Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Reversal and Conversion Strategies, 55453-55455 [2011-22725]

Download as PDF Federal Register / Vol. 76, No. 173 / Wednesday, September 7, 2011 / Notices 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 Exchange Act. Interested persons are also invited to submit views and arguments as to whether they can effectively comment on the proposed rule change prior to the date of final adoption of the Commission’s permanent rules for the registration of municipal advisors. Comments may be submitted by any of the following methods: For the Commission by the Division of Trading and Markets, pursuant to delegated authority.22 Elizabeth M. Murphy, Secretary. [FR Doc. 2011–22726 Filed 9–6–11; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–65228; File No. SR–Phlx– 2011–119] • 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– MSRB–2011–10 on the subject line. emcdonald on DSK5VPTVN1PROD with NOTICES Electronic Comments August 30, 2011. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1, and Rule 19b–4 2 thereunder, Paper Comments notice is hereby given that, on August 18, 2011, NASDAQ OMX PHLX LLC • Send paper comments in triplicate (‘‘Phlx’’ or ‘‘Exchange’’) filed with the to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission Securities and Exchange Commission, (‘‘SEC’’ or ‘‘Commission’’) the proposed 100 F Street, NE., Washington, DC rule change as described in Items I, II, 20549–1090. and III below, which Items have been All submissions should refer to File prepared by the Exchange. The Number SR–MSRB–2011–10. This file Commission is publishing this notice to number should be included on the solicit comments on the proposed rule subject line if e-mail is used. To help the change from interested persons. Commission process and review your comments more efficiently, please use I. Self-Regulatory Organization’s only one method. The Commission will Statement of the Terms of Substance of post all comments on the Commission’s the Proposed Rule Change Web site (https://www.sec.gov/rules/sro. The Exchange proposes to establish a shtml). Copies of the submission, all fee cap on equity options transactions subsequent amendments, all written on certain reversals and conversion statements with respect to the proposed strategies. The text of the proposed rule rule change that are filed with the change is available on the Exchange’s Commission, and all written Web site at https://nasdaqtrader.com/ communications relating to the micro.aspx?id=PHLXRulefilings, at the proposed rule change between the principal office of the Exchange, at the Commission and any person, other than Commission’s Public Reference Room, those that may be withheld from the and on the Commission’s Web site at public in accordance with the www.sec.gov. provisions of 5 U.S.C. 552, will be II. Self-Regulatory Organization’s available for Web site viewing and Statement of the Purpose of, and printing in the Commission’s Public Statutory Basis for, the Proposed Rule Reference Room, 100 F Street, NE., Change Washington, DC 20549, on official business days between the hours of 10 In its filing with the Commission, the a.m. and 3 p.m. Copies of such filing Exchange included statements also will be available for inspection and concerning the purpose of and basis for copying at the MSRB’s offices. the proposed rule change and discussed All comments received will be posted any comments it received on the without change; the Commission does proposed rule change. The text of these not edit personal identifying statements may be examined at the information from submissions. You places specified in Item IV below. The should submit only information that Exchange has prepared summaries, set you wish to make available publicly. All forth in sections A, B, and C below, of submissions should refer to File Number SR–MSRB–2011–10 and should 22 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). be submitted on or before September 28, 2 17 CFR 240.19b–4. 2011. 17:37 Sep 06, 2011 Jkt 223001 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 Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Reversal and Conversion Strategies VerDate Mar<15>2010 55453 PO 00000 Frm 00109 Fmt 4703 Sfmt 4703 The purpose of the proposed rule change is to incentivize market participants by capping option transaction fees related to reversal and conversion strategies to encourage trading on the Exchange. Reversals are established by combining a short stock position with a short put and a long call position that shares the same strike and expiration. Conversions are established by combining a long position in the underlying security with a long put and a short call position that shares the same strike and expiration. The Exchange proposes to cap Specialist,3 Registered Option Trader (‘‘ROT’’),4 SQT,5 RSQT,6 Professional,7 Broker-Dealer and Firm option transaction fees in Multiply Listed Options 8 at $500 per day for reversal and conversion strategies which are executed on the same trading day in the same options class (‘‘Reversal and Conversion Cap’’). The Reversal and Conversion Cap will only apply to executions occurring on either of the two days preceding the standard options expiration date, which is typically the third Thursday and Friday of every 3 A Specialist is an Exchange member who is registered as an options specialist pursuant to Rule 1020(a). 4 A Registered Options Trader (‘‘ROT’’) includes a SQT, a RSQT and a Non-SQT ROT, which by definition is neither a SQT or a RSQT. A ROT is defined in Exchange Rule 1014(b) as a regular member or a foreign currency options participant of the Exchange located on the trading floor who has received permission from the Exchange to trade in options for his own account. See Exchange Rule 1014 (b)(i) and (ii). 5 An SQT is defined in Exchange Rule 1014(b)(ii)(A) as an ROT who has received permission from the Exchange to generate and submit option quotations electronically in options to which such SQT is assigned. 6 An RSQT is defined Exchange Rule in 1014(b)(ii)(B) as an ROT that is a member or member organization with no physical trading floor presence who has received permission from the Exchange to generate and submit option quotations electronically in options to which such RSQT has been assigned. An RSQT may only submit such quotations electronically from off the floor of the Exchange. 7 The Exchange defines a ‘‘professional’’ as any person or entity that (i) is not a broker or dealer in securities, and (ii) places more than 390 orders in listed options per day on average during a calendar month for its own beneficial account(s) (hereinafter ‘‘Professional’’). 8 For purposes of this filing, a Multiply Listed security means an option that is listed on more than one exchange. E:\FR\FM\07SEN1.SGM 07SEN1 55454 Federal Register / Vol. 76, No. 173 / Wednesday, September 7, 2011 / Notices emcdonald on DSK5VPTVN1PROD with NOTICES month.9 The Exchange proposes to add language to Section II of the Exchange’s Fee Schedule entitled, Equity Options Fees, to describe the Reversal and Conversion Cap and define reversals and conversions. For example, the standard options expiration date for September 2011 is September 17, 2011. Therefore, on the two preceding days, Thursday, September 15, 2011, and Friday, September 16, 2011, Specialists, ROTs, SQTs, RSQTs, Professionals, BrokerDealers and Firms are eligible for the Reversal and Conversion Cap. In order to capture the necessary information electronically, the Exchange requires members to designate on the trade ticket whether the trade involves a dividend, merger, short stock interest or reversal and conversion strategy. Specifically, members would be required to enter the proper code, ‘‘Z4’’, on the trading ticket and into the system, or directly into the Floor Broker Management System (‘‘FBMS’’).10 The Exchange also proposes to make an amendment to Section VII of the Fee Schedule entitled, ‘‘Options Floor Broker Subsidy.’’ The Exchange currently excludes dividend, merger and short stock interest strategies from the eligible contract computations in computing the monthly eligible contracts for the Options Floor Broker Subsidy (‘‘Subsidy’’).11 The Exchange proposes to also exclude those executions subject to the Reversal and Conversion Cap from the Subsidy. The Exchange proposes to amend Section VII to add language to indicate that executions subject to the Reversal and Conversion Cap will not be included in the eligible contract computations. 9 When the standard expiration date is also an Exchange holiday, the trading dates will be brought forward by one day. 10 FBMS is designed to enable Floor Brokers and/ or their employees to enter, route and report transactions stemming from options orders received on the Exchange. FBMS also is designed to establish an electronic audit trail for options orders represented and executed by Floor Brokers on the Exchange, such that the audit trail provides an accurate, time-sequenced record of electronic and other orders, quotations and transactions on the Exchange, beginning with the receipt of an order by the Exchange, and further documenting the life of the order through the process of execution, partial execution, or cancellation of that order. See Exchange Rule 1080, Commentary .06. 11 The Exchange currently pays an Options Floor Broker Subsidy (‘‘Subsidy’’) to member organizations with Exchange registered floor brokers that enter eligible contracts into the Exchange’s FBMS. The Subsidy is paid based on the contract volume on Customer-to-non-Customer as well as non-Customer-to-non-Customer transactions for that month. Only the volume from orders entered by floor brokers into FBMS and subsequently executed on the Exchange qualifies. VerDate Mar<15>2010 17:37 Sep 06, 2011 Jkt 223001 The Exchange also proposes to amend the applicability of the dividend,12 merger 13 and short stock interest 14 strategies in Section II of the Exchange’s Fee Schedule. Currently, Specialist, ROT, SQT and RSQT, Firm and BrokerDealer equity option transaction charges 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.15 The Exchange proposes to add Professionals to the list of market participants that may cap their options transaction charges for dividend, merger and short stock interest strategies. 2. Statutory Basis The Exchange believes that its proposal to amend its Fee Schedule is consistent with Section 6(b) of the Act 16 in general, and furthers the objectives of Section 6(b)(4) of the Act 17 in particular, in that it is an equitable allocation of reasonable fees and other charges among Exchange members and other persons using its facilities. The Exchange believes that the proposed Reversal and Conversion Cap is reasonable because the Exchange is proposing to offer all members an opportunity to reduce option transaction fees in Multiply Listed options for reversals and conversions. Customers are not subject to the Reversal and Conversion Cap because they do not pay option transaction charges for reversal and conversion strategies. The Exchange also believes that this proposal is equitable and not unfairly discriminatory because the Exchange is offering all members, except for Customers, the same opportunity to cap their option transaction fees in Multiply Listed 12 A dividend strategy is defined as transactions done to achieve a dividend arbitrage involving the purchase, sale and exercise of in-the-money options of the same class, executed the first business day prior to the date on which the underlying stock goes ex-dividend. 13 A merger strategy is defined as transactions done to achieve a merger arbitrage involving the purchase, sale and exercise of options of the same class and expiration date, executed the first business day prior to the date on which shareholders of record are required to elect their respective form of consideration, i.e., cash or stock. 14 A short stock interest strategy is defined as transactions done to achieve a short stock interest arbitrage involving the purchase, sale and exercise of in-the-money options of the same class. 15 Equity option transaction charges for dividend, merger and short stock interest strategies combined are further capped at the greater of $10,000 per member or $25,000 per member organization per month when such members are trading in their own proprietary accounts. 16 15 U.S.C. 78f(b). 17 15 U.S.C. 78f(b)(4). PO 00000 Frm 00110 Fmt 4703 Sfmt 4703 Options for two days every month. Also, this proposal is similar in nature to caps on other exchanges, namely NYSE Arca, Inc. (‘‘NYSEArca’’),18 NYSE Amex, Inc. (‘‘NYSE Amex’’) 19 and the Chicago Board Options Exchange, Incorporated(‘‘CBOE’’) 20 for reversals and conversions. The Exchange also believes that its proposal to allow Professionals to cap option transaction charges 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 is reasonable because all other market participants, other than Customers, are able to cap these fees. In addition, the Exchange believes that adding Professionals to the list of market participants that may cap dividend, merger and short stock interest strategies, is equitable and not unfairly discriminatory because the Exchange is offering all members, except for Customers, the opportunity to cap their transaction fees for dividend, merger and short stock interest strategies. Customers do not pay option transaction charges for dividend, merger or short stock interest strategies. The Exchange believes that amending Section VII to indicate that executions subject to the Reversal and Conversion Cap will not be included in the eligible contract computations of the Subsidy is reasonable since the Exchange currently excludes other strategies that are the subject of a cap. The recipients of the cap on strategies already receive a benefit by capping their options transaction charges and therefore the Exchange believes it is reasonable to exclude those strategies from the Subsidy. Additionally, the Exchange believes that excluding those executions that are subject to the Reversal and Conversion Cap from the Subsidy computation is equitable and not unfairly discriminatory because the exclusion will be applied evenly for all member organizations with Exchange registered floor brokers. 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. 18 See NYSE Arca’s Fee Schedule. NYSE Amex’s Fee Schedule. 20 See CBOE’s Fees Schedule. 19 See E:\FR\FM\07SEN1.SGM 07SEN1 Federal Register / Vol. 76, No. 173 / Wednesday, September 7, 2011 / Notices 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.21 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: emcdonald on DSK5VPTVN1PROD with NOTICES 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–2011–119 on the subject line. 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 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– 2011–119 and should be submitted on or before September 28, 2011. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Elizabeth M. Murphy, Secretary. [FR Doc. 2011–22725 Filed 9–6–11; 8:45 am] BILLING CODE 8011–01–P SMALL BUSINESS ADMINISTRATION Data Collection Available for Public Comments and Recommendations Small Business Administration. Notice and request for comments. AGENCY: ACTION: In accordance with the Paperwork Reduction Act of 1995, this notice announces the Small Business Paper Comments Administration’s intentions to request • Send paper comments in triplicate approval on a new and/or currently to Elizabeth M. Murphy, Secretary, approved information collection. Securities and Exchange Commission, DATES: Submit comments on or before 100 F Street, NE., Washington, DC November 7, 2011. 20549–1090. ADDRESSES: Send all comments All submissions should refer to File regarding whether these information Number SR–Phlx–2011–119. This file collections are necessary for the proper number should be included on the subject line if e-mail is used. To help the performance of the function of the agency, whether the burden estimates Commission process and review your are accurate, and if there are ways to comments more efficiently, please use only one method. The Commission will minimize the estimated burden and post all comments on the Commission’s enhance the quality of the collections, to Cynthia Pitts, Director, Disaster Internet Web site (https://www.sec.gov/ Administrative Service, Small Business rules/sro.shtml). Copies of the Administration, 409 3rd Street, 6th submission, all subsequent Floor, Washington, DC 20416. amendments, all written statements FOR FURTHER INFORMATION CONTACT: with respect to the proposed rule Cynthia Pitts, Disaster Administrative change that are filed with the Service, 202–205–7570, Cynthia/ Commission, and all written pitts@sba.gov; Curtis B. Rich, communications relating to the 21 15 U.S.C. 78s(b)(3)(A)(ii). VerDate Mar<15>2010 17:37 Sep 06, 2011 SUMMARY: 22 17 Jkt 223001 PO 00000 CFR 200.30–3(a)(12). Frm 00111 Fmt 4703 Sfmt 4703 55455 Management Analyst, 202–205–7030 curtis.rich@sba.gov. SUPPLEMENTARY INFORMATION: Application for benefits (ban) used to determine eligibility and credit worthiness of business owners/ businesses who seek Federal assistance in a declared disaster. Respondents are disaster business owners seeking disaster assistance. Title: ‘‘Disaster Business Loan Application.’’ Description of Respondents: Applicants requesting Disaster Business Loan. Form Number: 5. Annual Responses: 8,014. Annual Burden: 18,709. SUPPLEMENTARY INFORMATION: Application for benefits (loan) used to determine eligibility and credit worthiness of individual victims who seek Federal assistance in a declared disaster. Respondents are disaster victims seeking disaster assistance. Title: ‘‘Disaster Home Loan Application.’’ Description of Respondents: Applicants requesting Disaster Home Loan. Form Number: 5C. Annual Responses: 46,462. Annual Burden: 69,693. ADDRESSES: Send all comments regarding whether this information collection is necessary for the proper performance of the function of the agency, whether the burden estimates are accurate, and if there are ways to minimize the estimated burden and enhance the quality of the collection, to Travis Farris, Assistant Counsel to the Inspector General, Office of Inspector General, Small Business Administration, 409 3rd Street, 5th Floor, Washington, DC 20416. FOR FURTHER INFORMATION CONTACT: Travis Farris, Assistant Counsel to the Inspector General, 202–205–7178, travis.farris@sba/gov; Curtis B. Rich, Management Analyst, 202–205–7030 curtis.rich@sba.gov. SUPPLEMENTARY INFORMATION: Small Business Administration SBA Form 912 is used to collect information needed to make character determinations with respect to applicants for monetary loan assistance or applicants for participation in SBA programs. The information collected is used as the basis for conducting name checks at national Federal Bureau of Investigations (FBI) and local levels. Title: ‘‘Statement of Personal History.’’ Description of Respondents: Applicants for Assistance or Temporary Employment in Disaster. E:\FR\FM\07SEN1.SGM 07SEN1

Agencies

[Federal Register Volume 76, Number 173 (Wednesday, September 7, 2011)]
[Notices]
[Pages 55453-55455]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-22725]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65228; File No. SR-Phlx-2011-119]


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

August 30, 2011.
    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 August 18, 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 establish a fee cap on equity options 
transactions on certain reversals and conversion strategies. The text 
of the proposed rule change is available on the Exchange's Web site at 
https://nasdaqtrader.com/micro.aspx?id=PHLXRulefilings, at the principal 
office of the Exchange, at the Commission's Public Reference Room, and 
on the Commission's Web site at www.sec.gov.

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 incentivize market 
participants by capping option transaction fees related to reversal and 
conversion strategies to encourage trading on the Exchange. Reversals 
are established by combining a short stock position with a short put 
and a long call position that shares the same strike and expiration. 
Conversions are established by combining a long position in the 
underlying security with a long put and a short call position that 
shares the same strike and expiration.
    The Exchange proposes to cap Specialist,\3\ Registered Option 
Trader (``ROT''),\4\ SQT,\5\ RSQT,\6\ Professional,\7\ Broker-Dealer 
and Firm option transaction fees in Multiply Listed Options \8\ at $500 
per day for reversal and conversion strategies which are executed on 
the same trading day in the same options class (``Reversal and 
Conversion Cap''). The Reversal and Conversion Cap will only apply to 
executions occurring on either of the two days preceding the standard 
options expiration date, which is typically the third Thursday and 
Friday of every

[[Page 55454]]

month.\9\ The Exchange proposes to add language to Section II of the 
Exchange's Fee Schedule entitled, Equity Options Fees, to describe the 
Reversal and Conversion Cap and define reversals and conversions.
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    \3\ A Specialist is an Exchange member who is registered as an 
options specialist pursuant to Rule 1020(a).
    \4\ A Registered Options Trader (``ROT'') includes a SQT, a RSQT 
and a Non-SQT ROT, which by definition is neither a SQT or a RSQT. A 
ROT is defined in Exchange Rule 1014(b) as a regular member or a 
foreign currency options participant of the Exchange located on the 
trading floor who has received permission from the Exchange to trade 
in options for his own account. See Exchange Rule 1014 (b)(i) and 
(ii).
    \5\ An SQT is defined in Exchange Rule 1014(b)(ii)(A) as an ROT 
who has received permission from the Exchange to generate and submit 
option quotations electronically in options to which such SQT is 
assigned.
    \6\ An RSQT is defined Exchange Rule in 1014(b)(ii)(B) as an ROT 
that is a member or member organization with no physical trading 
floor presence who has received permission from the Exchange to 
generate and submit option quotations electronically in options to 
which such RSQT has been assigned. An RSQT may only submit such 
quotations electronically from off the floor of the Exchange.
    \7\ The Exchange defines a ``professional'' as any person or 
entity that (i) is not a broker or dealer in securities, and (ii) 
places more than 390 orders in listed options per day on average 
during a calendar month for its own beneficial account(s) 
(hereinafter ``Professional'').
    \8\ For purposes of this filing, a Multiply Listed security 
means an option that is listed on more than one exchange.
    \9\ When the standard expiration date is also an Exchange 
holiday, the trading dates will be brought forward by one day.
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    For example, the standard options expiration date for September 
2011 is September 17, 2011. Therefore, on the two preceding days, 
Thursday, September 15, 2011, and Friday, September 16, 2011, 
Specialists, ROTs, SQTs, RSQTs, Professionals, Broker-Dealers and Firms 
are eligible for the Reversal and Conversion Cap.
    In order to capture the necessary information electronically, the 
Exchange requires members to designate on the trade ticket whether the 
trade involves a dividend, merger, short stock interest or reversal and 
conversion strategy. Specifically, members would be required to enter 
the proper code, ``Z4'', on the trading ticket and into the system, or 
directly into the Floor Broker Management System (``FBMS'').\10\
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    \10\ FBMS is designed to enable Floor Brokers and/or their 
employees to enter, route and report transactions stemming from 
options orders received on the Exchange. FBMS also is designed to 
establish an electronic audit trail for options orders represented 
and executed by Floor Brokers on the Exchange, such that the audit 
trail provides an accurate, time-sequenced record of electronic and 
other orders, quotations and transactions on the Exchange, beginning 
with the receipt of an order by the Exchange, and further 
documenting the life of the order through the process of execution, 
partial execution, or cancellation of that order. See Exchange Rule 
1080, Commentary .06.
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    The Exchange also proposes to make an amendment to Section VII of 
the Fee Schedule entitled, ``Options Floor Broker Subsidy.'' The 
Exchange currently excludes dividend, merger and short stock interest 
strategies from the eligible contract computations in computing the 
monthly eligible contracts for the Options Floor Broker Subsidy 
(``Subsidy'').\11\ The Exchange proposes to also exclude those 
executions subject to the Reversal and Conversion Cap from the Subsidy. 
The Exchange proposes to amend Section VII to add language to indicate 
that executions subject to the Reversal and Conversion Cap will not be 
included in the eligible contract computations.
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    \11\ The Exchange currently pays an Options Floor Broker Subsidy 
(``Subsidy'') to member organizations with Exchange registered floor 
brokers that enter eligible contracts into the Exchange's FBMS. The 
Subsidy is paid based on the contract volume on Customer-to-non-
Customer as well as non-Customer-to-non-Customer transactions for 
that month. Only the volume from orders entered by floor brokers 
into FBMS and subsequently executed on the Exchange qualifies.
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    The Exchange also proposes to amend the applicability of the 
dividend,\12\ merger \13\ and short stock interest \14\ strategies in 
Section II of the Exchange's Fee Schedule. Currently, Specialist, ROT, 
SQT and RSQT, Firm and Broker-Dealer equity option transaction charges 
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.\15\ 
The Exchange proposes to add Professionals to the list of market 
participants that may cap their options transaction charges for 
dividend, merger and short stock interest strategies.
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    \12\ A dividend strategy is defined as transactions done to 
achieve a dividend arbitrage involving the purchase, sale and 
exercise of in-the-money options of the same class, executed the 
first business day prior to the date on which the underlying stock 
goes ex-dividend.
    \13\ A merger strategy is defined as transactions done to 
achieve a merger arbitrage involving the purchase, sale and exercise 
of options of the same class and expiration date, executed the first 
business day prior to the date on which shareholders of record are 
required to elect their respective form of consideration, i.e., cash 
or stock.
    \14\ A short stock interest strategy is defined as transactions 
done to achieve a short stock interest arbitrage involving the 
purchase, sale and exercise of in-the-money options of the same 
class.
    \15\ Equity option transaction charges for dividend, merger and 
short stock interest strategies combined are further capped at the 
greater of $10,000 per member or $25,000 per member organization per 
month when such members are trading in their own proprietary 
accounts.
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2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \16\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \17\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among Exchange members and other persons using its 
facilities.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that the proposed Reversal and Conversion Cap 
is reasonable because the Exchange is proposing to offer all members an 
opportunity to reduce option transaction fees in Multiply Listed 
options for reversals and conversions. Customers are not subject to the 
Reversal and Conversion Cap because they do not pay option transaction 
charges for reversal and conversion strategies. The Exchange also 
believes that this proposal is equitable and not unfairly 
discriminatory because the Exchange is offering all members, except for 
Customers, the same opportunity to cap their option transaction fees in 
Multiply Listed Options for two days every month. Also, this proposal 
is similar in nature to caps on other exchanges, namely NYSE Arca, Inc. 
(``NYSEArca''),\18\ NYSE Amex, Inc. (``NYSE Amex'') \19\ and the 
Chicago Board Options Exchange, Incorporated(``CBOE'') \20\ for 
reversals and conversions.
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    \18\ See NYSE Arca's Fee Schedule.
    \19\ See NYSE Amex's Fee Schedule.
    \20\ See CBOE's Fees Schedule.
---------------------------------------------------------------------------

    The Exchange also believes that its proposal to allow Professionals 
to cap option transaction charges 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 is reasonable because all other market participants, other 
than Customers, are able to cap these fees. In addition, the Exchange 
believes that adding Professionals to the list of market participants 
that may cap dividend, merger and short stock interest strategies, is 
equitable and not unfairly discriminatory because the Exchange is 
offering all members, except for Customers, the opportunity to cap 
their transaction fees for dividend, merger and short stock interest 
strategies. Customers do not pay option transaction charges for 
dividend, merger or short stock interest strategies.
    The Exchange believes that amending Section VII to indicate that 
executions subject to the Reversal and Conversion Cap will not be 
included in the eligible contract computations of the Subsidy is 
reasonable since the Exchange currently excludes other strategies that 
are the subject of a cap. The recipients of the cap on strategies 
already receive a benefit by capping their options transaction charges 
and therefore the Exchange believes it is reasonable to exclude those 
strategies from the Subsidy. Additionally, the Exchange believes that 
excluding those executions that are subject to the Reversal and 
Conversion Cap from the Subsidy computation is equitable and not 
unfairly discriminatory because the exclusion will be applied evenly 
for all member organizations with Exchange registered floor brokers.

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.

[[Page 55455]]

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.\21\ 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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    \21\ 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-2011-119 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-2011-119. 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 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-2011-119 and should be 
submitted on or before September 28, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-22725 Filed 9-6-11; 8:45 am]
BILLING CODE 8011-01-P
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