[Federal Register Volume 74, Number 158 (Tuesday, August 18, 2009)]
[Notices]
[Pages 41777-41778]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-19733]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60477; File No. SR-Phlx-2009-67]


Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Firm Proprietary Facilitation Orders

August 11, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934,\1\ notice is hereby given that on August 5, 2009, NASDAQ OMX 
PHLX, Inc. (``Phlx'' or the ``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 Phlx. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested parties.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to waive the Firm Proprietary Options 
Transaction Charge for members executing facilitation orders \2\ when 
such members are trading in their own proprietary account.
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    \2\ A facilitation occurs when a floor broker holds an options 
order for a public customer and a contra-side order for the same 
option series and, after providing an opportunity for all persons in 
the trading crowd to participate in the transaction, executes both 
orders as a facilitation cross. See Exchange Rule 1064.
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    While changes to the Exchange's fee schedule pursuant to this 
proposal are effective upon filing, the Exchange has designated this 
proposal to be effective for trades settling on or after August 11, 
2009.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqomxphlx.cchwallstreet.com/NASDAQOMXPHLX/Filings/, 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, Phlx 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 Phlx 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, Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to encourage firm 
facilitation transactions, raise additional revenue for the Exchange 
and create incentive for Member Organizations to continue to facilitate 
customer order flow. Currently, the Firm Proprietary Options 
Transaction Charge is $.24 per contract. This fee applies to firm 
proprietary orders (``F'' account type) in equity options products. In 
addition, Firm Proprietary Options Transaction Charges is capped in the 
aggregate for one billing month at $75,000 per member organization 
(``Monthly Firm Cap''), except for orders of joint back-office 
(``JBO'') participants.\3\
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    \3\ A JBO participant is a Member, Member Organization or non-
member organization that maintains a JBO arrangement with a clearing 
broker-dealer (``JBO Broker'') subject to the requirements of 
Regulation T Section 220.7 of the Federal Reserve System. See also 
Exchange Rule 703. JBO participant orders are excluded from the 
definition of Firm Proprietary because the Exchange is unable to 
differentiate orders of a JBO participant from orders of its JBO 
Broker and therefore is unable to aggregate the JBO participant's 
orders for purposes of the defining Firm Proprietary transactions. 
JBO participant orders may employ the F-account type and qualify for 
the firm proprietary charge, but would not be eligible for the 
Monthly Firm Cap.
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    The Exchange is proposing to waive the $.24 Firm Proprietary 
Options Transaction Charge for members executing facilitation orders 
pursuant to Exchange Rule 1064 when such members are trading in their 
own proprietary account.\4\ The Exchange desires to waive the Firm 
Proprietary Options Transaction Charge for member transacting 
proprietary trades in their own account to encourage member firms to 
facilitate additional customer order flow.
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    \4\ The waiver would not apply to orders where a member is 
acting as agent on behalf of a non-member.
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2. Statutory Basis
    The Exchange believes that its proposal to amend its schedule of 
fees 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 waiver of the Firm Proprietary Options Transaction Charge is 
equitable because it uniformly applies to all member organizations. 
This waiver is consistent with the current fee schedule and industry 
fee assessments of member firms that allow for different rates to be 
charged for different order types originated by dissimilarly classified 
market participants.\7\ For example, the Exchange assesses different 
transaction fees applicable to the execution of Principal Acting as 
Agent Orders (``P/A Orders'') \8\ and Principal Orders (``P Orders'') 
\9\ sent to the Exchange via the Intermarket Option Linkage 
(``Linkage'') under the Plan for the Purpose of Creating and Operating 
an Intermarket Option Linkage (the ``Plan''). The Exchange charges 
$0.45 per option

[[Page 41778]]

contract for P Orders sent to the Exchange and $.30 per contract for P/
A Orders.\10\ The Exchange believes that waiving the Firm Proprietary 
Options Transaction Charge for members executing facilitation orders 
pursuant to Exchange Rule 1064 when such members are trading in their 
own account is consistent with rate differentials that exist in the 
current fee schedule and serves to encourage members to facilitate 
customer order flow.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4).
    \7\ NYSE Amex currently charges different rates to different 
market participants in assessing its firm facilitation fee. See 
Securities Exchange Act Release No. 60378 (July 23, 2009), 74 FR 
38245 (July 31, 2009) (SR-NYSEAmex-2009-38).
    \8\ A P/A order is an order for the principal account of a 
specialist (or equivalent entity on another participant exchange 
that is authorized to represent public customer orders), reflecting 
the terms of a related unexecuted Public Customer order for which 
the specialist is acting as agent. See Exchange Rule 1083(k)(i).
    \9\ A Principal Order is an order for the principal account of 
an Eligible Market Maker and is not a P/A Order. See Exchange Rule 
1083(k)(ii).
    \10\ See Securities Exchange Act Release No. 60210 (July 1, 
2009), 74 FR 32989 (July 9, 2009) (SR-Phlx-2009-53).
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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

    Because the foregoing rule change established or changes a due, 
fee, or other charge imposed by the Exchange, it has become effective 
pursuant to Section 19(b)(3)(A) of the Act \11\ and subparagraph (f)(2) 
of Rule 19b-4 \12\ thereunder. At any time within 60 days of the filing 
of the proposed rule change, the Commission may summarily abrogate 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.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(2).
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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 e-mail to [email protected]. Please include 
File Number SR-Phlx-2009-67 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 submission should refer to File Number SR-Phlx-2009-67. 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 inspection and 
copying 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 Phlx. 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 with to make available publicly. All 
submissions should refer to File Number SR-Phlx-2009-67 and should be 
submitted on or before September 8, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-19733 Filed 8-17-09; 8:45 am]
BILLING CODE 8010-01-P