[Federal Register Volume 78, Number 89 (Wednesday, May 8, 2013)]
[Notices]
[Pages 26841-26843]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-10875]
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SECURITIES AND EXCHANGE COMMISSION
Release No. 34-69500; File No. SR-Phlx-2013-43]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Waive the
Application and Initiation Fees in Certain Circumstances
May 2, 2013.
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 April 24, 2013, 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 amend the Exchange's Pricing Schedule to
waive the Application and Initiation Fees, for a defined period of
time, in order that certain market making firms may comply with new
requirements imposed by the Exchange at no additional cost.
The text of the proposed rule change is available on the Exchange's
Web site at http://nasdaqomxphlx.cchwallstreet.com/, 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
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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 Exchange recently amended various Exchange Rules to establish
that member organizations may qualify to be Remote Streaming Quote
Traders \3\ with as many as three affiliated RSQTs.\4\ RSQTs are, along
with Specialists,\5\ one of several types of Registered Option Traders
(``ROTs'') \6\ on the Exchange. SR-Phlx-2013-03 amended Rules 507 and
1014 to define a Remote Streaming Quote Trader Organization or
(``RSQTO'') and a Remote Market Maker Organizations (``RMOs'').\7\ In
addition RSQTs may also be referred to as Remote Market Markers
(``RMMs'').\8\ Amended Rule 507(a) provides that ``. . . [a]s many as
three RSQTs at any time may be identified by and affiliated with an
RSQTO. Each of the affiliated RSQTs must be qualified as an ROT and
must be in good standing.'' \9\ Further, the rule change requires that
``[u]pon approval of the proposal . . . each member organization
operating as an RSQT pursuant this rule will: (a) be deemed an RSQTO,
and b) within 21 days notify the Exchange of no more three RSQTs
affiliated with the RSQTO (the ``Conversion Period'').'' \10\
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\3\ A Remote Streaming Quote Trader (``RSQT'') is defined in
Exchange Rule 1014(b)(ii)(B) as an Registered Options Trader that is
a member or member organization with no physical trading floor
presence who has received permission from the Exchange to generate
and submit option quotations electronically in options to which such
RSQT has been assigned. An RSQT may only submit such quotations
electronically from off the floor of the Exchange.
\4\ See Securities Exchange Act Release No. 68689 (January 18,
2013), 78 FR 5518 (January 25, 2013) (SR-Phlx-2013-03) (a rule
change which amended Phlx Rules 507 and 1014 to enable RSQT
Organizations to affiliate with up to three RSQTS).
\5\ A Specialist is an Exchange member who is registered as an
options specialist pursuant to Rule 1020(a).
\6\ A ROT includes a Streaming Quote Trader (``SQT''), a RSQT
and a Non-SQT, which by definition is neither a SQT nor a RSQT. A
ROT is defined in Exchange Rule 1014(b) as a regular member of the
Exchange located on the trading floor who has received permission
from the Exchange to trade in options for his own account. See
Exchange Rule 1014 (b)(i) and (ii). Rule 1014 states that, in
addition to other requirements, on a daily basis RSQTs and other
SQTs are responsible to quote two-sided markets in not less than a
specified percentage of options assigned by the Exchange at the
request of such traders, unless specifically exempted from such
quoting (market-making) responsibility.
\7\ See Exchange Rule 507(a) and 1014(b)(ii)(B). See Securities
Exchange Act Release No. 68689 (January 18, 2013), 78 FR 5518
(January 25, 2013) (SR-Phlx-2013-03). This filing became effective
on April 19, 2013.
\8\ See Rule 507(a).
\9\ Id.
\10\ See Rule 507(a). See also Options Trader Alert (``OTA'')
2013-21 dated April 22, 2013 which provided additional
notice to RSQTOs of their obligation to notify the Exchange of
affiliated RMMs during the Conversion Period.
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Phlx member organizations are required to have one associated
person designated as their qualifying permit holder in order for the
firm to be eligible for membership.\11\ Further, ``[a]ny Series A-1
permit holder who is associated with a duly qualified and registered
member organization (unless such holder's permit has been terminated or
the rights and privileges thereof have been suspended or restricted)
shall, subject to the By-Laws (including, without limitation, Section
6-1 thereof) and these Rules, be: . . . (ii) required to designate a
single existing or applying member organization as such permit holder's
``primarily affiliated'' member organization for the purpose of
exercising (through such member organization's designated Member
Organization Representative) such permit holder's right to vote, as set
forth in Article II of the By-Laws, provided that, if such holder
designates any applying member organization, such holder will then also
qualify such applying member organization for the purposes of Rule
921(a); and (iii) required to maintain a primary affiliation, as
described in the foregoing clause (ii), with an eligible member
organization at all times that such holder holds a permit.
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\11\ See Exchange Rule 908 entitled ``Rights and Privileges of
A-1 Permits.'' Specifically, ``[a] Series A-1 permit shall only be
issued to an individual who is a natural person of at least twenty-
one (21) years of age. A Series A-1 permit shall only be issued to a
corporation who meets the eligibility and application requirements
set forth in the By-Laws and Rules, including, without limitation,
Rule 972, and no individual shall hold more than a single Series A-1
permit. Series A-1 permits issued in accordance with this Rule 908
shall be in such limited or unlimited number and may be issued from
time to time by the Exchange, in each case as determined by the
Board of Directors in its sole discretion.'' See Rule 908(b).
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In light of SR-Phlx-2013-03, the Exchange now requires that each
RSQTO have a minimum of one affiliated RMM (an RSQT) to qualify the
RSQTO. The RSQTO may have up to a maximum of three affiliated RMMS
under the amended rules. The Exchange anticipates that during the
Conversion Period certain RSQTOs will need to transfer their existing
permit to an RMM, by filing an Individual Member Application with the
Exchange for the RMM pursuant to Rule 900.2, in order to comply with
the new requirements. Today, all new member applicants are assessed an
Application Fee of $350.00 and an Initiation Fee of $1,500. Under the
current Pricing Schedule, an RMM would be assessed these fees as a new
Phlx member.
The Exchange desires to assist RSQTOs in complying with the
requirements of Rule 507(a) during the Conversion Period without
incurring additional costs. The Exchange, therefore, proposes to waive
both the Application and Initiation Fees for existing RSQTOs desiring
to file an application to transfer their existing permits to a new RMM
during the Conversion Period. The Exchange will only waive the
Application and Initiation Fees for RSQTOs to qualify up to one RMM,
provided the existing qualifier is not an RMM today. If an RSQTO
desires to qualify up to the maximum number of three RMMs, only the
first application involving the transfer of the existing permit to a
new RMM will receive the waiver of the Application and Initiation Fees,
the other two RMMs would be assessed the Application and Initiation
Fees. In addition, new RSQTOs would be assessed the Application and
Initiation Fees, the waiver would only apply to existing RSQTOs.
The waiver period will be from April 24, 2013 to May 13, 2013.\12\
The Exchange is proposing to add rule text to the Pricing Schedule to
note the waiver period.
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\12\ Pursuant to SR-Phlx-2013-03, the Conversion Period starts
at the later of the approval of SR-Phlx-2013-03, which was on April
19, 2013, or the issuance of an OTA by the Exchange, which was on
April 22, 2013, and ends 21 days later.
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2. Statutory Basis
The Exchange believes that its proposal to amend its Pricing
Schedule is consistent with Section 6(b) of the Act \13\ in general,
and furthers the objectives of Section 6(b)(4) of the Act \14\ 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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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the proposal is reasonable because the
Exchange is seeking to lower costs for RSQTOs that are impacted by the
recent amendment to Rules 507 and 1014. The Exchange does not desire to
increase costs for RSQTOs attempting to comply with the new
requirements of Rule 507(a) during the Conversion Period. The Exchange
also believes that the proposal is equitable and not unfairly
[[Page 26843]]
discriminatory because the Exchange is uniformly applying the waiver to
all RSQTOs impacted by the proposal who are current members of the
Exchange. All other market participants would not be affected by the
rule change as it applies specifically to remote market makers.
Further, new RSQTOs to the Exchange should pay Application and
Initiation Fees similar to current RSQTOs that incurred those fees at
the time of application.
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. The Exchange is waiving the
fees associated with complying with Rule 507(a) during the Conversion
Period for RSQTOs that would be impacted and incur fees not borne by
other Exchange members. The Exchange does not believe that the waiver
creates an undue burden on competition, rather the waiver attempts to
equalize the treatment of its members in not imposing higher costs on
market making firms.
The Exchange operates in a highly competitive market, comprised of
eleven exchanges, in which market participants can easily and readily
direct order flow to competing venues if they deem fee levels at a
particular venue to be excessive. Accordingly, the fees that are
assessed are influenced by robust market forces and therefore must
remain competitive with fees charged and rebates paid by other venues
and therefore must continue to be reasonable and equitably allocated to
those members that opt to direct orders to the Exchange rather than
competing venues.
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.\15\ 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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\15\ 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 [email protected]. Please include
File Number SR-Phlx-2013-43 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-2013-43. 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 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-2013-43 and should be
submitted on or before May 29, 2013.
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\16\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-10875 Filed 5-7-13; 8:45 am]
BILLING CODE 8011-01-P