Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Routing Fees, 22037-22039 [2012-8779]
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Federal Register / Vol. 77, No. 71 / Thursday, April 12, 2012 / Notices
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.7 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:
mstockstill on DSK4VPTVN1PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
No. SR–Phlx–2012–43 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 No.
SR–Phlx–2012–43. This file number
should be included on the subject line
if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
7 15
8 17
U.S.C. 78s(b)(3)(A)(ii).
CFR 200.30–3(a)(12).
VerDate Mar<15>2010
16:27 Apr 11, 2012
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 No. SR–Phlx–2012–
43 and should be submitted on or before
May 3, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–8780 Filed 4–11–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66755; File No. SR–Phlx–
2012–42]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to
Routing Fees
April 6, 2012.
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 March 28,
2012, 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
1 15
2 17
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PO 00000
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
certain Customer Routing Fees to recoup
costs incurred by the Exchange in
routing to away markets and also create
a new category of Routing Fees entitled
‘‘Firm/Broker-Dealer/Market Maker’’
fees.
While changes to the Pricing
Schedule pursuant to this proposal are
effective upon filing, the Exchange has
designated the proposed amendment to
the ISE Select Symbols Customer
Routing Fee to be operative on April 2,
2012. In addition, the Exchange has
designated the new category ‘‘Firm/
Broker-Dealer/Market Maker’’ to be
operative on the same date that SR–
Phlx–2012–41 becomes operative.
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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this filing is to recoup
costs that the Exchange incurs for
routing and executing certain Customer
orders in equity and index options to
the International Securities Exchange,
LLC (‘‘ISE’’) and also to recoup costs
related to a new category of Routing
Fees entitled ‘‘Firm/Broker-Dealer/
Market Maker’’ fees. The Exchange’s
Pricing Schedule at Section V, currently
includes the following Routing Fees for
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 77, No. 71 / Thursday, April 12, 2012 / Notices
routing Customer and Professional
orders to away markets:
Exchange
Customer
NYSE AMEX ............................................................................................................................................................
BATS ........................................................................................................................................................................
BOX .........................................................................................................................................................................
CBOE .......................................................................................................................................................................
CBOE orders greater than 99 contracts in RUT, RMN, NDX, MNX, ETFs, ETNs and HOLDRs ..........................
C2 ............................................................................................................................................................................
ISE ...........................................................................................................................................................................
ISE Select Symbols* ................................................................................................................................................
NYSE ARCA (Penny Pilot) ......................................................................................................................................
NYSE ARCA (Standard) ..........................................................................................................................................
NOM .........................................................................................................................................................................
NOM (NDX and MNX) .............................................................................................................................................
$0.11
0.55
0.11
0.11
0.29
0.55
0.11
0.23
0.55
0.11
0.54
0.56
Professional
$0.31
0.55
0.11
0.31
0.31
0.56
0.29
0.39
0.55
0.11
0.54
0.56
* These fees are applicable to orders routed to ISE that are subject to Rebates and Fees for Adding and Removing Liquidity in Select Symbols. See ISE’s Schedule of Fees for the complete list of symbols that are subject to these fees.
mstockstill on DSK4VPTVN1PROD with NOTICES
The Exchange is proposing to amend
the ‘‘ISE Select Symbols’’ 3 Customer
Routing Fee from $0.23 per contract to
$0.31 per contract. ISE recently
amended its ‘‘taker’’ fee for regular, or
non-complex, Priority Customer orders
in the Select Symbols, regardless of size,
from $0.15 per contract to $0.20 per
contract.4 In addition to the ISE taker
fee, the Exchange also incurs other
routing costs which it seeks to recoup.
In May 2009, the Exchange adopted
Rule 1080(m)(iii)(A) to establish Nasdaq
Options Services LLC (‘‘NOS’’), a
member of the Exchange, as the
Exchange’s exclusive order router.5 NOS
is utilized by the Exchange’s fully
automated options trading system,
PHLX XL®,6 solely to route orders in
options listed and open for trading on
the PHLX XL system to destination
markets. Each time NOS routes to away
markets NOS is charged a $0.06 clearing
fee and, in the case of certain exchanges,
a transaction fee is also charged in
certain symbols, which fees are passed
through to the Exchange. The Exchange
currently recoups clearing and
transaction charges incurred by the
Exchange as well as certain other costs
incurred by the Exchange when routing
to away markets, such as administrative
3 See ISE’s Schedule of Fees for the complete list
of symbols that are subject to these fees.
4 See ISE’s Schedule of Fees. See also Securities
Exchange Act Release No. 66597 (March 14, 2012),
77 FR 16295 (March 20, 2012) (SR–ISE–2012–17).
5 See Securities Exchange Act Release No. 59995
(May 28, 2009), 74 FR 26750 (June 3, 2009) (SR–
Phlx–2009–32).
6 See SR–Phlx–2012–41. This proposal refers to
‘‘PHLX XL’’ as the Exchange’s automated options
trading system. In May 2009 the Exchange
enhanced the system and adopted corresponding
rules referring to the system as ‘‘Phlx XL II.’’ See
Securities Exchange Act Release No. 59995 (May
28, 2009), 74 FR 26750 (June 3, 2009) (SR–Phlx–
2009–32). The Exchange intends to submit a
separate technical proposed rule change that would
change all references to the system from ‘‘Phlx XL
II’’ to ‘‘PHLX XL’’ for branding purposes.
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Jkt 226001
and technical costs associated with
operating NOS, membership fees at
away markets, and technical costs
associated with routing.7 While changes
to the Pricing Schedule pursuant to this
proposal are effective upon filing, the
Exchange has designated these changes
to be operative on April 2, 2012.
The Exchange is also proposing to
create a new category of Routing Fees
entitled ‘‘Firm/Broker-Dealer/Market
Maker’’ fees. The Exchange recently
filed a rule change to expand the routing
capabilities of certain options orders
that are eligible for electronic routing to
other market centers by PHLX XL.
Currently, Rule 1080(m) states that
PHLX XL will route only Customer 8
FIND 9 and SRCH 10 orders to away
markets. The rule change seeks to add
non-customer FIND orders as a new
category of orders that are eligible for
routing.11 This amendment to Exchange
Rule 1080(m) would permit Firm,
Broker-Dealer and Market Maker orders
to be eligible for routing to other market
centers when the Exchange cannot
execute such orders at the National Best
Bid or Offer (‘‘NBBO’’).12
Specifically, the Exchange proposes to
amend Section V of the Pricing
Schedule to add a new category ‘‘Firm/
Broker-Dealer/Market Maker’’ to
correspond to the non-customer FIND
orders that would be eligible for Routing
upon the effectiveness of SR–Phlx–
2012–41 and its proposed amendments
to Rule 1080(m). The Exchange
proposes to assess a fixed Routing Fee
of $0.55 per contract applicable to all
away markets. The Exchange has
designated the new category ‘‘Firm/
Broker-Dealer/Market Maker’’ to be
operative on the same date that SR–
Phlx–2012–41 becomes operative.
As with all fees, the Exchange may
adjust these Routing Fees in response to
competitive conditions by filing a new
proposed rule change.
7 The Exchange is therefore increasing the ISE
Select Symbols Customer Routing Fee to $0.31 per
contract to account for the $0.20 ISE taker fee, the
$0.06 clearing cost and another $0.05 per contract
associated with administrative and technical costs
associated with operating NOS.
8 SR–Phlx–2012–41 defined the term ‘‘customer’’
as a person or entity that is neither a broker-dealer
nor a direct or indirect affiliate of a broker-dealer.
The rule filing specifically states that the term
‘‘customer’’ includes a ‘‘professional’’ as defined in
Exchange Rule 1000(b)(14).
9 A FIND order is currently defined as an order
that is routable upon receipt. A FIND order received
during open trading that is not marketable against
the PHLX best Bid/Offer ‘‘PBBO’’ or the Away Best
Bid/Offer (‘‘ABBO’’) will be entered into the limit
order book at its limit price. The FIND order will
not be eligible for routing until the next time the
option series is subject to a new Opening Process.
See Exchange Rule 1080(m)(iv)(B).
10 A SRCH order is an order that is routable at any
time. A SRCH order received during open trading
that is not marketable against the PBBO or the
ABBO will be entered into the Phlx XLII book. Once
on the book, the SRCH order is eligible for routing
if it is locked or crossed by an away market. See
Exchange Rule 1080(m)(iv)(C).
11 See SR–Phlx–2012–41.
2. Statutory Basis
The Exchange believes that its
proposal to amend its Pricing Schedule
is consistent with Section 6(b) of the
Act 13 in general, and furthers the
objectives of Section 6(b)(4) of the Act 14
in particular, in that it is an equitable
allocation of reasonable fees and other
charges among Exchange members.
The Exchange believes that the
proposed ISE Customer Routing Fee for
Select Symbols is reasonable because it
seeks to recoup costs that are incurred
by the Exchange when routing certain
PO 00000
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12 Under the proposal, non-customer FIND orders
would be treated in the same manner as customer
FIND orders, except that non-customer FIND orders
would not be eligible for routing during the
Opening Process. The proposed Routing Fees would
apply to all orders that are routed to an away
market and would not apply to orders not eligible
for routing.
13 15 U.S.C. 78f(b).
14 15 U.S.C. 78f(b)(4).
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Federal Register / Vol. 77, No. 71 / Thursday, April 12, 2012 / Notices
mstockstill on DSK4VPTVN1PROD with NOTICES
Customer orders to ISE on behalf of its
members. Each destination market’s
transaction charge varies and there is a
standard clearing charge for each
transaction incurred by the Exchange
along with other administrative and
technical costs that are incurred by the
Exchange. The Exchange believes that
the proposed Routing Fee would enable
the Exchange to recover the customer
taker fees assessed by ISE, plus clearing
and other administrative and technical
fees for the execution of Customer
orders routed to ISE. The Exchange also
believes that the proposed Routing Fee
is equitable and not unfairly
discriminatory because it would be
uniformly applied to all Customer
orders that are routed to ISE and part of
ISE’s Select Symbols.
The Exchange believes that the
proposed new category of Routing Fee
‘‘Firm/Broker-Dealer/Market Maker’’
and the fixed $0.55 per contract Routing
Fee are reasonable because other
options exchanges charge fees for nonCustomer orders such as Firm, BrokerDealer and Market Maker orders and
these fees are consistently higher than
fees for Customer orders.15 The pricing
on the various options exchanges for
such orders varies significantly from
exchange to exchange, with much more
variation than for Customer orders.
Accordingly, the Exchange is proposing
a $0.55 per contract side Routing Fee in
order to capture the majority of the
transaction and clearing fees for Firm,
Broker-Dealer and Market Maker orders,
while making the Exchange’s Routing
Fees easier to calculate and predict for
members whose proprietary orders are
routed away. In addition, fixed Routing
Fees are easier to comprehend by the
members whose orders are routed away.
There is no uncertainty and it is simpler
for members acting as agent for other
members to pass-through fees to its
Customer. Currently, predicting,
calculating and charging back ‘‘passthrough’’ fees is an unduly burdensome,
expensive and complicated task for
Exchange members whose orders are
routed away. The fixed Routing Fees for
Firm, Broker-Dealer and Market Maker
orders should ease the burden, expense
and complexity of this task.
Furthermore, fixed fees are easier to
manage and maintain for the Exchange,
15 The NASDAQ Options Market LLC (‘‘NOM’’)
assesses a fixed Routing Fee to its Firms and Market
Makers of $0.55 per contract. See Chapter V,
Section (2) of The NASDAQ Stock Market LLC’s
Rules. In addition, the Chicago Board Options
Exchange Incorporated (‘‘CBOE’’) assesses noncustomer orders, including voluntary professionals
and professionals, routing fees of $0.50 per contract
in addition to the customary CBOE execution
charges. See CBOE’s Fees Schedule.
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Jkt 226001
ensuring accurate billing and
accounting. The Exchange believes that
the proposed new category of Routing
Fee ‘‘Firm/Broker-Dealer/Market
Maker’’ and the fixed $0.55 per contract
Routing Fees are equitable and not
unfairly discriminatory because the
Exchange would assess all Firm, BrokerDealer and Market Maker orders,
eligible for routing to any away market,
the same fee.16
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.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 email to rulecomments@sec.gov. Please include File
No. SR–Phlx–2012–42 on the subject
line.
16 A market participant may mark an order
‘‘DNR’’ for do not route and therefore would not be
subject to the fees noted herein. See Rules 1066(h)
and 1080(m).
17 15 U.S.C. 78s(b)(3)(A)(ii).
PO 00000
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22039
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 No.
SR–Phlx–2012–42. This file number
should be included on the subject line
if email 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 No. SR–Phlx–2012–
42 and should be submitted on or before
May 3, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–8779 Filed 4–11–12; 8:45 am]
BILLING CODE 8011–01–P
18 17
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]]>Agencies
[Federal Register Volume 77, Number 71 (Thursday, April 12, 2012)]
[Notices]
[Pages 22037-22039]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-8779]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66755; File No. SR-Phlx-2012-42]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
Routing Fees
April 6, 2012.
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 March 28, 2012, 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 amend certain Customer Routing Fees to
recoup costs incurred by the Exchange in routing to away markets and
also create a new category of Routing Fees entitled ``Firm/Broker-
Dealer/Market Maker'' fees.
While changes to the Pricing Schedule pursuant to this proposal are
effective upon filing, the Exchange has designated the proposed
amendment to the ISE Select Symbols Customer Routing Fee to be
operative on April 2, 2012. In addition, the Exchange has designated
the new category ``Firm/Broker-Dealer/Market Maker'' to be operative on
the same date that SR-Phlx-2012-41 becomes operative.
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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this filing is to recoup costs that the Exchange
incurs for routing and executing certain Customer orders in equity and
index options to the International Securities Exchange, LLC (``ISE'')
and also to recoup costs related to a new category of Routing Fees
entitled ``Firm/Broker-Dealer/Market Maker'' fees. The Exchange's
Pricing Schedule at Section V, currently includes the following Routing
Fees for
[[Page 22038]]
routing Customer and Professional orders to away markets:
------------------------------------------------------------------------
Exchange Customer Professional
------------------------------------------------------------------------
NYSE AMEX............................... $0.11 $0.31
BATS.................................... 0.55 0.55
BOX..................................... 0.11 0.11
CBOE.................................... 0.11 0.31
CBOE orders greater than 99 contracts in 0.29 0.31
RUT, RMN, NDX, MNX, ETFs, ETNs and
HOLDRs.................................
C2...................................... 0.55 0.56
ISE..................................... 0.11 0.29
ISE Select Symbols*..................... 0.23 0.39
NYSE ARCA (Penny Pilot)................. 0.55 0.55
NYSE ARCA (Standard).................... 0.11 0.11
NOM..................................... 0.54 0.54
NOM (NDX and MNX)....................... 0.56 0.56
------------------------------------------------------------------------
* These fees are applicable to orders routed to ISE that are subject to
Rebates and Fees for Adding and Removing Liquidity in Select Symbols.
See ISE's Schedule of Fees for the complete list of symbols that are
subject to these fees.
The Exchange is proposing to amend the ``ISE Select Symbols'' \3\
Customer Routing Fee from $0.23 per contract to $0.31 per contract. ISE
recently amended its ``taker'' fee for regular, or non-complex,
Priority Customer orders in the Select Symbols, regardless of size,
from $0.15 per contract to $0.20 per contract.\4\ In addition to the
ISE taker fee, the Exchange also incurs other routing costs which it
seeks to recoup.
---------------------------------------------------------------------------
\3\ See ISE's Schedule of Fees for the complete list of symbols
that are subject to these fees.
\4\ See ISE's Schedule of Fees. See also Securities Exchange Act
Release No. 66597 (March 14, 2012), 77 FR 16295 (March 20, 2012)
(SR-ISE-2012-17).
---------------------------------------------------------------------------
In May 2009, the Exchange adopted Rule 1080(m)(iii)(A) to establish
Nasdaq Options Services LLC (``NOS''), a member of the Exchange, as the
Exchange's exclusive order router.\5\ NOS is utilized by the Exchange's
fully automated options trading system, PHLX XL[supreg],\6\ solely to
route orders in options listed and open for trading on the PHLX XL
system to destination markets. Each time NOS routes to away markets NOS
is charged a $0.06 clearing fee and, in the case of certain exchanges,
a transaction fee is also charged in certain symbols, which fees are
passed through to the Exchange. The Exchange currently recoups clearing
and transaction charges incurred by the Exchange as well as certain
other costs incurred by the Exchange when routing to away markets, such
as administrative and technical costs associated with operating NOS,
membership fees at away markets, and technical costs associated with
routing.\7\ While changes to the Pricing Schedule pursuant to this
proposal are effective upon filing, the Exchange has designated these
changes to be operative on April 2, 2012.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 59995 (May 28,
2009), 74 FR 26750 (June 3, 2009) (SR-Phlx-2009-32).
\6\ See SR-Phlx-2012-41. This proposal refers to ``PHLX XL'' as
the Exchange's automated options trading system. In May 2009 the
Exchange enhanced the system and adopted corresponding rules
referring to the system as ``Phlx XL II.'' See Securities Exchange
Act Release No. 59995 (May 28, 2009), 74 FR 26750 (June 3, 2009)
(SR-Phlx-2009-32). The Exchange intends to submit a separate
technical proposed rule change that would change all references to
the system from ``Phlx XL II'' to ``PHLX XL'' for branding purposes.
\7\ The Exchange is therefore increasing the ISE Select Symbols
Customer Routing Fee to $0.31 per contract to account for the $0.20
ISE taker fee, the $0.06 clearing cost and another $0.05 per
contract associated with administrative and technical costs
associated with operating NOS.
---------------------------------------------------------------------------
The Exchange is also proposing to create a new category of Routing
Fees entitled ``Firm/Broker-Dealer/Market Maker'' fees. The Exchange
recently filed a rule change to expand the routing capabilities of
certain options orders that are eligible for electronic routing to
other market centers by PHLX XL. Currently, Rule 1080(m) states that
PHLX XL will route only Customer \8\ FIND \9\ and SRCH \10\ orders to
away markets. The rule change seeks to add non-customer FIND orders as
a new category of orders that are eligible for routing.\11\ This
amendment to Exchange Rule 1080(m) would permit Firm, Broker-Dealer and
Market Maker orders to be eligible for routing to other market centers
when the Exchange cannot execute such orders at the National Best Bid
or Offer (``NBBO'').\12\
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\8\ SR-Phlx-2012-41 defined the term ``customer'' as a person or
entity that is neither a broker-dealer nor a direct or indirect
affiliate of a broker-dealer. The rule filing specifically states
that the term ``customer'' includes a ``professional'' as defined in
Exchange Rule 1000(b)(14).
\9\ A FIND order is currently defined as an order that is
routable upon receipt. A FIND order received during open trading
that is not marketable against the PHLX best Bid/Offer ``PBBO'' or
the Away Best Bid/Offer (``ABBO'') will be entered into the limit
order book at its limit price. The FIND order will not be eligible
for routing until the next time the option series is subject to a
new Opening Process. See Exchange Rule 1080(m)(iv)(B).
\10\ A SRCH order is an order that is routable at any time. A
SRCH order received during open trading that is not marketable
against the PBBO or the ABBO will be entered into the Phlx XLII
book. Once on the book, the SRCH order is eligible for routing if it
is locked or crossed by an away market. See Exchange Rule
1080(m)(iv)(C).
\11\ See SR-Phlx-2012-41.
\12\ Under the proposal, non-customer FIND orders would be
treated in the same manner as customer FIND orders, except that non-
customer FIND orders would not be eligible for routing during the
Opening Process. The proposed Routing Fees would apply to all orders
that are routed to an away market and would not apply to orders not
eligible for routing.
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Specifically, the Exchange proposes to amend Section V of the
Pricing Schedule to add a new category ``Firm/Broker-Dealer/Market
Maker'' to correspond to the non-customer FIND orders that would be
eligible for Routing upon the effectiveness of SR-Phlx-2012-41 and its
proposed amendments to Rule 1080(m). The Exchange proposes to assess a
fixed Routing Fee of $0.55 per contract applicable to all away markets.
The Exchange has designated the new category ``Firm/Broker-Dealer/
Market Maker'' to be operative on the same date that SR-Phlx-2012-41
becomes operative.
As with all fees, the Exchange may adjust these Routing Fees in
response to competitive conditions by filing a new proposed rule
change.
2. Statutory Basis
The Exchange believes that its proposal to amend its Pricing
Schedule is consistent with Section 6(b) of the Act \13\ in general,
and furthers the objectives of Section 6(b)(4) of the Act \14\ in
particular, in that it is an equitable allocation of reasonable fees
and other charges among Exchange members.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the proposed ISE Customer Routing Fee
for Select Symbols is reasonable because it seeks to recoup costs that
are incurred by the Exchange when routing certain
[[Page 22039]]
Customer orders to ISE on behalf of its members. Each destination
market's transaction charge varies and there is a standard clearing
charge for each transaction incurred by the Exchange along with other
administrative and technical costs that are incurred by the Exchange.
The Exchange believes that the proposed Routing Fee would enable the
Exchange to recover the customer taker fees assessed by ISE, plus
clearing and other administrative and technical fees for the execution
of Customer orders routed to ISE. The Exchange also believes that the
proposed Routing Fee is equitable and not unfairly discriminatory
because it would be uniformly applied to all Customer orders that are
routed to ISE and part of ISE's Select Symbols.
The Exchange believes that the proposed new category of Routing Fee
``Firm/Broker-Dealer/Market Maker'' and the fixed $0.55 per contract
Routing Fee are reasonable because other options exchanges charge fees
for non-Customer orders such as Firm, Broker-Dealer and Market Maker
orders and these fees are consistently higher than fees for Customer
orders.\15\ The pricing on the various options exchanges for such
orders varies significantly from exchange to exchange, with much more
variation than for Customer orders. Accordingly, the Exchange is
proposing a $0.55 per contract side Routing Fee in order to capture the
majority of the transaction and clearing fees for Firm, Broker-Dealer
and Market Maker orders, while making the Exchange's Routing Fees
easier to calculate and predict for members whose proprietary orders
are routed away. In addition, fixed Routing Fees are easier to
comprehend by the members whose orders are routed away. There is no
uncertainty and it is simpler for members acting as agent for other
members to pass-through fees to its Customer. Currently, predicting,
calculating and charging back ``pass-through'' fees is an unduly
burdensome, expensive and complicated task for Exchange members whose
orders are routed away. The fixed Routing Fees for Firm, Broker-Dealer
and Market Maker orders should ease the burden, expense and complexity
of this task. Furthermore, fixed fees are easier to manage and maintain
for the Exchange, ensuring accurate billing and accounting. The
Exchange believes that the proposed new category of Routing Fee ``Firm/
Broker-Dealer/Market Maker'' and the fixed $0.55 per contract Routing
Fees are equitable and not unfairly discriminatory because the Exchange
would assess all Firm, Broker-Dealer and Market Maker orders, eligible
for routing to any away market, the same fee.\16\
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\15\ The NASDAQ Options Market LLC (``NOM'') assesses a fixed
Routing Fee to its Firms and Market Makers of $0.55 per contract.
See Chapter V, Section (2) of The NASDAQ Stock Market LLC's Rules.
In addition, the Chicago Board Options Exchange Incorporated
(``CBOE'') assesses non-customer orders, including voluntary
professionals and professionals, routing fees of $0.50 per contract
in addition to the customary CBOE execution charges. See CBOE's Fees
Schedule.
\16\ A market participant may mark an order ``DNR'' for do not
route and therefore would not be subject to the fees noted herein.
See Rules 1066(h) and 1080(m).
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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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\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.
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\17\ 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 email to rule-comments@sec.gov. Please include
File No. SR-Phlx-2012-42 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 No. SR-Phlx-2012-42. This file
number should be included on the subject line if email 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 No. SR-Phlx-2012-42 and should be
submitted on or before May 3, 2012.
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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-8779 Filed 4-11-12; 8:45 am]
BILLING CODE 8011-01-P
