amend its Pricing 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 believes that the proposed NOM Routing Fees are reasonable because they seek to recoup costs that are incurred by the Exchange when routing Customer, Professional, Firm, Broker-Dealer, Specialist and Market Maker orders to NOM on behalf of members, respectively. Each destination market's transaction charge varies and there is a standard clearing charge for each transaction incurred by the Exchange along with other administrative and technical costs that are incurred by the Exchange. The Exchange believes that the proposed Routing Fees would enable the Exchange to recover the remove fees assessed to market participants by NOM on options overlying FB, GOOG and GRPN, plus clearing and other administrative and technical fees for the execution of Customer, Professional, Firm, Broker-Dealer, Specialist and Market Maker orders when routed to NOM. The Exchange also believes that the proposed NOM Routing Fees are equitable and not unfairly discriminatory because they would be uniformly applied to all Customer, Professional, Firm, Broker-Dealer, Specialist and Market Maker orders that are routed to NOM.
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:
- Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml) ; or
- Send an email to firstname.lastname@example.org. Please include File Number SR-Phlx-2012-111 on the subject line.
- 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-2012-111. 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 10:00 a.m. and 3:00 p.m. Copies of the 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-2012-111 and should be submitted on or before October 9, 2012.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13
Kevin M. O'Neill,
3. The term “professional” means 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). See Rule 1000(b)(14).Back to Citation
4. A “Market Maker” includes Registered Options Traders (“ROTs”) (Rule 1014(b)(i) and (ii), which include Streaming Quote Traders (“SQTs”) (See Rule 1014(b)(ii)(A)) and Remote Streaming Quote Traders (“RSQTs”) (See Rule 1014(b)(ii)(B)).Back to Citation
5. A Specialist is an Exchange member who is registered as an options specialist pursuant to Rule 1020(a).Back to Citation
6. See SR-NASDAQ-2012-102 (not yet published). NOM filed to adopt Fees for Removing Liquidity applicable to FB, GOOG and GRPN as follows: $0.79 per contract fee for Customers, $0.85 per contract fee for Professionals, Firms, Non-NOM Market Makers and $0.79 per contract fee for NOM Market Makers.Back to Citation
7. See Securities Exchange Act Release No. 59995 (May 28, 2009), 74 FR 26750 (June 3, 2009) (SR-Phlx-2009-32).Back to Citation
8. This proposal refers to “PHLX XL” as the Exchange's automated options trading system. In May 2009 the Exchange enhanced the system and adopted corresponding rules referring to the system as “Phlx XL II.” See Securities Exchange Act Release No. 59995 (May 28, 2009), 74 FR 26750 (June 3, 2009) (SR-Phlx-2009-32). The Exchange intends to submit a separate technical proposed rule change that would change all references to the system from “Phlx XL II” to “PHLX XL” for branding purposes.Back to Citation
9. In addition to membership fees and transaction fees, the Exchange also incurs an Options Regulatory Fee when routing to an away market that assesses that fee. The Exchange's proposed Routing Fees for NOM for FB, GOOG and GRPN would include the NOM Fees for Removing Liquidity of $0.79 per contract fee for Customers, $0.85 per contract fee for Professionals, Firms and Non-NOM Market Makers, and $0.79 per contract fee for NOM Market Makers, as well as a $0.06 clearing cost and another $0.05 per contract fee associated with administrative and technical costs for operating NOS. At this time, the Exchange has determined to assess a maximum fee of $0.91 per contract for routing options overlying FB, GOOG and GRPN to NOM. While this does not recover all of the Exchange's costs, the Exchange has determined at this time to not assess more than a $0.91 per contract Routing Fee.Back to Citation
[FR Doc. 2012-22790 Filed 9-14-12; 8:45 am]
BILLING CODE 8011-01-P