Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX LLC Relating to Dividend and Merger Strategies, 11551-11553 [2011-4688]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 76, Number 41 (Wednesday, March 2, 2011)]
[Notices]
[Pages 11551-11553]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-4688]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63957; File No. SR-Phlx-2011-20]


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

February 24, 2011.
    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 February 14, 2011, 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 its Fee Schedule to clarify the 
definitions of dividend and merger strategies in Section II of its Fee 
Schedule titled, ``Equity Options Fees.''
    The text of the proposed rule change is available on the Exchange's 
Web site at https://nasdaqtrader.com/micro.aspx?id=PHLXfilings, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to clarify the 
definitions of dividend and merger strategies in Section II of the Fee 
Schedule titled ``Equity Options Fees,'' so that the applicability of 
equity option transaction charges and caps \3\ are clear to members.
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    \3\ Equity options transaction charges for Specialists, 
Registered Options Traders, Streaming Quote Traders, Remote 
Streaming Quote Traders, Firms and Broker-Dealers are capped at 
$1,000 for dividend, merger and short stock interest strategies 
executed on the same trading day in the same options class when such 
members are trading in their own proprietary accounts. Equity option 
transaction charges for dividend, merger and short stock interest 
strategies combined are capped at $25,000 per member organization 
per month when such members are trading in their own proprietary 
accounts.
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    The Exchange provides a definition of a dividend strategy in 
Section II of its Fee Schedule. The Exchange defines a dividend 
strategy, along with other strategies, to provide members with 
information necessary to calculate the combined fee cap on equity 
option transaction charges for dividend, merger and short stock 
interest strategies. The Exchange defines a dividend strategy as 
follows ``* * *transactions done to achieve a dividend arbitrage 
involving the purchase, sale and exercise of in-the-money options of 
the same class, executed prior to the date on which the underlying 
stock goes ex-dividend.''

[[Page 11552]]

    The Exchange proposes to amend this dividend strategy definition to 
provide clarity with respect to the text ``prior to the date.'' The 
Exchange proposes to amend the definition to state, ``transactions done 
to achieve a dividend arbitrage involving the purchase, sale and 
exercise of in-the-money options of the same class, executed 
immediately prior to the date on which the underlying stock goes ex-
dividend.'' The Exchange believes that this language would clarify the 
timing of such a dividend strategy. The Exchange is proposing to make 
clear that such transactions must occur immediately prior to the date 
on which the underlying stock goes ex-dividend to meet the definition 
of a dividend strategy. The Exchange would interpret the proposed term 
``immediately'' to mean the first business day prior to the date on 
which the underlying stock goes ex-dividend.
    Similarly, the Exchange provides a definition of a merger strategy 
in Section II of its Fee Schedule. The Exchange defines a merger 
strategy, along with other strategies, to provide members with 
information necessary to calculate the combined fee cap on equity 
option transaction charges for dividend, merger and short stock 
interest strategies. The Exchange defines a merger strategy as follows 
``* * *as transactions done to achieve a merger arbitrage involving the 
purchase, sale and exercise of options of the same class and expiration 
date, executed prior to the date on which shareholders of record are 
required to elect their respective form of consideration, i.e., cash or 
stock.''
    The Exchange proposes to amend this merger strategy definition to 
provide clarity with respect to the text ``prior to the date.'' The 
Exchange proposes to amend the definition to state, ``transactions done 
to achieve a merger arbitrage involving the purchase, sale and exercise 
of options of the same class and expiration date, executed immediately 
prior to the date on which shareholders of record are required to elect 
their respective form of consideration, i.e., cash or stock.'' The 
Exchange believes that this language would clarify the timing of such a 
merger strategy. The Exchange is proposing to make clear that such 
transactions must occur immediately prior to the date on which the 
shareholders of record are required to elect their respective form of 
consideration to meet the definition of a merger strategy. The Exchange 
would interpret the proposed term ``immediately'' to mean the first 
business day prior to the date on which shareholders of record are 
required to elect their respective form of consideration.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \4\ in general, and furthers 
the objectives of Section 6(b)(4) of the Act \5\ 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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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that it is reasonable to amend the 
definitions of dividend and merger strategies to provide members with a 
definition that is clear and unambiguous. In addition, the Exchange 
believes that the amended definitions would provide members clear 
guidance on the applicability of the equity option transaction charges 
and the available caps.
    The Exchange believes that the proposed amendments are equitable 
because the proposed new definitions would apply equally to all members 
transacting dividend or merger strategies. The Exchange would uniformly 
apply the definitions to all members who transacted such dividend and/
or merger strategies when assessing equity option transaction charges 
and applying caps.

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.\6\ 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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    \6\ 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2011-20 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-2011-20. 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 Web site 
viewing and printing in the Commission's Public Reference Room on 
official business days between the hours of 10 a.m. and 3 p.m. Copies 
of such filing also will be available for inspection and copying at the 
principal offices 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-2011-20, and should

[[Page 11553]]

be submitted on or before March 23, 2011.
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    \7\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-4688 Filed 3-1-11; 8:45 am]
BILLING CODE 8011-01-P