[Federal Register Volume 75, Number 200 (Monday, October 18, 2010)]
[Notices]
[Pages 63878-63880]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-26175]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63082; File No. SR-Phlx-2010-130]


 Self-Regulatory Organizations; Self-Regulatory Organizations; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change by 
NASDAQ OMX PHLX LLC Relating to PIXL Fees

October 13, 2010.
    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 September 29, 2010, NASDAQ OMX PHLX LLC (``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 Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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 add pricing 
applicable to members utilizing the Exchange's

[[Page 63879]]

price improvement mechanism known as Price Improvement XL or 
(PIXL\SM\).
    While changes to the Fee Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative upon the approval and effectiveness of SR-Phlx-2010-108.\3\
---------------------------------------------------------------------------

    \3\ SR-Phlx-2010-108 is a proposal to adopt Rule 1080(n) to 
establish a price-improvement mechanism.
---------------------------------------------------------------------------

    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 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 assess fees for 
orders known as PIXL Orders \4\ and Initiating Orders \5\ according to 
the following categories: Customers, Directed Participants,\6\ 
Specialists,\7\ Streaming Quote Traders (``SQT''),\8\ Remote Streaming 
Quote Traders (``RSQT''),\9\ Firms and Broker-Dealers. All options 
traded on the Exchange are eligible for PIXL.
---------------------------------------------------------------------------

    \4\ ``A member may electronically submit for execution an order 
it represents as agent on behalf of a public customer, broker-
dealer, or any other entity (``PIXL Order'') against principal 
interest or against any other order (except as provided in sub-
paragraph (n)(i)(E) below) it represents as agent (``Initiating 
Order'') provided it submits the PIXL order for electronic execution 
into the PIXL Auction (``Auction'') pursuant to Rule 1080. See 
Exchange Rule 1080(n) as proposed in SR-Phlx-2010-108.
    \5\ See footnote 4.
    \6\ See Exchange Rule 1080(l), ``* * * The term `Directed 
Specialist, RSQT, or SQT' means a specialist, RSQT, or SQT that 
receives a Directed Order.'' A Directed Participant has a higher 
quoting requirement as compared with a specialist, SQT or RSQT who 
is not acting as a Directed Participant. See Exchange Rule 1014.
    \7\ A Specialist is an Exchange member who is registered as an 
options specialist pursuant to Rule 1020(a).
    \8\ A Streaming Quote Trader is defined in Exchange Rule 
1014(b)(ii)(A) as an ROT who has received permission from the 
Exchange to generate and submit option quotations electronically 
through AUTOM in eligible options to which such SQT is assigned.
    \9\ A Remote Streaming Quote Trader is defined Exchange Rule in 
1014(b)(ii)(B) as an ROT 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 through AUTOM in eligible options to which such RSQT 
has been assigned.
---------------------------------------------------------------------------

Initiating Order Trades Against the PIXL Order

    The Exchange proposes to assess a fee of $0.05 per contract when an 
Initiating Order executes against a PIXL Order in the symbols listed in 
Section I, the Fees and Rebates for Adding and Removing Liquidity in 
Select Symbols \10\ (known as ``Select Symbols''), and the symbols 
defined in Section II \11\ (``Section II Symbols''). The Exchange 
proposes to only assess the fees listed in Section II of the Fee 
Schedule for the PIXL Order when the PIXL Order trades against the 
Initiating Order in Section II Symbols and the Select Symbols. For 
example, a member or member organization would be assessed $0.00 for 
Customer transactions.
---------------------------------------------------------------------------

    \10\ The Fees and Rebates for Adding and Removing Liquidity in 
Select Symbols are listed in Section I of the Fee Schedule.
    \11\ An equity option includes exchange-traded fund share 
(``ETF''), Holding Company Depositary Receipt (``HOLDR''), Russell 
2000(R) Index (the ``Full Value Russell Index'' or ``RUT''), options 
on the one-tenth value Russell 2000[supreg] Index (the ``Reduced 
Value Russell Index'' or ``RMN''), options on the Nasdaq 100 Index 
traded under the symbol NDX (``NDX'') and options on the one-tenth 
value of the Nasdaq 100 Index traded under the symbol MNX (``MNX'').
---------------------------------------------------------------------------

    For the symbols assessed according to Section III \12\ of the Fee 
Schedule, titled Sector Index Options Fees and U.S Dollar-Settled 
Foreign Currency (``WCO'') Options Fees, the transaction fees described 
in Section III would apply to both the Initiating Order and the PIXL 
Order for all executions.
---------------------------------------------------------------------------

    \12\ The symbols assessed fees according to Section III are BKX, 
FPX, HGX, OSX, SOX, UTY, and XAU (``Sector Index Options'') and U.S. 
Dollar-Settled Foreign Currency Options (``WCOs'').
---------------------------------------------------------------------------

PIXL Order Fees When the PIXL Order Does Not Trade Against the 
Initiating Order Select Symbols

Select Symbols: Section I

    With respect to executions in Select Symbols, where the PIXL Order 
is not trading against the Initiating Order, the PIXL Order would be 
assessed the Fee for Removing Liquidity when that order is executed 
against a resting contra-side order or quote that was present upon 
initial receipt of the PIXL Order. The resting contra-side order or 
quote would receive the Rebate for Adding Liquidity. Additionally, the 
PIXL Order would receive the Rebate for Adding Liquidity when that 
order is executed against contra-side order(s) that respond to the PIXL 
auction broadcast message, as well as when executed against contra-side 
quotes and unrelated orders on the PHLX book that arrived after the 
PIXL auction was initiated. The PIXL auction responders, contra-side 
order(s) and quote(s) would be assessed the Fee for Removing Liquidity.
    For the symbols assessed according to Section III of the Fee 
Schedule, titled Sector Index Options Fees and U.S Dollar-Settled 
Foreign Currency (``WCO'') Options Fees, the transaction fees described 
in Section III would apply to both the Initiating Order and the PIXL 
Order for all executions.

Equity Options: Section II

    With respect to executions in Section II Equity Options,\13\ the 
PIXL Order would be assessed the appropriate Equity Option Fee in 
Section II of the Fee Schedule. The contra-side order or quote would be 
assessed the appropriate Equity Option Fee listed on the Fee Schedule 
as well. All other Equity Options Fees in Section II would apply as 
appropriate, including but not limited to Payment for Order Flow.
---------------------------------------------------------------------------

    \13\ This includes all Symbols that are not specifically Select 
Symbols as listed in Section I of the Fee Schedule.
---------------------------------------------------------------------------

    Finally, the Exchange is proposing to relocate the Flex Equity 
Option Fees from Section IV, FLEX Equity Options, of the Fee Schedule 
to Section II, Equity Options, and consolidate those fee with other 
Equity Option Fees for the sake of clarity. Section IV will now contain 
the proposed PIXL fees and is proposed to be titled ``PIXL Pricing.''
    While changes to the Fee Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative upon the approval and effectiveness of SR-Phlx-2010-108.\14\
---------------------------------------------------------------------------

    \14\ SR-Phlx-2010-108 is a proposal to adopt Rule 1080(n) to 
establish a price-improvement mechanism.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \15\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \16\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among Exchange members. The Exchange believes that 
the fee proposal

[[Page 63880]]

is both equitable and reasonable for the reasons listed hereafter.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The proposed fees are consistent with the equitable price 
differentials that exist today at all option exchanges. For example, 
the fees and rebates assessed by the Exchange are similar, and in some 
cases less than, the fees and rebates assessed by the Boston Options 
Exchange Group, LLC (``BOX'') \17\ and the International Securities 
Exchange (``ISE'') \18\ for orders executed in a price improvement 
mechanism. For example a BOX participant could be assessed total fees 
of $0.35 per contract as the price improvement period (``PIP'') 
initiator and receive a rebate for their customer PIP order of $0.25 
per contract (in this example the net fee charged the BOX participant 
would be $0.10), whereas the PIP responder could be assessed a fee of 
$0.50 per contract. This is a differential of $0.40 per contract 
between two BOX participants for participating in the PIP auction, 
which is equal to or less than the differentials that exist in the 
Exchange's proposal. With respect to ISE, the Exchange pays a rebate 
for certain PIXL executions, which is similar to the $0.15 rebate ISE 
pays for its price improvement mechanism.
---------------------------------------------------------------------------

    \17\ See Securities and Exchange Act Release No. 62632 (August 
3, 2010), 75 FR 47869 (August 3, 2010) (SR-BX-2010-049).
    \18\ See the ISE schedule of fee as of August 2, 2010.
---------------------------------------------------------------------------

    The Exchange operates in a fiercely competitive market place in 
which Exchange members and member organizations are highly 
sophisticated and highly knowledgeable. As is the case, members and 
member organizations readily and swiftly direct order flow or post 
liquidity to competing venues if they deem fee levels at a particular 
options exchange to be excessive, unfair or unreasonable. The Exchange 
believes the proposal is an equitable allocation of fees and not 
unfairly discriminatory for the reasons stated above.

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.\19\ 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.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

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-2010-130 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-2010-130. 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,\20\ 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, 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-2010-130 and should be submitted on or before 
November 8, 2010.
---------------------------------------------------------------------------

    \20\ The text of the proposed rule change is available on the 
Commission's Web site at http://www.sec.gov/rules/sro.shtml.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
---------------------------------------------------------------------------

    \21\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-26175 Filed 10-15-10; 8:45 am]
BILLING CODE 8011-01-P