[Federal Register Volume 76, Number 143 (Tuesday, July 26, 2011)]
[Notices]
[Pages 44640-44642]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-18822]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64938; File No. SR-Phlx-2011-93]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
a Service Fee on QCC Orders and Floor QCC Orders
July 20, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\, and Rule 19b-4\2\ thereunder, notice is hereby given
that, on July 11, 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 amend its Fee Schedule to adopt a Service
Fee of $0.05 per side for Qualified Contingent Cross (``QCC'') Orders
(electronic) \3\ and Floor QCC Orders.\4\
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\3\ A QCC Order is comprised of an order to buy or sell at least
1000 contracts that is identified as being part of a qualified
contingent trade, as that term is defined in Rule 1080(o)(3),
coupled with a contra-side order to buy or sell an equal number of
contracts. The QCC Order must be executed at a price at or between
the National Best Bid and Offer and be rejected if a Customer order
is resting on the Exchange book at the same price. A QCC Order shall
only be submitted electronically from off the floor to the PHLX XL
II System. See Rule 1080(o). See also Securities Exchange Act
Release No. 64249 (April 7, 2011), 76 FR 20773 (April 13, 2011) (SR-
Phlx-2011-47) (a rule change to establish a QCC Order to facilitate
the execution of stock/option Qualified Contingent Trades (``QCTs'')
that satisfy the requirements of the trade through exemption in
connection with Rule 611(d) of the Regulation NMS).
\4\ A Floor QCC Order must: (i) Be for at least 1,000 contracts,
(ii) meet the six requirements of Rule 1080(o)(3) which are modeled
on the QCT Exemption, (iii) be executed at a price at or between the
National Best Bid and Offer (``NBBO''); and (iv) be rejected if a
Customer order is resting on the Exchange book at the same price. In
order to satisfy the 1,000-contract requirement, a Floor QCC Order
must be for 1,000 contracts and could not be, for example, two 500-
contract orders or two 500-contract legs. See Rule 1064(e). See also
Securities Exchange Act Release No. 64688 (June 16, 2011), 76 FR
36606 (June 22, 2011) (SR-Phlx-2011-56) (a rule change to establish
a qualified contingent cross order for execution on the floor of the
Exchange).
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[[Page 44641]]
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, 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 to adopt a Service Fee
for both QCC Orders (electronic) and Floor QCC Orders once a Firm
reaches the Firm Related Equity Option Cap (``Cap''), which is
described below. The Exchange proposes this Service Fee recognizing
that the qualified contingent cross capability is a premium service
offered by the Exchange. This Service Fee is proposed to recoup costs
incurred by the Exchange to offer this capability including trade
matching and processing, post trade allocation, submission for clearing
and customer service activities related to trading activity on the
Exchange.
Firms are subject to a $75,000 Cap. Firm equity option transaction
charges and QCC Transaction Fees, in the aggregate, for one billing
month may not exceed the Cap per member organization when such members
are trading in their own proprietary account. The Firm equity options
transaction charges are waived for members executing facilitation
orders pursuant to Exchange Rule 1064 when such members are trading in
their own proprietary account.\5\
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\5\ In addition, Firms that (i) Are on the contra-side of an
electronically-delivered and executed Customer complex order; and
(ii) have reached the Cap will be assessed a $0.05 per contract fee.
See Section II of the Exchange's Fee Schedule.
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The Exchange proposes to adopt a Service Fee of $0.05 per side once
a Firm has reached the Cap. This $0.05 per side Service Fee will apply
to every contract side of a QCC Order (electronic) and Floor QCC Order
that is executed once a Firm has reached the Cap in a particular
calendar month. A Firm that does not reach the Cap in a particular
calendar month will not be assessed the Service Fee in that month. The
Exchange proposes to add text to Section II of the Fee Schedule
entitled ``Equity Options Fees'' to describe the Service Fee. The
Exchange also proposes to add a clarifying sentence to Section II of
the Fee Schedule to clarify that QCC Transaction Fees are included in
the monthly calculation of the Cap.\6\
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\6\ See Securities Exchange Act Release No. 64520 (May 19,
2011), 76 FR 30223 (May 24, 2011) (SR-Phlx-2011-66) (a rule change
to adopt fees applicable to a Qualified Contingent Cross Order) and
SR-Phlx-2011-84 (an immediately effective proposed rule change to
adopt fees applicable to a Floor Qualified Contingent Cross order).
QCC Transaction Fees are defined in Section II of the Fee Schedule
as applicable to QCC Orders, as defined in Exchange Rule 1080(o),
and Floor QCC Orders, as defined in 1064(e).
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2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \7\ in general, and furthers
the objectives of Section 6(b)(4) of the Act \8\ in particular, in that
it is an equitable allocation of reasonable fees and other charges
among Exchange members and other persons using its facilities.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the proposed Service Fee is reasonable
because Firms have the ability to cap fees and even with the added
Service Fee, Firms should generally pay less once they reach the Cap
because they will not pay the normally applicable transaction fees.
This Service Fee would reduce the discrepancy that exists today between
Firms and other market participants. For example, Firms who reach the
Cap in a particular month would pay the Service Fee instead of other
normally applicable transaction fees as a result of reaching the Cap.
As stated in the filing, the Service Fee does not apply to Firms who
did not reach the Cap. Also, the Exchange believes that the Service Fee
is reasonable because the fee would allow the Exchange to defray costs
incurred in providing the qualified contingent cross capability in the
form of QCC Orders (electronic) and Floor QCC Orders. Specifically, the
Exchange is providing trade matching and processing, post trade
allocation, submission for clearing and customer service activities
related to trading activity on the Exchange. The Exchange also believes
that the Service Fee is reasonable because it is comparable to a fee
assessed by the International Securities Exchange, LLC (``ISE''). ISE
assesses a $0.05 per side service fee for qualified contingent cross
volume once a member reaches the monthly fee cap.\9\
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\9\ See ISE's Schedule of Fees. See also Securities Exchange Act
Release No. 64270 (April 8, 2011), 76 FR 20754 (April 13, 2011) (SR-
ISE-2011-13).
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The Exchange believes that the proposed Service Fee is equitable
and not unfairly discriminatory because it would be uniformly applied
to Firms in the same way that the Cap is uniformly available to these
Firms.
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.\10\ 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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\10\ 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.
[[Page 44642]]
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 [email protected]. Please include
File Number SR-Phlx-2011-93 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 Number SR-Phlx-2011-93. 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. 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-2011-93 and should be
submitted on or August 16, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-18822 Filed 7-25-11; 8:45 am]
BILLING CODE 8011-01-P