Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX LLC Relating to Clarifying Changes to Rules 607 and 3202 Concerning the Application and Collection of the Covered Sale Fee, 12169-12171 [2011-4903]
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Federal Register / Vol. 76, No. 43 / Friday, March 4, 2011 / Notices
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, 100 F Street, NE.,
Washington, DC 20549–1090. Copies of
the filing will also be available for
inspection and copying at the NYSE’s
principal office and on its Internet Web
site at https://www.nyse.com. 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–NYSE–2011–05 and should
be submitted on or before March 25,
2011.
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.46
Cathy H. Ahn,
Deputy Secretary.
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–NYSE–2011–05 on the
subject line.
jlentini on DSKJ8SOYB1PROD with NOTICES
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),44 the
Commission may designate a shorter
time if such action is consistent with the
protection of investors and the public
interest. The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. The Commission hereby grants
the request.45 Waiving the 30-day
operative delay will allow the Exchange
to implement the proposed amendments
by February 28, 2011, which, as noted
by the Exchange, is the compliance date
for amendments to Regulation SHO
under the Act. By waiving the operative
delay, the Exchange will be able to
comply with the amendments to
Regulation SHO by February 28, 2011.
Therefore, the Commission believes it is
consistent with the protection of
investors and the public interest to
waive the 30-day operative delay and
designates the proposal as operative
upon filing.
At any time within 60 days of the
filing of such 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.
SECURITIES AND EXCHANGE
COMMISSION
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–NYSE–2011–05. This file
number should be included on the
44 17
CFR 240.19b–4(f)(6)(iii).
purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule change’s impact on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
45 For
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[FR Doc. 2011–4895 Filed 3–3–11; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–63985; File No. SR–Phlx–
2011–23]
Self-Regulatory Organizations; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change by NASDAQ
OMX PHLX LLC Relating to Clarifying
Changes to Rules 607 and 3202
Concerning the Application and
Collection of the Covered Sale Fee
February 28, 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
16, 2011, NASDAQ OMX PHLX LLC
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the
46 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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12169
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 make
clarifying changes to Rules 607and 3202
concerning the application and
collection of the Covered Sale Fee.
The text of the proposed rule change
is available on the Exchange’s Website
at https://www.nasdaqtrader.com/
micro.aspx?id=PHLXRulefilings, at the
principal office of the Exchange, on the
Commission’s Web site at https://
www.sec.gov, 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 make clarifying changes to
Rules 607 and 3202 concerning the
application and collection of the
Covered Sale Fee. In light of the varying
means by which a Covered Sale Fee is
incurred by members, as described
below, the Exchange believes that a
more detailed description of the
circumstances that trigger the Covered
Sale Fee is warranted. Accordingly, the
new rule language proposed by the
Exchange expressly discusses covered
sales in both equity and option
securities. In addition, the proposed
new rule language includes a
description of sell orders entered into
the Exchange transaction execution
systems that result in a covered sale on
another exchange, expressly discussing
the fee incurred by the Exchange and
E:\FR\FM\04MRN1.SGM
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12170
Federal Register / Vol. 76, No. 43 / Friday, March 4, 2011 / Notices
the application of the Covered Sale Fee
in such circumstances.
jlentini on DSKJ8SOYB1PROD with NOTICES
PHLX Rule 607
The Exchange is proposing
amendments to Rule 607 to make clear
the circumstances that trigger
application of the Covered Sale Fee, and
to make other clarifying changes.
Initially, the Exchange is proposing to
enumerate all paragraphs in Rule 607
for clarity. Furthermore, the Exchange
proposes to amend paragraph two by
removing the reference to Rule 185(g),
the former equities platform rule
regarding the Exchange’s Routing
Facility; and insert Rule 1080(m)(iii),
the current options platform rule
regarding the Exchange’s Routing
Facility. This amendment is predicated
on the fact that upon the
implementation of the Exchange’s
current equities platform, NASDAQ
OMX PSX, 3 only options transactions
may be routed to other markets for
executions.
Rule 607 permits the Exchange to
collect a fee from its members for sales
of securities with respect to which the
Exchange is obligated to pay a fee to the
SEC pursuant to Section 31 of the Act 4
and Rule 31, thereunder.5 Each national
securities exchange and association is
required to calculate the aggregate dollar
amount of ‘‘covered sales’’ occurring on
the exchange or through a member of
the national securities association and
to pay fees based on those covered sales
to the Commission (‘‘Section 31 fees’’). A
covered sale is a ‘‘sale of a security,
other than an exempt sale or a sale of
a security future, occurring on a
national securities exchange or by or
through any member of a national
securities association otherwise than on
a national securities exchange.’’ 6
Pursuant to Rule 607 the Exchange
assesses a member the Covered Sale Fee
for an executed sell order entered into
the Exchange’s transaction execution
systems that results in a covered sale.
The Covered Sale Fee defrays the cost
of the Section 31 fee triggered by the
covered sale. In this regard, the Covered
Sale Fee assessed a member is equal to
the Section 31 fee assessed by the
Commission for the covered sale.
Further, the Exchange adjusts the
Covered Sale Fee in lock step with
changes to the Section 31 fee made by
the Commission.7 Assessing a sales fee
3 See
Exchange Rules 3000–3407.
U.S.C. 78ee.
5 17 CFR 240.31.
6 17 CFR 240.31(a)(6).
7 The Exchange issues Regulatory Alerts to
provide members with notice of Covered Sale Fee
changes. See e.g., https://www.nasdaqtrader.com/
TraderNews.aspx?id=ERA2011–01.
4 15
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is common practice among the national
securities exchanges and associations.8
As noted above, the Covered Sale Fee
defrays the cost of the Section 31 fee.
The Covered Sale Fee is triggered by the
fulfillment of a members [sic] sell order
in equity or options securities entered
into the Exchange transaction execution
systems that results in a covered sale. If
the member’s sell order is fulfilled on
the Exchange’s equity or options trading
markets, the Exchange incurs a Section
31 fee obligation. Sell orders in options
securities entered into the Exchange
transaction execution system that are
routed to another market for execution,
however, does [sic] not result in a
covered sale on the Exchange. Execution
of such routed orders is facilitated by
the Exchange’s routing broker,9 which
acts as the selling member for a routed
order on the away market on behalf of
the Exchange member. Such routed sell
orders result in a covered sale on the
away market, which incurs a Section 31
fee obligation. Like the Exchange, the
away market assesses a sales fee on the
member that entered the sell order, in
this case Nasdaq Options Services
LLC,10 to defray the cost of the Section
31 fee obligation. In turn, the Exchange
assesses its member, the original selling
party, a Covered Sale Fee pursuant to
Rule 607 to defray the cost of the
Section 31 fee passed on by the away
exchange pursuant to its sales fee. As
such, the Exchange’s Covered Sale Fee
offsets the sales fee it is assessed by the
away market, the result of which is to
place the parties involved in the
transaction in the same position as if the
covered sale had occurred on the
Exchange.
Additionally, the Exchange is
updating its rules to indicate that the
Covered Sale fee is collected by
‘‘designated clearing agency,’’ which is
defined by rule promulgated under the
Act as a ‘‘clearing agency registered
under section 17A of the Act * * * that
clears and settles covered sales or
covered round turn transactions.’’ 11 The
Exchange employs the National Security
Clearing Corporation to collect the
Covered Sale Fee from members arising
from their covered sales in equity
securities. Covered Sale Fees arising
from options covered sales, however,
8 See e.g., CBOE Fees Schedule (January 3, 2011),
Item 6 ‘‘Sales Value Fee,’’ ISE Rule 212, NYSE Rule
440H, and NYSE Amex Rule 393.
9 Nasdaq Options Services LLC is the Exchange’s
routing broker for option securities. See PHLX
Options Rule 1080(m)(iii).
10 See e-mail from Arlinda Clark, Assistant
General Counsel, Phlx, to Jennifer Dodd, Special
Counsel, Office of Market Supervision, Division of
Trading and Markets, Commission, dated February
22, 2011 (requesting corrections to this sentence).
11 17 CFR 240.31(a)(9).
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Frm 00158
Fmt 4703
Sfmt 4703
are collected from members by the
Options Clearing Corporation, another
designated clearing agency that clears
option securities.12 The Exchange
believes such amendment will more
accurately reflect all parts the Exchange
employs to collect the Covered Sale Fee
from its members.
PHLX Rule 3202
The Exchange also proposes to amend
its equity rules to clarify application
and collection of the Covered Sale Fee.
PHLX Rule 3202 sets forth that certain
rules of the Exchange are applicable to
market participants trading on the
Exchange’s equity trading platform.
PHLX Rule 607 is cross referenced
within Rule 3202, however Rule 3202
only references the first paragraph of
Rule 607. For clarification, Rule 3202
will be amended to indicate that Rule
607 will be referenced in its entirety.
Such amendment serves to describe the
full process for collection of the Covered
Sale Fee regarding equity transactions.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b)(4) of the Act 13 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 the Exchange operates or
controls, and it does not unfairly
discriminate between customers,
issuers, brokers or dealers. The
proposed clarifying language does not
change the application and assessment
of the Covered Sale Fee under the rule,
but rather provides greater detail on the
transactions that trigger the fee. The
Exchange applies Rule 607 uniformly to
all members’ sell orders entered into the
Exchange’s transaction execution
systems resulting in covered sales.
The Exchange also believes the
proposed rule change is consistent with
the provisions of Section 6 of the Act,14
in general and with Section 6(b)(5) of
the Act,15 in particular, which requires
that the rules of an exchange be
designed to prevent fraudulent and
manipulative acts and practices,
promote just and equitable principles of
trade, foster cooperation and
coordination with persons engaged in
regulating, clearing, settling, processing
information with respect to, and
facilitating transactions in securities,
12 In addition to clearing transactions in options,
the Options Clearing Corporation also clears
security futures. See https://
www.optionsclearing.com.
13 15 U.S.C. 78f(b)(4).
14 15 U.S.C. 78f.
15 15 U.S.C. 78f(b)(5).
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Federal Register / Vol. 76, No. 43 / Friday, March 4, 2011 / Notices
remove impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, protect investors and the public
interest. The Exchange believes that the
proposed rule change is consistent with
these requirements because the
proposed amended rule text provides
members with more detail regarding the
circumstances under which the
Exchange assesses a Covered Sale Fee.
As such, the proposed changes will help
avoid member confusion and foster
better understanding of the application
of the rule. Accordingly, the Exchange
believes the proposed rule change will
promote just and equitable principles of
trade, remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and protect investors and the
public interest.
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.
jlentini on DSKJ8SOYB1PROD with NOTICES
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change establishes or changes a due, fee
or other charge applicable only to a
member, it has become effective
pursuant to Section 19(b)(3)(A) of the
Act 16 and Rule 19b–4(f)(2)
thereunder.17
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.
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–2011–23 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–2011–23. 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, 100 F Street, NE.,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of such filing
also will be available for inspection and
copying at the principal office of the
Exchange. All comments received will
be posted without change; the
Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–Phlx–
2011–23 and should be submitted on or
before March 25, 2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011–4903 Filed 3–3–11; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–63984; File No. SR–
NASDAQ–2011–027]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Make
Clarifying Changes to Rule 7002
Concerning the Application and
Collection of the Sales Fee
February 28, 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
16, 2011, The NASDAQ Stock Market
LLC (‘‘NASDAQ’’) 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 NASDAQ. 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 the Substance
of the Proposed Rule Change
NASDAQ is proposing to make
clarifying changes to Rule 7002
concerning the application and
collection of the Sales Fee.
The text of the proposed rule change
is below. Proposed new language is
italicized; proposed deletions are in
brackets.
7002. Sales Fee
A Sales Fee is assessed by Nasdaq to
each member for sales of securities
through Nasdaq transaction execution
systems in the following circumstances:
(a) When a sale in equity securities
occurs with respect to which Nasdaq is
obligated to pay a fee to the SEC under
Section 31 of the Act;
(b) When a sale in option securities
occurs with respect to which Nasdaq is
obligated to pay a fee to the SEC under
Section 31 of the Act;
(c) When a sell order in equity
securities is routed for execution at a
market other than Nasdaq, resulting in
a covered sale on that market and an
obligation of the routing facility of
Nasdaq to pay the related sales fee of
that market;
(d) When a sell order in option
securities is routed for execution at a
market other than the Nasdaq Options
Market, resulting in a covered sale on
that market and an obligation of the
BILLING CODE 8011–01–P
16 15
U.S.C. 78s(b)(3)(A).
17 17 CFR 240.19b–4(f)(2).
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2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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]]>Agencies
[Federal Register Volume 76, Number 43 (Friday, March 4, 2011)]
[Notices]
[Pages 12169-12171]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-4903]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63985; File No. SR-Phlx-2011-23]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX LLC Relating
to Clarifying Changes to Rules 607 and 3202 Concerning the Application
and Collection of the Covered Sale Fee
February 28, 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 16, 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.
---------------------------------------------------------------------------
\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 make clarifying changes to Rules 607and
3202 concerning the application and collection of the Covered Sale Fee.
The text of the proposed rule change is available on the Exchange's
Website at https://www.nasdaqtrader.com/micro.aspx?id=PHLXRulefilings,
at the principal office of the Exchange, on the Commission's Web site
at https://www.sec.gov, 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 make clarifying
changes to Rules 607 and 3202 concerning the application and collection
of the Covered Sale Fee. In light of the varying means by which a
Covered Sale Fee is incurred by members, as described below, the
Exchange believes that a more detailed description of the circumstances
that trigger the Covered Sale Fee is warranted. Accordingly, the new
rule language proposed by the Exchange expressly discusses covered
sales in both equity and option securities. In addition, the proposed
new rule language includes a description of sell orders entered into
the Exchange transaction execution systems that result in a covered
sale on another exchange, expressly discussing the fee incurred by the
Exchange and
[[Page 12170]]
the application of the Covered Sale Fee in such circumstances.
PHLX Rule 607
The Exchange is proposing amendments to Rule 607 to make clear the
circumstances that trigger application of the Covered Sale Fee, and to
make other clarifying changes. Initially, the Exchange is proposing to
enumerate all paragraphs in Rule 607 for clarity. Furthermore, the
Exchange proposes to amend paragraph two by removing the reference to
Rule 185(g), the former equities platform rule regarding the Exchange's
Routing Facility; and insert Rule 1080(m)(iii), the current options
platform rule regarding the Exchange's Routing Facility. This amendment
is predicated on the fact that upon the implementation of the
Exchange's current equities platform, NASDAQ OMX PSX, \3\ only options
transactions may be routed to other markets for executions.
---------------------------------------------------------------------------
\3\ See Exchange Rules 3000-3407.
---------------------------------------------------------------------------
Rule 607 permits the Exchange to collect a fee from its members for
sales of securities with respect to which the Exchange is obligated to
pay a fee to the SEC pursuant to Section 31 of the Act \4\ and Rule 31,
thereunder.\5\ Each national securities exchange and association is
required to calculate the aggregate dollar amount of ``covered sales''
occurring on the exchange or through a member of the national
securities association and to pay fees based on those covered sales to
the Commission (``Section 31 fees''). A covered sale is a ``sale of a
security, other than an exempt sale or a sale of a security future,
occurring on a national securities exchange or by or through any member
of a national securities association otherwise than on a national
securities exchange.'' \6\ Pursuant to Rule 607 the Exchange assesses a
member the Covered Sale Fee for an executed sell order entered into the
Exchange's transaction execution systems that results in a covered
sale. The Covered Sale Fee defrays the cost of the Section 31 fee
triggered by the covered sale. In this regard, the Covered Sale Fee
assessed a member is equal to the Section 31 fee assessed by the
Commission for the covered sale. Further, the Exchange adjusts the
Covered Sale Fee in lock step with changes to the Section 31 fee made
by the Commission.\7\ Assessing a sales fee is common practice among
the national securities exchanges and associations.\8\
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78ee.
\5\ 17 CFR 240.31.
\6\ 17 CFR 240.31(a)(6).
\7\ The Exchange issues Regulatory Alerts to provide members
with notice of Covered Sale Fee changes. See e.g., https://www.nasdaqtrader.com/TraderNews.aspx?id=ERA2011-01.
\8\ See e.g., CBOE Fees Schedule (January 3, 2011), Item 6
``Sales Value Fee,'' ISE Rule 212, NYSE Rule 440H, and NYSE Amex
Rule 393.
---------------------------------------------------------------------------
As noted above, the Covered Sale Fee defrays the cost of the
Section 31 fee. The Covered Sale Fee is triggered by the fulfillment of
a members [sic] sell order in equity or options securities entered into
the Exchange transaction execution systems that results in a covered
sale. If the member's sell order is fulfilled on the Exchange's equity
or options trading markets, the Exchange incurs a Section 31 fee
obligation. Sell orders in options securities entered into the Exchange
transaction execution system that are routed to another market for
execution, however, does [sic] not result in a covered sale on the
Exchange. Execution of such routed orders is facilitated by the
Exchange's routing broker,\9\ which acts as the selling member for a
routed order on the away market on behalf of the Exchange member. Such
routed sell orders result in a covered sale on the away market, which
incurs a Section 31 fee obligation. Like the Exchange, the away market
assesses a sales fee on the member that entered the sell order, in this
case Nasdaq Options Services LLC,\10\ to defray the cost of the Section
31 fee obligation. In turn, the Exchange assesses its member, the
original selling party, a Covered Sale Fee pursuant to Rule 607 to
defray the cost of the Section 31 fee passed on by the away exchange
pursuant to its sales fee. As such, the Exchange's Covered Sale Fee
offsets the sales fee it is assessed by the away market, the result of
which is to place the parties involved in the transaction in the same
position as if the covered sale had occurred on the Exchange.
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\9\ Nasdaq Options Services LLC is the Exchange's routing broker
for option securities. See PHLX Options Rule 1080(m)(iii).
\10\ See e-mail from Arlinda Clark, Assistant General Counsel,
Phlx, to Jennifer Dodd, Special Counsel, Office of Market
Supervision, Division of Trading and Markets, Commission, dated
February 22, 2011 (requesting corrections to this sentence).
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Additionally, the Exchange is updating its rules to indicate that
the Covered Sale fee is collected by ``designated clearing agency,''
which is defined by rule promulgated under the Act as a ``clearing
agency registered under section 17A of the Act * * * that clears and
settles covered sales or covered round turn transactions.'' \11\ The
Exchange employs the National Security Clearing Corporation to collect
the Covered Sale Fee from members arising from their covered sales in
equity securities. Covered Sale Fees arising from options covered
sales, however, are collected from members by the Options Clearing
Corporation, another designated clearing agency that clears option
securities.\12\ The Exchange believes such amendment will more
accurately reflect all parts the Exchange employs to collect the
Covered Sale Fee from its members.
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\11\ 17 CFR 240.31(a)(9).
\12\ In addition to clearing transactions in options, the
Options Clearing Corporation also clears security futures. See
https://www.optionsclearing.com.
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PHLX Rule 3202
The Exchange also proposes to amend its equity rules to clarify
application and collection of the Covered Sale Fee. PHLX Rule 3202 sets
forth that certain rules of the Exchange are applicable to market
participants trading on the Exchange's equity trading platform. PHLX
Rule 607 is cross referenced within Rule 3202, however Rule 3202 only
references the first paragraph of Rule 607. For clarification, Rule
3202 will be amended to indicate that Rule 607 will be referenced in
its entirety. Such amendment serves to describe the full process for
collection of the Covered Sale Fee regarding equity transactions.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b)(4) of the Act \13\ 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 the Exchange operates or controls, and it does not unfairly
discriminate between customers, issuers, brokers or dealers. The
proposed clarifying language does not change the application and
assessment of the Covered Sale Fee under the rule, but rather provides
greater detail on the transactions that trigger the fee. The Exchange
applies Rule 607 uniformly to all members' sell orders entered into the
Exchange's transaction execution systems resulting in covered sales.
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\13\ 15 U.S.C. 78f(b)(4).
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The Exchange also believes the proposed rule change is consistent
with the provisions of Section 6 of the Act,\14\ in general and with
Section 6(b)(5) of the Act,\15\ in particular, which requires that the
rules of an exchange be designed to prevent fraudulent and manipulative
acts and practices, promote just and equitable principles of trade,
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities,
[[Page 12171]]
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general, protect investors
and the public interest. The Exchange believes that the proposed rule
change is consistent with these requirements because the proposed
amended rule text provides members with more detail regarding the
circumstances under which the Exchange assesses a Covered Sale Fee. As
such, the proposed changes will help avoid member confusion and foster
better understanding of the application of the rule. Accordingly, the
Exchange believes the proposed rule change will promote just and
equitable principles of trade, remove impediments to and perfect the
mechanism of a free and open market and a national market system, and
protect investors and the public interest.
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\14\ 15 U.S.C. 78f.
\15\ 15 U.S.C. 78f(b)(5).
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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.
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
Because the foregoing proposed rule change establishes or changes a
due, fee or other charge applicable only to a member, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \16\ and Rule 19b-
4(f)(2) thereunder.\17\
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 17 CFR 240.19b-4(f)(2).
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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.
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-2011-23 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-2011-23. 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, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-Phlx-2011-23 and should be
submitted on or before March 25, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-4903 Filed 3-3-11; 8:45 am]
BILLING CODE 8011-01-P
