[Federal Register Volume 77, Number 200 (Tuesday, October 16, 2012)]
[Notices]
[Pages 63401-63404]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-25331]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68008; File No. SR-Phlx-2012-120]


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

October 9, 2012.
    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 October 1, 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 adopt certain Routing Fees to recoup costs 
incurred by the Exchange when routing to the NASDAQ Options Market LLC 
(``NOM'').
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.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 this filing is to recoup costs that the Exchange 
incurs for routing and executing certain orders in equity options to 
NOM in Non-Penny Pilot Options.
    The Exchange's Pricing Schedule at Section V currently includes the 
following Routing Fees for routing Customer, Professional,\3\ Firm, 
Broker-Dealer, Market Maker \4\ and Specialist \5\ orders to away 
markets.
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    \3\ The term ``professional'' means any person or entity that 
(i) is not a broker or dealer in securities, and (ii) places more 
than 390 orders in listed options per day on average during a 
calendar month for its own beneficial account(s). See Rule 
1000(b)(14).
    \4\ A ``Market Maker'' includes Registered Options Traders 
(``ROTs'') (Rule 1014(b)(i) and (ii), which include Streaming Quote 
Traders (``SQTs'') (See Rule 1014(b)(ii)(A)) and Remote Streaming 
Quote Traders (``RSQTs'') (See Rule 1014(b)(ii)(B)).
    \5\ A Specialist is an Exchange member who is registered as an 
options specialist pursuant to Rule 1020(a).

[[Page 63402]]



----------------------------------------------------------------------------------------------------------------
                                                                                                  Firm/broker-
                        Exchange                              Customer         Professional    dealer/specialist/
                                                                                                  market maker
----------------------------------------------------------------------------------------------------------------
NYSE AMEX..............................................              $0.11              $0.31              $0.55
BATS Penny.............................................               0.55               0.55               0.55
BATS non-Penny.........................................               0.86               0.91               0.91
BOX....................................................               0.11               0.11               0.55
BX Options.............................................               0.11               0.54               0.54
CBOE...................................................               0.11               0.31               0.55
CBOE orders greater than 99 contracts in RUT, RMN, NDX,               0.29               0.31               0.55
 MNX, ETFs, ETNs and HOLDRs............................
C2.....................................................               0.55               0.56               0.55
ISE....................................................               0.11               0.29               0.55
ISE Select Symbols \13\................................               0.31               0.39               0.55
NYSE ARCA (Penny Pilot)................................               0.55               0.55               0.55
NYSE ARCA (Standard)...................................               0.11               0.11               0.55
NOM....................................................               0.54               0.54               0.55
NOM--MNX...............................................               0.56               0.56               0.55
NOM--NDX...............................................               0.11               0.81               0.81
NOM--FB, GOOG and GRPN.................................               0.86               0.91               0.91
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\13\ These fees are applicable to orders routed to ISE that are subject to Rebates and Fees for Adding and
  Removing Liquidity in Select Symbols. See ISE's Schedule of Fees for the complete list of symbols that are
  subject to these fees.

    The Exchange proposes to adopt NOM Routing Fees for Non-Penny Pilot 
Options. NOM recently filed an immediately effective rule change that 
amended its Non-Penny Pilot Options transaction fees in Section 2 of 
Chapter XV to mirror the Fees for Removing Liquidity for options 
overlying Facebook, Inc. (``FB''), Google Inc. (``GOOG'') and Groupon, 
Inc. (``GRPN'').\6\ NOM eliminated pricing for options overlying the 
Nasdaq 100 Index traded under the symbol NDX (``NDX'') and amended its 
pricing for Non-Penny Pilot Options, which includes NDX.\7\ NOM also 
eliminated the FB, GOOG, GRPN and MNX pricing in that filing.\8\ The 
Exchange proposes to rename the current ``NOM'' Routing Fees as ``NOM 
Penny Pilot Options'' to distinguish those Routing Fees from the new 
Routing Fees the Exchange is proposing to adopt for Non-Penny Pilot 
Options. The Exchange proposes to rename the current ``NOM--FB, GOOG 
and GRPN'' Routing Fees as ``NOM Non-Penny Pilot Options'' and not 
otherwise amend those Routing Fees as they represent the amended 
pricing for Non-Penny Pilot Options as described below. This new 
category of Routing Fees would apply to all Non-Penny Pilot Options 
which would include NDX, FB, GOOG and GRPN. Finally, NOM proposes to 
eliminate the ``NOM--NDX,'' and ``NOM--MNX'' Routing Fees as the NOM--
NDX Routing Fees will be replaced by the NOM Non-Penny Pilot Options 
Routing Fees and the NOM--MNX Routing Fees are no longer necessary as 
NOM delisted those options.\9\ The NOM Routing Fees would therefore be 
as follows:
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    \6\ See SR-NASDAQ-2012-114 (not yet published). This immediately 
effective rule filing amended the NOM Non-Penny Pilot Fees for 
Removing Liquidity to assess Customers and NOM Marker Makers a $0.79 
per contract fee and Professionals, Firms and Non-NOM Marker Makers 
a $0.85 per contract fee. NDX, FB, GOOG and GRPN no longer have 
separate pricing, but rather are assessed the fees for Non-Penny 
Pilot Options. MNX pricing was also removed from the NOM's pricing 
in this rule change because MNX was delisted on September 13, 2012.
    \7\ Id.
    \8\ Id.
    \9\ NOM delisted MNX on September 13, 2012.

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                                                                                                  Firm/broker-
                        Exchange                              Customer         Professional    dealer/specialist/
                                                                                                  market maker
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NYSE AMEX..............................................              $0.11              $0.31              $0.55
BATS Penny.............................................               0.55               0.55               0.55
BATS non-Penny.........................................               0.86               0.91               0.91
BOX....................................................               0.11               0.11               0.55
BX Options.............................................               0.11               0.54               0.54
CBOE...................................................               0.11               0.31               0.55
CBOE orders greater than 99 contracts in RUT, RMN, NDX,               0.29               0.31               0.55
 MNX, ETFs, ETNs and HOLDRs............................
C2.....................................................               0.55               0.56               0.55
ISE....................................................               0.11               0.29               0.55
ISE Select Symbols \13\................................               0.31               0.39               0.55
NYSE ARCA (Penny Pilot)................................               0.55               0.55               0.55
NYSE ARCA (Standard)...................................               0.11               0.11               0.55
NOM Penny Pilot Options................................               0.54               0.54               0.55
NOM Non-Penny Pilot Options............................               0.86               0.91               0.91
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\13\ These fees are applicable to orders routed to ISE that are subject to Rebates and Fees for Adding and
  Removing Liquidity in Select Symbols. See ISE's Schedule of Fees for the complete list of symbols that are
  subject to these fees.

    In May 2009, the Exchange adopted Rule 1080(m)(iii)(A) to establish 
Nasdaq Options Services LLC (``NOS''), a member of the Exchange, as the 
Exchange's exclusive order router.\10\ NOS is utilized by the 
Exchange's fully

[[Page 63403]]

automated options trading system, PHLX XL,\11\ to route orders in 
options listed and open for trading on the PHLX XL system to 
destination markets. Each time NOS routes to away markets NOS is 
charged a 0.06 clearing fee and, in the case of certain exchanges, a 
transaction fee is also charged in certain symbols, which fees are 
passed through to the Exchange. The Exchange currently recoups clearing 
and transaction charges incurred by the Exchange as well as certain 
other costs incurred by the Exchange when routing to away markets, such 
as administrative and technical costs associated with operating NOS, 
membership fees at away markets, and technical costs associated with 
routing options.\12\
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    \10\ See Securities Exchange Act Release No. 59995 (May 28, 
2009), 74 FR 26750 (June 3, 2009) (SR-Phlx-2009-32).
    \11\ This proposal refers to ``PHLX XL'' as the Exchange's 
automated options trading system. In May 2009 the Exchange enhanced 
the system and adopted corresponding rules referring to the system 
as ``Phlx XL II.'' See Securities Exchange Act Release No. 59995 
(May 28, 2009), 74 FR 26750 (June 3, 2009) (SR-Phlx-2009-32). The 
Exchange intends to submit a separate technical proposed rule change 
that would change all references to the system from ``Phlx XL II'' 
to ``PHLX XL'' for branding purposes.
    \12\ In addition to membership fees and transaction fees, the 
Exchange also incurs an Options Regulatory Fee when routing to an 
away market that assesses that fee. The Exchange's proposed Routing 
Fees for NOM Non-Penny Pilot Options include NOM's Fees for Removing 
Liquidity of $0.79 per contract fee for Customers and NOM Market 
Makers and $0.85 per contract fee for Professionals, Firms and Non-
NOM Market Makers (which Fees for Removing Liquidity were the same 
fees assessed for FB, GOOG and GRPN), as well as a 0.06 clearing 
cost and another 0.05 per contract fee associated with 
administrative and technical costs for operating NOS. At this time, 
the Exchange has determined to assess a maximum fee of 0.91 per 
contract for routing Non-Penny Pilot Options to NOM. While this does 
not recover all of the Exchange's costs, the Exchange has determined 
at this time to not assess more than a $0.91 per contract Routing 
Fee.
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    As with all fees, the Exchange may adjust these Routing Fees in 
response to competitive conditions by filing a new proposed rule 
change.
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.
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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 proposed NOM Non-Penny Pilot Options 
Routing Fees are reasonable because they seek to recoup costs that are 
incurred by the Exchange when routing Customer, Professional, Firm, 
Broker-Dealer, Specialist and Market Maker orders to NOM on behalf of 
members, respectively. Each destination market's transaction charge 
varies and there is a standard clearing charge for each transaction 
incurred by the Exchange along with other administrative and technical 
costs that are incurred by the Exchange. The Exchange believes that the 
proposed Routing Fees would enable the Exchange to recover the remove 
fees assessed to market participants by NOM when routing Non-Penny 
Pilot Options (including NDX, FB, GOOG and GRPN), plus clearing and 
other administrative and technical fees for the execution of Customer, 
Professional, Firm, Broker-Dealer, Specialist and Market Maker orders 
when routed to NOM. The Exchange also believes that the proposed NOM 
Non-Penny Pilot Options Routing Fees are equitable and not unfairly 
discriminatory because they would be uniformly applied to all Customer, 
Professional, Firm, Broker-Dealer, Specialist and Market Maker orders 
that are routed to NOM.

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. To the contrary, Phlx Routing 
Fees seek to recoup costs for Routing Orders to other exchanges on 
behalf of its members. Options Participants may choose to mark the 
order as ineligible for routing to avoid incurring these fees.\15\
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    \15\ See Rule 1066(h) (Certain Types of Orders Defined) and 
1080(b)(i)(A) (PHLX XL and PHLX XL II).
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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.\16\ 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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    \16\ 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-2012-120 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-2012-120. 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 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-2012-120 and should be 
submitted on or before November 6, 2012.


[[Page 63404]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-25331 Filed 10-15-12; 8:45 am]
BILLING CODE 8011-01-P