Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of Filing of Proposed Rule Change Relating to Collection of Exchange Fees, 67003-67004 [E9-29969]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 74, Number 241 (Thursday, December 17, 2009)]
[Notices]
[Pages 67003-67004]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-29969]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61141; File No. SR-Phlx-2009-101]


Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of 
Filing of Proposed Rule Change Relating to Collection of Exchange Fees

December 10, 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 December 8, 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.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Exchange Rule 909, Security for 
Exchange Fees and Other Claims, to require member organizations to 
provide a clearing account number at the National Securities Clearing 
Corporation (``NSCC'') for purposes of permitting the Exchange to debit 
any undisputed or final fees, fines, charges and/or other monetary 
sanctions or monies due and owing to the Exchange.
    The text of the proposed rule change is available on the Exchange's 
Web site at https://nasdaqomxphlx.cchwallstreet.com/NASDAQOMXPHLX/Filings/, on the Commission's Web site at https://www.sec.gov, 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 create an efficient 
method of collecting undisputed or final fees, fines, charges and/or 
other monetary sanctions or monies due and owing to the Exchange.\3\ 
This proposal will provide a cost savings to the Exchange in that it 
will alleviate administrative processes related to the collection of 
monies owed to the Exchange. Collection matters divert staff resources 
away from the Exchange's regulatory and business purposes. In addition, 
the debiting process will prevent member accounts from becoming 
overdue.
---------------------------------------------------------------------------

    \3\ The Exchange will not debit accounts for fees that are 
unusually large or for special circumstances, unless such debiting 
is requested by the member.
---------------------------------------------------------------------------

    The Exchange proposes to eliminate the requirement to provide and 
maintain a security deposit. Currently, Rule 909 requires member 
organizations and applicants for registration to provide and maintain a 
security deposit in an amount not to exceed $50,000, unless the member 
organization maintains excess net capital of at least the amount 
established by the Exchange in which case a deposit is not required. 
The Exchange proposes to amend Rule 909 to eliminate all references to 
the security deposit and the excess net capital requirements. The 
security deposit was meant to require adequate financial security for 
the debts of member corporations and for ensuring that member 
corporations are generally financially solvent. The Exchange would 
instead propose to require member organizations and applicants to 
provide a clearing account number for an account at NSCC in order to 
permit the Exchange to debit undisputed or final fees, fines, charges 
and/or other monetary sanctions or monies due and owing to the Exchange 
or other charges related to Rule 924.\4\ The Exchange will send a 
monthly invoice \5\ to each member organization on approximately the 
4th-6th business day of the following month.\6\ The Exchange will also 
send a file to NSCC each month on approximately the 23rd of the 
following month to initiate the debit of the appropriate amount stated 
on the member's invoice for the prior month. Because the members will 
receive an invoice well before any monies are debited (normally within 
two weeks), the members will have adequate time to contact the staff 
with any questions concerning their invoice. If a member disputes an 
invoice, the Exchange will not include the disputed amount in the debit 
if the member has disputed the amount in writing to the Exchange's 
designated staff by the 15th of the month, or the following business 
day if the 15th is not a business day, and the amount in dispute is at 
least $10,000 or greater.
---------------------------------------------------------------------------

    \4\ Exchange Rule 924 entitled, Obligations of Members and 
Member Organizations to the Exchange, states, among other things, 
that members and member organizations shall be liable for such fees, 
fines, dues, penalties and other amounts imposed by the Exchange.
    \5\ The monthly invoice will indicate that the amount on the 
invoice will be debited from the designated NSCC account. Each 
month, the Exchange will send a file to the member's clearing firm 
which will indicate the amounts to be debited from each member. If a 
member is ``self-clearing'', no such file would be sent as the 
member would receive the invoice, as noted above, which would 
indicate the amount to be debited.
    \6\ By way of example, October invoices were sent on November 
5th.
---------------------------------------------------------------------------

    Once NSCC receives the file from the Exchange, NSCC would proceed 
to debit the amounts indicated from the clearing members' account. In 
the instance where the member clears through an Exchange clearing 
member, the estimated transactions fees owed to the Exchange are 
typically debited by the clearing member on a daily basis using daily 
transaction detail reports provided by the Exchange to the clearing 
member\7\ in order to ensure adequate funds have been escrowed. The 
Exchange would debit any monies owed including undisputed or final 
fees\8\, fines, charges and/or other monetary sanctions or monies due 
and owing to the Exchange.\9\ The Exchange believes

[[Page 67004]]

that the debit process eliminates the need to require a security 
deposit since the Exchange would debit member accounts at NSCC on a 
given day of each month and such debiting would eliminate the risk of 
unpaid invoices because of the large amounts of capital held at NSCC by 
members.
---------------------------------------------------------------------------

    \7\ The Exchange provides a Daily Transaction Detail Report to 
Clearing Members on a daily basis.
    \8\ Exchange fees are noted on the Exchange Fee Schedule.
    \9\ This includes, among other things, fines which result from: 
violation of Rule 60, Order and Decorum; violations of the Minor 
Rule Plan pursuant to Rule 970; monetary sanctions imposed by the 
Business Conduct Committee relating to a Letter of Caution; and 
monetary sanctions imposed by a Hearing Panel in connection with 
Disciplinary Violations. With respect to disciplinary sanctions that 
are imposed by either the Business Conduct Committee or a Hearing 
Panel, the Exchange would not debit any monies until such action is 
final. The Exchange would not consider an action final until all 
appeal periods have run and/or all appeal timeframes are exhausted. 
With respect to non-disciplinary actions, the Exchange would 
similarly not take action to debit a member account until all appeal 
periods have run and/or all appeal timeframes are exhausted. Any 
uncontested disciplinary or non-disciplinary actions will be 
debited, and the amount due will appear on the members invoice prior 
to the actual NSCC debit.
---------------------------------------------------------------------------

    Additionally, the Exchange proposes amending the title of Rule 909 
from ``Security for Exchange Fees and Other Claims'' to ``Collection of 
Exchange Fees and Other Claims'' in order to more accurately describe 
the proposed rule. The Exchange would provide members with a thirty day 
period, upon approval of this proposal, to provide the Membership 
Department with an NSCC number, if they have not already provided such 
a number in the past.\10\
---------------------------------------------------------------------------

    \10\ Currently, there are members who have provided the Exchange 
with an NSCC clearing account number, which accounts are already 
debited on a monthly basis.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \11\ in general, and furthers the objectives of Section 
6(b)(5) of the Act\12\ in particular, in that it is designed to promote 
just and equitable principles of trade, 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, 
by providing its members with an alternative to providing a security 
deposit to the Exchange while also providing members with an efficient 
process to pay undisputed or final fees, fines, charges and/or other 
monetary sanctions or monies due and owing to the Exchange. The 
Exchange believes that this process of debiting NSCC accounts will ease 
the member's administrative burden in paying monthly invoices, avoid 
overdue balances and provide same day collection from all members, who 
owe monies to the Exchange, which results in equitable treatment.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    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-2009-101 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-2009-101. 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 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-2009-101 and should be submitted on or before January 7, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-29969 Filed 12-16-09; 8:45 am]
BILLING CODE 8011-01-P