[Federal Register Volume 76, Number 238 (Monday, December 12, 2011)]
[Notices]
[Pages 77277-77279]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-31734]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65897; File No. SR-Phlx-2011-163]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Relating
to the Options Regulatory Fee
December 6, 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 November 23, 2011, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'')
filed with the Securities and Exchange Commission (``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 increase its Options Regulatory Fee
(``ORF'').
While changes to the Fee Schedule pursuant to this proposal are
effective upon filing, the Exchange has designated these changes to be
operative January 3, 2012.
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, 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
[[Page 77278]]
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 amend the ORF to
increase it from $0.0035 per contract to $0.004 per contract in order
to recoup increased regulatory expenses while also ensuring that the
ORF will not exceed costs.
The ORF is assessed to each member for all options transactions
executed or cleared by the member that are cleared by The Options
Clearing Corporation (``OCC'') in the customer range (i.e., that clear
in the customer account of the member's clearing firm at OCC). The
Exchange monitors the amount of revenue collected from the ORF to
ensure that it, in combination with its other regulatory fees and
fines, does not exceed regulatory costs. The ORF is imposed upon all
[sic] transactions executed by a member, even if such transactions do
not take place on the Exchange.\3\ The ORF also includes options
transactions that are not executed by an Exchange member but are
ultimately cleared by an Exchange member.\4\ The ORF is not charged for
member options transactions because members incur the costs of owning
memberships and through their memberships are charged transaction fees,
dues and other fees that are not applicable to non-members. The dues
and fees paid by members go into the general funds of the Exchange, a
portion of which is used to help pay the costs of regulation. The ORF
is collected indirectly from members through their clearing firms by
OCC on behalf of the Exchange.
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\3\ The ORF applies to all ``C'' account origin code orders
executed by a member on the Exchange. Exchange rules require each
member to record the appropriate account origin code on all orders
at the time of entry in order to allow the Exchange to properly
prioritize and route orders and assess transaction fees pursuant to
the rules of the Exchange and report resulting transactions to the
OCC. See Exchange Rule 1063, Responsibilities of Floor Brokers, and
Options Floor Procedure Advice F-4, Orders Executed as Spreads,
Straddles, Combinations or Synthetics and Other Order Ticket Marking
Requirements. The Exchange represents that it has surveillances in
place to verify that members mark orders with the correct account
origin code.
\4\ In the case where one member both executes a transaction and
clears the transaction, the ORF is assessed to the member only once
on the execution. In the case where one member executes a
transaction and a different member clears the transaction, the ORF
is assessed only to the member who executes the transaction and is
not assessed to the member who clears the transaction. In the case
where a non-member executes a transaction and a member clears the
transaction, the ORF is assessed to the member who clears the
transaction.
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The ORF is designed to recover a portion of the costs to the
Exchange of the supervision and regulation of its members, including
performing routine surveillances, investigations, examinations,
financial monitoring, and policy, rulemaking, interpretive, and
enforcement activities. The Exchange believes that revenue generated
from the ORF, when combined with all of the Exchange's other regulatory
fees, will cover a material portion, but not all, of the Exchange's
regulatory costs. The Exchange will continue to monitor the amount of
revenue collected from the ORF to ensure that it, in combination with
its other regulatory fees and fines, do not exceed regulatory costs. If
the Exchange determines regulatory revenues exceed regulatory costs,
the Exchange will adjust the ORF by submitting a fee change filing to
the Commission.
While changes to the Fee Schedule pursuant to this proposal are
effective upon filing, the Exchange has designated these changes to be
operative on January 3, 2012.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \5\ in general, and furthers
the objectives of Section 6(b)(4) of the Act \6\ in particular, in that
it is an equitable allocation of reasonable fees and other charges
among Exchange members. The Exchange believes that the fee change is
reasonable because the Exchange desires to recoup its regulatory
expenses while also ensuring that the revenue collected from the ORF
does not exceed regulatory costs.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the ORF is equitable and not unfairly
discriminatory because it is objectively allocated to Exchange members
in that it would continue to be charged to all members on all of their
transactions that clear as customer at OCC. The Exchange is assessing
higher fees to those member firms that require more Exchange regulatory
services based on the amount of customer options business they conduct.
In addition, the ORF seeks to recover the costs of supervising and
regulating members, including performing routine surveillances,
investigations, examinations, financial monitoring, and policy,
rulemaking, interpretive, and enforcement activities. The ORF is not
charged for member options transactions because members incur the costs
of owning memberships and through their memberships are charged
transaction fees, dues and other fees that are not applicable to non-
members. Additionally, the dues and fees paid by members go into the
general funds of the Exchange, a portion of which is used to help pay
the costs of regulation.
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.\7\ 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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\7\ 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
[[Page 77279]]
Send an email to [email protected]. Please include
File Number SR-Phlx-2011-163 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-2011-163. 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 publicly available. All
submissions should refer to File Number SR-Phlx-2011-163 and should be
submitted on or before January 3, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-31734 Filed 12-9-11; 8:45 am]
BILLING CODE 8011-01-P