Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by NASDAQ OMX PHLX, Inc. Relating to Fees for the Top of PHLX Options (“TOPO”) Data Feed, 32675-32678 [E9-15997]

Download as PDF Federal Register / Vol. 74, No. 129 / Wednesday, July 8, 2009 / Notices program that imposes a fee for the NASDAQ Last Sale Data Feeds for an additional three months will be beneficial to investors and in the public interest, in that it is intended to allow continued broad public dissemination of increased real-time pricing information. In addition, extending the pilot program for an additional three months will allow NASDAQ, consistent with its representation, to file within 30 days, the public to comment on, and the Commission to analyze consistent with the Order and in light of Section 19(b) of the Act, a proposal to permanently approve the fee for NASDAQ Last Sale Data Feeds.18 The Commission finds good cause for approving the proposed rule change before the thirtieth day after the date of publication of notice of filing thereof in the Federal Register. Accelerating approval of this proposal is expected to benefit investors by continuing to facilitate their access to widespread, free, real-time pricing information contained in the NASDAQ Last Sale Data Feeds. Therefore, the Commission finds good cause, consistent with Section 19(b)(2) of the Act,19 to approve the proposed rule change on an accelerated basis to extend the operation of the pilot until September 30, 2009. V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act, that the proposed rule change (SR–NASDAQ– 2009–062) is hereby approved on an accelerated basis until September 30, 2009. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 Elizabeth M. Murphy. Secretary. [FR Doc. E9–16002 Filed 7–7–09; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–60202; File No. SR–Phlx– 2009–54)] Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by NASDAQ OMX PHLX, Inc. Relating to Fees for the Top of PHLX Options (‘‘TOPO’’) Data Feed June 30, 2009. 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 June 30, 2009, NASDAQ OMX PHLX, Inc. (‘‘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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its fee schedule by establishing subscriber fees for a direct data product related to the trading of standardized options on the Exchange’s enhanced electronic trading platform for options, Phlx XL II.3 Specifically, the Exchange is proposing to adopt fees for the Top of Phlx Options (‘‘TOPO’’), a direct data feed product that features the Exchange’s best bid and offer position, with aggregate size and last sale information on the Phlx XL II system. The text of the proposed rule change is available on the Exchange’s Web site at https:// nasdaqomxphlx.cchwallstreet.com/ NASDAQOMXPHLX/Filings/, at the principal office of the Exchange, and at the Commission’s Public Reference Room. mstockstill on DSKH9S0YB1PROD with NOTICES II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 18 The Exchange has represented that it will file a proposed rule change within thirty days of filing of this proposal seeking permanent approval of the NASDAQ Last Sale Data Feeds pilot program. See supra note 3. 19 15 U.S.C. 78s(b)(2). 20 17 CFR 200.30–3(a)(12). VerDate Nov<24>2008 17:23 Jul 07, 2009 Jkt 217001 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 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 59995 (May 28, 2009), 74 FR 26750 (June 3, 2009) (SR– Phlx–2009–32). PO 00000 32675 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 On June 5, 2009, the Exchange launched the Phlx XL II system, which is subject to a symbol-by-symbol rollout schedule expected to last up to 12 weeks. In conjunction with the launch and rollout of the Phlx XL II system, the Exchange is developing TOPO. TOPO will provide to subscribers a direct data feed that includes the Exchange’s best bid and offer position, with aggregate size, based on displayable order and quoting interest on the Phlx XL II system. The data contained in the TOPO data feed is identical to the data sent to the processor for the Options Price Regulatory Authority (‘‘OPRA’’), and the TOPO and OPRA data leave the Phlx XL II System at the same time. Currently, the Exchange does not make market data products such as TOPO available. Accordingly, there are no current fees for distribution or use of these products on the Exchange’s fee schedule. In coordination with the projected completion of the rollout of the Phlx XL II system, the Exchange proposes to charge monthly fees to distributors, beginning August 1, 2009, for use of TOPO. The monthly ‘‘Distributor Fee’’ charged will depend on whether the distributor is an ‘‘Internal Distributor’’ or an ‘‘External Distributor,’’ as defined below. Under the proposal, the Exchange’s fee schedule will reflect that a ‘‘distributor’’ of NASDAQ OMX PHLX data is any entity that receives a feed or data file of data directly from NASDAQ OMX PHLX or indirectly through another entity and then distributes it either internally (within that entity) or externally (outside that entity), and that all distributors would be required to execute a NASDAQ OMX PHLX distributor agreement.4 Internal Distributor An Internal Distributor is an organization that subscribes to the Exchange for the use of TOPO, and is permitted by agreement with the Exchange to provide TOPO data to internal users (i.e., users within their 1 15 2 17 Frm 00147 Fmt 4703 Sfmt 4703 4 The Exchange notes that the proposed definition of ‘‘distributor’’ and references to internal and external distribution are identical to those set forth in NASDAQ Rule 7019(c). E:\FR\FM\08JYN1.SGM 08JYN1 32676 Federal Register / Vol. 74, No. 129 / Wednesday, July 8, 2009 / Notices own organization). Internal Distributors would be charged a monthly fee of $2,000 per organization. External Distributor An External Distributor is an organization that subscribes to the Exchange for the use of TOPO, and is permitted by agreement with the Exchange to provide TOPO data to both internal users and to external users (i.e., users outside of their own organization). External Distributors will be charged a monthly fee of $2,500 per organization. mstockstill on DSKH9S0YB1PROD with NOTICES 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,5 in general and with Section 6(b)(4) of the Act,6 in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility or system which Phlx operates or controls. The Exchange believes that the proposed rule change is also consistent with the provisions of Section 6(b)(5) of the Act,7 in that it is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest; and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers, or to regulate by virtue of any authority conferred by the Act matters not related to the purposes of the Act or the administration of the Exchange. The Exchange believes that the proposed rule change is also consistent with Section 6(b)(8) of the Act 8 in that it does not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act, as set forth in more detail below. In adopting Regulation NMS, the Commission granted self-regulatory organizations and broker-dealers increased authority and flexibility to offer new and unique market data to the public. It was believed that this authority would expand the amount of data available to consumers, and also 5 15 U.S.C. 78f. U.S.C. 78f(b)(4). 7 15 U.S.C. 78f(b)(5). 8 15 U.S.C. 78f(b)(8). 6 15 VerDate Nov<24>2008 18:52 Jul 07, 2009 Jkt 217001 spur innovation and competition for the provision of market data. The Commission has recently issued an order firmly establishing that in reviewing non-core data products such as TOPO, the Commission will utilize a market-based approach that relies primarily on competitive forces to determine the terms on which non-core data is made available to investors.9 The Commission adopted a two-part test: The first is to ask whether the exchange was subject to significant competitive forces in setting the terms of its proposal for noncore data, including the level of any fees. If an exchange was subject to significant competitive forces in setting the terms of a proposal, the Commission will approve the proposal unless it determines that there is a substantial countervailing basis to find that the terms nevertheless fail to meet an applicable requirement of the Exchange Act or the rules thereunder. If, however, the exchange was not subject to significant competitive forces in setting the terms of a proposal for non-core data, the Commission will require the exchange to provide a substantial basis, other than competitive forces, in its proposed rule change demonstrating that the terms of the proposal are equitable, fair, reasonable, and not unreasonably discriminatory.10 This standard begins from the premise that no Commission rule requires exchanges or market participants either to distribute non-core data to the public or to display non-core data to investors.11 In its NetCoalition Order the Commission concluded that ‘‘at least two broad types of significant competitive forces applied to NYSE Arca in setting the terms of its Proposal to distribute the ArcaBook data: (1) NYSE Arca’s compelling need to attract order flow from market participants; and (2) the availability to market participants of alternatives to purchasing the ArcaBook data. The Commission conducted an exhaustive 14-page review of these two competitive forces before concluding that the availability of alternatives, as well as the compelling need to attract order flow, imposed significant competitive pressure on the exchange’s need to act equitably, fairly, and reasonably in setting the terms of the fees for its noncore data product.12 The market data provided in TOPO is non-core data that is governed by the 9 Securities Exchange Act Release No. 57917 [sic] (Dec. 2, 2008) (NetCoalition Order’’ resolving File No. SR–NYSEArca–2006–21). 10 Id. at 48–49. 11 Id. at 4. 12 Id. at 51–65. The Commission then spent an additional 36 pages (65–101) analyzing and refuting comments challenging the Commission’s competition analysis. PO 00000 Frm 00148 Fmt 4703 Sfmt 4703 same analysis the Commission set forth in the NetCoalition Order. As with the NYSE Arca depth-of-book product, no rule requires Phlx or any other exchange to offer top of book data; nor are vendors required to purchase or display that data. Additionally, Phlx is constrained by the same two competitive forces in the options market as the Commission found are present in the proposal of the International Securities Exchange, Inc. (‘‘ISE’’) to establish fees for a real-time depth of market data offering, the ISE Depth of Market Data Feed (‘‘Depth of Market’’).13 First, Phlx has a compelling need to attract order flow from market participants, just as ISE, in order to maintain its share of trading volume. This compelling need to attract order flow imposes significant pressure on Phlx to act reasonably in setting its fees for Phlx market data, particularly given that the market participants that will pay such fees often will be the same market participants from whom Phlx must attract order flow. These market participants include broker-dealers that control the handling of a large volume of customer and proprietary order flow. Given the portability of order flow from one exchange to another, any exchange that sought to charge unreasonably high data fees would risk alienating many of the same customers on whose orders it depends for competitive survival. As an illustration of the intensity of the competition for options order flow among the seven U.S. options exchanges, the ISE and Chicago Board Options Exchange, Inc. (‘‘CBOE’’) each enjoy close to thirty percent market share of volume, followed by Phlx at close to twenty percent market share, followed by four other exchanges with meaningful market share. Phlx currently trades options on 7 proprietary index products that are not traded on any other exchange. These 7 options currently represent less than 0.04% of Phlx’s total contract volume. Given the small percentage of Phlx’s total contract volume represented by these 7 products, the Exchange believes that the inclusion of data on these products in the TOPO product should not confer market power on Phlx to compel market participants to purchase the entire Phlx data feed. The Exchange therefore believes that the inclusion of top-of-book data for these products in Phlx’s TOPO product does not undermine the fact that Phlx is subject 13 See Securities Exchange Act Release No. 59949 (May 20, 2009), 74 FR 25593 (May 28, 2009) (SR– ISE–2007–97) (Order Approving Proposed Rule Change, as Modified by Amendment No. 1, Relating to Market Data Fees). E:\FR\FM\08JYN1.SGM 08JYN1 mstockstill on DSKH9S0YB1PROD with NOTICES Federal Register / Vol. 74, No. 129 / Wednesday, July 8, 2009 / Notices to significant competitive forces in setting the terms of its proposal. Second, Phlx is constrained in pricing TOPO by the availability to market participants of alternatives to purchasing TOPO. Phlx must consider the extent to which market participants would choose one or more alternatives instead of purchasing the exchange’s data. For example, although the TOPO data feed is separate from the core data feed made available by OPRA, all the information available in TOPO is included in the core data feed. The core OPRA data is widely distributed and relatively inexpensive, thus constraining Phlx’s ability to price TOPO. Additionally, both ISE and CBOE are potential competitors because each exchange enjoys greater market share and thus the ability to offer a topof-book product that would compete favorably with TOPO. If the Commission finds that Phlx is subject to significant competitive forces in setting the terms of TOPO pricing, then the Commission should approve the proposal in the absence of a substantial countervailing basis to find that its terms nevertheless fail to meet an applicable requirement of the Act or the rules thereunder. Phlx submits that no such countervailing basis exists. To the contrary, Phlx’s considerations in setting the fees for TOPO are virtually identical to those the Commission approved in the NetCoaltion Order. First, the proposed fees for TOPO are lower for Internal Distributors than for External Distributors. Because Internal Distributors are by definition more limited in the scope of their distribution of TOPO data than External Distributors, it is reasonable to expect that Internal Distributors will provide TOPO data to a smaller number of internal subscribers. Conversely, External Distributors can reasonably be expected to distribute the TOPO data to a higher number of subscribers because they do not have the same limitation. Accordingly, the Exchange will charge a higher fee to External Distributors than to Internal Distributors. The fees therefore do not unreasonably discriminate among types of subscribers, such as by favoring participants in the Phlx market or penalizing participants in other markets. Second, Phlx projects that the total revenues generated by the TOPO fee initially will amount to less than the $8 million per year that NYSE Arca projected would be generated by its ArcaBook data.14 14 Id. at 101–104. [sic] VerDate Nov<24>2008 17:23 Jul 07, 2009 Jkt 217001 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, the market for options orders and executions is already highly competitive and Phlx’s proposal is itself pro-competitive in several ways. First, the TOPO data feed offers a competitive, lower-priced alternative to the consolidated data OPRA feed for users and situations where consolidated data is unnecessary. Second, the Phlx believes that offering the TOPO data feed will help attract new users and new order flow to the Phlx market, thereby improving Phlx’s ability to compete in the market for options order flow and executions. 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 Exchange requests accelerated approval in order to expedite the availability of TOPO, which should promote consistency and transparency in the Exchange’s markets. The Exchange believes that accelerated approval should provide customers, and broker-dealers that make routing decisions on behalf of customers, with greater transparency in the Phlx markets on an expedited basis. Once a full 21-day comment period has taken place, the Exchange believes (in the absence of any comments that would require a response) that it is appropriate for the Commission to accelerate the operative date for TOPO fees because the proposed rule change is in the public interest and supports the protection of investors by allowing data distributors to make additional market data available to investors that choose to purchase it. Widespread availability of Phlx options data benefits average investors by improving access to realtime market data that investors can use to make better-informed trading decisions. Additionally, to the extent users can substitute the lower-priced TOPO data for the higher-priced consolidated data feed, those users will have the opportunity to pass the savings on to investors in the form of lower overall trading costs. Within 35 days of the date of publication of this notice in the Federal PO 00000 Frm 00149 Fmt 4703 Sfmt 4703 32677 Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission shall: (a) by order approve such proposed rule change, or (b) institute proceedings to determine whether the proposed rule change should be disapproved. 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 (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–Phlx–2009–54 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–2009–54. 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 (https://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, 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 E:\FR\FM\08JYN1.SGM 08JYN1 32678 Federal Register / Vol. 74, No. 129 / Wednesday, July 8, 2009 / Notices available publicly. All submissions should refer to File Number SR–Phlx– 2009–54 and should be submitted on or before July 29, 2009. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Elizabeth M. Murphy, Secretary. [FR Doc. E9–15997 Filed 7–7–09; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–60195; File No. SR– NYSEArca–2009–55] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To List and Trade Shares of the Dent Tactical ETF June 30, 2009. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’ or ‘‘Exchange Act’’)1 and Rule 19b–4 thereunder,2 notice is hereby given that, on June 18, 2009, NYSE Arca, Inc. (‘‘NYSE Arca’’ 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. mstockstill on DSKH9S0YB1PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to list and trade the following under NYSE Arca Equities Rule 8.600 (‘‘Managed Fund Shares’’): The Dent Tactical ETF. The text of the proposed rule change is available on the Exchange’s Web site at https://www.nyx.com, at the Exchange’s principal office, and at the Commission’s Public Reference Room.3 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 self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received 15 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 E-mail from Michael Cavalier, Chief Counsel, NYSE Euronext, to Edward Cho, Special Counsel, Division of Trading and Markets, Commission, dated June 30, 2009 (‘‘June 30 E-mail’’). 1 15 VerDate Nov<24>2008 17:23 Jul 07, 2009 Jkt 217001 on the proposed rule change. The text of those 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 parts 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 list and trade the following Managed Fund Shares 4 (‘‘Shares’’) under NYSE Arca Equities Rule 8.600: The Dent Tactical ETF (‘‘Fund’’).5 The Shares will be offered by AdvisorShares Trust (‘‘Trust’’), a statutory trust organized under the laws of the State of Delaware and registered with the Commission as an open-end management investment company.6 According to the Registration Statement, the Fund is a ‘‘fund of funds,’’ which means that the Fund seeks to achieve its investment objective by investing primarily in other exchange-traded funds (‘‘ETFs’’) that are 4 A Managed Fund Share is a security that represents an interest in an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a) (‘‘1940 Act’’) organized as an open-end investment company or similar entity that invests in a portfolio of securities selected by its investment advisor consistent with its investment objectives and policies. In contrast, an open-end investment company that issues Investment Company Units, listed and traded on the Exchange under NYSE Arca Equities Rule 5.2(j)(3), seeks to provide investment results that correspond generally to the price and yield performance of a specific foreign or domestic stock index, fixed income securities index, or combination thereof. 5 The Commission previously approved listing and trading on the Exchange of the following actively managed funds under Rule 8.600. See Securities Exchange Act Release No. 57619 (April 4, 2008), 73 FR 19544 (April 10, 2008) (SR– NYSEArca–2008–25) (order approving Rule 8.600 and Exchange listing and trading of PowerShares Active AlphaQ Fund, PowerShares Active Alpha Multi-Cap Fund, PowerShares Active Mega-Cap Portfolio and PowerShares Active Low Duration Portfolio); Securities Exchange Act Release No. 57801 (May 8, 2008), 73 FR 27878 (May 14, 2008) (SR–NYSEArca–2008–31) (order approving Exchange listing and trading of twelve activelymanaged funds of the WisdomTree Trust); Securities Exchange Act Release No. 59826 (April 28, 2009), 74 FR 20512 (May 4, 2009) (SR– NYSEArca–2009–22) (order approving Exchange listing and trading of Grail American Beacon Large Cap Value ETF). 6 The Trust is registered under the 1940 Act. On June 9, 2009, the Trust filed with the Commission Form N–1A under the Securities Act of 1933 (15 U.S.C. 77a), and under the 1940 Act relating to the Fund (File Nos. 333–157876 and 811–22110) (‘‘Registration Statement’’). The Trust has also filed a Third Amended Application for an Order under Sections 6(c) and 17(b) of the Investment Company Act of 1940 (‘‘1940 Act’’) for an exemption from certain provisions of the 1940 Act and rules thereunder (File No. 812–13488). The description of the operation of the Trust and the Fund herein is based on the Registration Statement. PO 00000 Frm 00150 Fmt 4703 Sfmt 4703 registered under 1940 Act and also shares of certain exchange-traded products that are not registered as investment companies under the 1940 Act (collectively, the ‘‘Underlying ETPs’’).7 Unlike certain of the Underlying ETPs, which may be based on underlying indexes, the Fund will not track or replicate a specific index. The Fund charges its own expenses and also indirectly bears a proportionate share of the Underlying ETPs’ expenses. Underlying ETPs will be listed on a national securities exchange and such Underlying ETPs may hold non-U.S. issues. The investment advisor to the Fund is AdvisorShares Investments, LLC (the ‘‘Advisor’’). The day-to-day portfolio management of the Fund is provided by HS Dent Investment Management, LLC, the sub-advisor to the Fund (‘‘SubAdvisor’’). The Sub-Advisor selects a group of Underlying ETPs for the Fund in which to invest pursuant to an ‘‘active’’ management strategy for asset allocation, security selection and portfolio construction. The Fund will periodically change the composition of its portfolio to best meet its investment objective. Neither the Advisor nor the Sub-Advisor is affiliated with a brokerdealer.8 7 Underlying ETPs include Investment Company Units (as described in NYSE Arca Equities Rule 5.2(j)(3)); Index-Linked Securities (as described in NYSE Arca Equities Rule 5.2(j)(6)); Portfolio Depositary Receipts (as described in NYSE Arca Equities Rule 8.100); Trust Issued Receipts (as described in NYSE Arca Equities Rule 8.200); Commodity-Based Trust Shares (as described in NYSE Arca Equities Rule 8.201); Currency Trust Shares (as described in NYSE Arca Equities Rule 8.202); Commodity Index Trust Shares (as described in NYSE Arca Equities Rule 8.203); Trust Units (as described in NYSE Arca Equities Rule 8.500); and Managed Fund Shares (as described in NYSE Arca Equities Rule 8.600). 8 The Exchange represents that the Advisor, as the investment advisor of the Fund, and its related personnel, are subject to Investment Advisers Act Rule 204A–1. This Rule specifically requires the adoption of a code of ethics by an investment advisor to include, at a minimum: (i) Standards of business conduct that reflect the firm’s/personnel fiduciary obligations; (ii) provisions requiring supervised persons to comply with applicable Federal securities laws; (iii) provisions that require all access persons to report, and the firm to review, their personal securities transactions and holdings periodically as specifically set forth in Rule 204A– 1; (iv) provisions requiring supervised persons to report any violations of the code of ethics promptly to the chief compliance officer (‘‘CCO’’) or, provided the CCO also receives reports of all violations, to other persons designated in the code of ethics; and (v) provisions requiring the investment advisor to provide each of the supervised persons with a copy of the code of ethics with an acknowledgement by said supervised persons. In addition, Rule 206(4)–7 under the Advisers Act makes it unlawful for an investment advisor to provide investment advice to clients unless such investment advisor has (i) adopted and implemented written policies and procedures reasonably designed to prevent violation, by the E:\FR\FM\08JYN1.SGM 08JYN1

Agencies

[Federal Register Volume 74, Number 129 (Wednesday, July 8, 2009)]
[Notices]
[Pages 32675-32678]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-15997]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60202; File No. SR-Phlx-2009-54)]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by NASDAQ OMX PHLX, Inc. Relating to Fees for the Top of PHLX 
Options (``TOPO'') Data Feed

June 30, 2009.
    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 June 30, 2009, NASDAQ OMX PHLX, Inc. (``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.
---------------------------------------------------------------------------

    \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 its fee schedule by establishing 
subscriber fees for a direct data product related to the trading of 
standardized options on the Exchange's enhanced electronic trading 
platform for options, Phlx XL II.\3\ Specifically, the Exchange is 
proposing to adopt fees for the Top of Phlx Options (``TOPO''), a 
direct data feed product that features the Exchange's best bid and 
offer position, with aggregate size and last sale information on the 
Phlx XL II system.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 59995 (May 28, 
2009), 74 FR 26750 (June 3, 2009) (SR-Phlx-2009-32).
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    The text of the proposed rule change is available on the Exchange's 
Web site at https://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, 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
    On June 5, 2009, the Exchange launched the Phlx XL II system, which 
is subject to a symbol-by-symbol rollout schedule expected to last up 
to 12 weeks. In conjunction with the launch and rollout of the Phlx XL 
II system, the Exchange is developing TOPO. TOPO will provide to 
subscribers a direct data feed that includes the Exchange's best bid 
and offer position, with aggregate size, based on displayable order and 
quoting interest on the Phlx XL II system. The data contained in the 
TOPO data feed is identical to the data sent to the processor for the 
Options Price Regulatory Authority (``OPRA''), and the TOPO and OPRA 
data leave the Phlx XL II System at the same time.
    Currently, the Exchange does not make market data products such as 
TOPO available. Accordingly, there are no current fees for distribution 
or use of these products on the Exchange's fee schedule. In 
coordination with the projected completion of the rollout of the Phlx 
XL II system, the Exchange proposes to charge monthly fees to 
distributors, beginning August 1, 2009, for use of TOPO. The monthly 
``Distributor Fee'' charged will depend on whether the distributor is 
an ``Internal Distributor'' or an ``External Distributor,'' as defined 
below.
    Under the proposal, the Exchange's fee schedule will reflect that a 
``distributor'' of NASDAQ OMX PHLX data is any entity that receives a 
feed or data file of data directly from NASDAQ OMX PHLX or indirectly 
through another entity and then distributes it either internally 
(within that entity) or externally (outside that entity), and that all 
distributors would be required to execute a NASDAQ OMX PHLX distributor 
agreement.\4\
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    \4\ The Exchange notes that the proposed definition of 
``distributor'' and references to internal and external distribution 
are identical to those set forth in NASDAQ Rule 7019(c).
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Internal Distributor

    An Internal Distributor is an organization that subscribes to the 
Exchange for the use of TOPO, and is permitted by agreement with the 
Exchange to provide TOPO data to internal users (i.e., users within 
their

[[Page 32676]]

own organization). Internal Distributors would be charged a monthly fee 
of $2,000 per organization.

External Distributor

    An External Distributor is an organization that subscribes to the 
Exchange for the use of TOPO, and is permitted by agreement with the 
Exchange to provide TOPO data to both internal users and to external 
users (i.e., users outside of their own organization). External 
Distributors will be charged a monthly fee of $2,500 per organization.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\5\ in general and with 
Section 6(b)(4) of the Act,\6\ in particular, in that it provides for 
the equitable allocation of reasonable dues, fees and other charges 
among members and issuers and other persons using any facility or 
system which Phlx operates or controls.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is also 
consistent with the provisions of Section 6(b)(5) of the Act,\7\ in 
that it is designed to promote just and equitable principles of trade, 
to foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities, to remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest; and is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers, or to regulate by virtue of 
any authority conferred by the Act matters not related to the purposes 
of the Act or the administration of the Exchange.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is also 
consistent with Section 6(b)(8) of the Act \8\ in that it does not 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act, as set forth in more detail 
below.
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    \8\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    In adopting Regulation NMS, the Commission granted self-regulatory 
organizations and broker-dealers increased authority and flexibility to 
offer new and unique market data to the public. It was believed that 
this authority would expand the amount of data available to consumers, 
and also spur innovation and competition for the provision of market 
data.
    The Commission has recently issued an order firmly establishing 
that in reviewing non-core data products such as TOPO, the Commission 
will utilize a market-based approach that relies primarily on 
competitive forces to determine the terms on which non-core data is 
made available to investors.\9\ The Commission adopted a two-part test:

    \9\ Securities Exchange Act Release No. 57917 [sic] (Dec. 2, 
2008) (NetCoalition Order'' resolving File No. SR-NYSEArca-2006-21).

    The first is to ask whether the exchange was subject to 
significant competitive forces in setting the terms of its proposal 
for non-core data, including the level of any fees. If an exchange 
was subject to significant competitive forces in setting the terms 
of a proposal, the Commission will approve the proposal unless it 
determines that there is a substantial countervailing basis to find 
that the terms nevertheless fail to meet an applicable requirement 
of the Exchange Act or the rules thereunder. If, however, the 
exchange was not subject to significant competitive forces in 
setting the terms of a proposal for non-core data, the Commission 
will require the exchange to provide a substantial basis, other than 
competitive forces, in its proposed rule change demonstrating that 
the terms of the proposal are equitable, fair, reasonable, and not 
unreasonably discriminatory.\10\
---------------------------------------------------------------------------

    \10\ Id. at 48-49.

    This standard begins from the premise that no Commission rule 
requires exchanges or market participants either to distribute non-core 
data to the public or to display non-core data to investors.\11\
---------------------------------------------------------------------------

    \11\ Id. at 4.
---------------------------------------------------------------------------

    In its NetCoalition Order the Commission concluded that ``at least 
two broad types of significant competitive forces applied to NYSE Arca 
in setting the terms of its Proposal to distribute the ArcaBook data: 
(1) NYSE Arca's compelling need to attract order flow from market 
participants; and (2) the availability to market participants of 
alternatives to purchasing the ArcaBook data. The Commission conducted 
an exhaustive 14-page review of these two competitive forces before 
concluding that the availability of alternatives, as well as the 
compelling need to attract order flow, imposed significant competitive 
pressure on the exchange's need to act equitably, fairly, and 
reasonably in setting the terms of the fees for its non-core data 
product.\12\
---------------------------------------------------------------------------

    \12\ Id. at 51-65. The Commission then spent an additional 36 
pages (65-101) analyzing and refuting comments challenging the 
Commission's competition analysis.
---------------------------------------------------------------------------

    The market data provided in TOPO is non-core data that is governed 
by the same analysis the Commission set forth in the NetCoalition 
Order. As with the NYSE Arca depth-of-book product, no rule requires 
Phlx or any other exchange to offer top of book data; nor are vendors 
required to purchase or display that data. Additionally, Phlx is 
constrained by the same two competitive forces in the options market as 
the Commission found are present in the proposal of the International 
Securities Exchange, Inc. (``ISE'') to establish fees for a real-time 
depth of market data offering, the ISE Depth of Market Data Feed 
(``Depth of Market'').\13\
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    \13\ See Securities Exchange Act Release No. 59949 (May 20, 
2009), 74 FR 25593 (May 28, 2009) (SR-ISE-2007-97) (Order Approving 
Proposed Rule Change, as Modified by Amendment No. 1, Relating to 
Market Data Fees).
---------------------------------------------------------------------------

    First, Phlx has a compelling need to attract order flow from market 
participants, just as ISE, in order to maintain its share of trading 
volume. This compelling need to attract order flow imposes significant 
pressure on Phlx to act reasonably in setting its fees for Phlx market 
data, particularly given that the market participants that will pay 
such fees often will be the same market participants from whom Phlx 
must attract order flow. These market participants include broker-
dealers that control the handling of a large volume of customer and 
proprietary order flow. Given the portability of order flow from one 
exchange to another, any exchange that sought to charge unreasonably 
high data fees would risk alienating many of the same customers on 
whose orders it depends for competitive survival.
    As an illustration of the intensity of the competition for options 
order flow among the seven U.S. options exchanges, the ISE and Chicago 
Board Options Exchange, Inc. (``CBOE'') each enjoy close to thirty 
percent market share of volume, followed by Phlx at close to twenty 
percent market share, followed by four other exchanges with meaningful 
market share.
    Phlx currently trades options on 7 proprietary index products that 
are not traded on any other exchange. These 7 options currently 
represent less than 0.04% of Phlx's total contract volume. Given the 
small percentage of Phlx's total contract volume represented by these 7 
products, the Exchange believes that the inclusion of data on these 
products in the TOPO product should not confer market power on Phlx to 
compel market participants to purchase the entire Phlx data feed. The 
Exchange therefore believes that the inclusion of top-of-book data for 
these products in Phlx's TOPO product does not undermine the fact that 
Phlx is subject

[[Page 32677]]

to significant competitive forces in setting the terms of its proposal.
    Second, Phlx is constrained in pricing TOPO by the availability to 
market participants of alternatives to purchasing TOPO. Phlx must 
consider the extent to which market participants would choose one or 
more alternatives instead of purchasing the exchange's data. For 
example, although the TOPO data feed is separate from the core data 
feed made available by OPRA, all the information available in TOPO is 
included in the core data feed. The core OPRA data is widely 
distributed and relatively inexpensive, thus constraining Phlx's 
ability to price TOPO. Additionally, both ISE and CBOE are potential 
competitors because each exchange enjoys greater market share and thus 
the ability to offer a top-of-book product that would compete favorably 
with TOPO.
    If the Commission finds that Phlx is subject to significant 
competitive forces in setting the terms of TOPO pricing, then the 
Commission should approve the proposal in the absence of a substantial 
countervailing basis to find that its terms nevertheless fail to meet 
an applicable requirement of the Act or the rules thereunder. Phlx 
submits that no such countervailing basis exists.
    To the contrary, Phlx's considerations in setting the fees for TOPO 
are virtually identical to those the Commission approved in the 
NetCoaltion Order. First, the proposed fees for TOPO are lower for 
Internal Distributors than for External Distributors. Because Internal 
Distributors are by definition more limited in the scope of their 
distribution of TOPO data than External Distributors, it is reasonable 
to expect that Internal Distributors will provide TOPO data to a 
smaller number of internal subscribers. Conversely, External 
Distributors can reasonably be expected to distribute the TOPO data to 
a higher number of subscribers because they do not have the same 
limitation. Accordingly, the Exchange will charge a higher fee to 
External Distributors than to Internal Distributors. The fees therefore 
do not unreasonably discriminate among types of subscribers, such as by 
favoring participants in the Phlx market or penalizing participants in 
other markets. Second, Phlx projects that the total revenues generated 
by the TOPO fee initially will amount to less than the $8 million per 
year that NYSE Arca projected would be generated by its ArcaBook 
data.\14\
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    \14\ Id. at 101-104. [sic]
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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. To the contrary, the market for 
options orders and executions is already highly competitive and Phlx's 
proposal is itself pro-competitive in several ways. First, the TOPO 
data feed offers a competitive, lower-priced alternative to the 
consolidated data OPRA feed for users and situations where consolidated 
data is unnecessary. Second, the Phlx believes that offering the TOPO 
data feed will help attract new users and new order flow to the Phlx 
market, thereby improving Phlx's ability to compete in the market for 
options order flow and executions.

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 Exchange requests accelerated approval in order to expedite the 
availability of TOPO, which should promote consistency and transparency 
in the Exchange's markets.
    The Exchange believes that accelerated approval should provide 
customers, and broker-dealers that make routing decisions on behalf of 
customers, with greater transparency in the Phlx markets on an 
expedited basis. Once a full 21-day comment period has taken place, the 
Exchange believes (in the absence of any comments that would require a 
response) that it is appropriate for the Commission to accelerate the 
operative date for TOPO fees because the proposed rule change is in the 
public interest and supports the protection of investors by allowing 
data distributors to make additional market data available to investors 
that choose to purchase it. Widespread availability of Phlx options 
data benefits average investors by improving access to real-time market 
data that investors can use to make better-informed trading decisions. 
Additionally, to the extent users can substitute the lower-priced TOPO 
data for the higher-priced consolidated data feed, those users will 
have the opportunity to pass the savings on to investors in the form of 
lower overall trading costs.
    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission shall: (a) by order approve 
such proposed rule change, or (b) institute proceedings to determine 
whether the proposed rule change should be disapproved.

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 (https://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2009-54 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-2009-54. 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 (https://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, 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

[[Page 32678]]

available publicly. All submissions should refer to File Number SR-
Phlx-2009-54 and should be submitted on or before July 29, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-15997 Filed 7-7-09; 8:45 am]
BILLING CODE 8010-01-P
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