[Federal Register Volume 77, Number 71 (Thursday, April 12, 2012)]
[Notices]
[Pages 22034-22036]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-8781]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66757; File No. SR-Phlx-2012-45]


 Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Rebates for Adding and Removing Liquidity in SPY

April 6, 2012.
    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 April 2, 2012, 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 Section I \3\ of its Pricing 
Schedule to further incentivize market participants to transact SPDR 
S&P 500 (``SPY'') \4\ options.
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    \3\ Section I of the Exchange's Pricing Schedule is entitled 
``Rebates and Fees for Adding and Removing Liquidity in Select 
Symbols.''
    \4\ SPY is one of the Select Symbols subject to the rebates and 
fees in Section I. A complete list of Select Symbols is included in 
Section I of the Pricing Schedule.
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    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, 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

[[Page 22035]]

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to further incentivize Customers who transact 
Complex Orders in SPY. The Exchange currently pays a Customer Complex 
Order Rebate for Adding Liquidity of $0.32 per contract and a Customer 
Complex Order Rebate for Removing Liquidity of $0.06 per contract. The 
Exchange is proposing to amend Section I of the Pricing Schedule to 
specify that the Exchange will increase the Customer Complex Order 
Rebates for Adding and Removing Liquidity by $0.01 per contract for 
transactions in SPY. Therefore, Customer Complex Orders that add 
liquidity in SPY will receive a rebate of $0.33 per contract and 
Customer Complex Orders that remove liquidity in SPY will receive a 
rebate of $0.07 per contract.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Pricing 
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 and other persons using its 
facilities.
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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's proposal to further incentivize Customers who 
transact Complex Orders in SPY is reasonable because Customer Complex 
Orders are becoming an increasingly important segment of options 
trading. The Exchange believes that it is reasonable to further 
incentivize Customer Complex Orders by offering a $0.01 per contract 
incentive for SPY options in addition to the Customer Complex Order 
Rebates for Adding and Removing Liquidity because the Exchange seeks to 
incentivize market participants to direct and transact a greater number 
of Customer Complex Orders at the Exchange, particularly in SPY. 
Creating these incentives and attracting Customer Complex Orders to the 
Exchange, in turn, benefits all market participants through increased 
liquidity at the Exchange. The Exchange's proposal to further 
incentivize Customers who transact Complex Orders in SPY is equitable 
and not unfairly discriminatory because the Exchange will uniformly pay 
an additional $0.01 per contract incentive in addition to the Customer 
Complex Order Rebates for Adding and Removing Liquidity to all Customer 
Complex Orders in SPY that receive the rebates.
    Further, the Exchange also believes it is reasonable, equitable and 
not unfairly discriminatory to only offer rebates to Customers and not 
other market participants because Customer Complex Order flow brings 
unique benefits to the marketplace in terms of liquidity and order 
interaction. It is an important Exchange function to provide an 
opportunity to all market participants to trade against Customer 
Complex Orders.
    In addition, the Exchange believes that paying an additional $0.01 
per contract incentive in addition to the Customer Complex Order 
Rebates for Adding and Removing Liquidity in SPY, as compared to other 
option symbols, is reasonable, equitable and not unfairly 
discriminatory because any market participant is able to transact a 
Customer Complex Order in SPY and receive the additional rebate 
incentive regardless of volume. There is no requirement to transact a 
certain volume of Customer Complex Orders to qualify for the additional 
$0.01 per contract rebate incentive. Further, options overlying SPY are 
the most actively traded equity and ETF option in the United States 
(U.S.), accounting for more than 15% of the total volume on any given 
day.\7\ Because of the substantial volume opportunity, the Exchange 
believes this additional $0.01 per contract incentive for SPY, as 
compared to other symbols, would continue to attract volume to the 
Exchange and benefit all market participants.
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    \7\ For March 2012, SPY options accounted for 17.21% of the 
total listed equity and ETF options volume traded in the U.S.
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    The Exchange operates in a highly competitive market, comprised of 
nine 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 rebates paid by the 
Exchange must remain competitive with rebates offered 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.

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.\8\ 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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    \8\ 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 No. SR-Phlx-2012-45 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 No. SR-Phlx-2012-45. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your

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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 available publicly. All submissions should refer to 
File No. SR-Phlx-2012-45 and should be submitted on or before May 3, 
2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-8781 Filed 4-11-12; 8:45 am]
BILLING CODE 8011-01-P