Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Pricing in Select Symbols and Multiply-Listed Options, 42541-42546 [2012-17573]

Download as PDF Federal Register / Vol. 77, No. 139 / Thursday, July 19, 2012 / Notices or otherwise in furtherance of the purposes of the Act. 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 Number SR–CBOE–2012–062 on the subject line. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–17574 Filed 7–18–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–67439; File No. SR–Phlx– 2012–90] Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Pricing in Select Symbols and MultiplyListed Options emcdonald on DSK67QTVN1PROD with NOTICES Paper Comments July 13, 2012. • 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–CBOE–2012–062. 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 10:00 a.m. and 3:00 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–CBOE– 2012–062 and should be submitted on or before August 9, 2012. 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 July 2, 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. 16 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 15:07 Jul 18, 2012 Jkt 226001 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the Select Symbols 3 and fees in Section I and amend a fee and adopt a Customer Rebate Program in Section II of the Pricing Schedule. The Exchange also proposes to make a minor amendment to Section I. The text of the proposed rule change is available on the Exchange’s Web site at https://www.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 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 The Select Symbols are subject to the fees and rebates in Section I of the Pricing Schedule. See Section I for a complete list of Select Symbols. PO 00000 1 15 2 17 Frm 00060 Fmt 4703 Sfmt 4703 42541 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 Exchange proposes to make various amendments to Section I of the Pricing Schedule entitled ‘‘Fees and Rebates for Adding and Removing Liquidity in Select Symbols.’’ The Exchange proposes to delete the following Select Symbols from the list of symbols subject to the fees and rebates in Section I: Barrick Gold Corporation (‘‘ABX’’), eBay Inc. (‘‘EBAY’’), Corning Inc. (‘‘GLW’’), Procter & Gamble Co. (‘‘PG’’), Potash Corp. of Saskatchewan, Inc. (‘‘POT’’), Starbucks Corporation (‘‘SBUX’’), SanDisk Corp. (‘‘SNDK’’) and United Continental Holdings, Inc. (‘‘UAL’’) (collectively ‘‘Proposed Deleted Symbols’’). These Proposed Deleted Symbols would be subject to the rebates and fees in Section II of the Pricing Schedule entitled ‘‘Multiply Listed Options Fees.’’ 4 The Exchange proposes to amend the title of Section I, Part A from ‘‘Single contra-side’’ to ‘‘Simple Order.’’ The Exchange believes this amendment better describes the type of orders subject to the fees and rebates in Section I, Part A of the Pricing Schedule. The Exchange also proposes to increase the Specialist 5 and Market Maker 6 Fees for Removing Liquidity in Section I, Part A from $0.38 per contract to $0.39 per contract. The Exchange believes that the increased fees better align the Fees for Removing Liquidity by assessing Customers the same fee as a Specialist and Market Maker. The Exchange proposes to amend the Electronic Firm Fee Discount which 4 Section II includes options overlying equities, ETFs, ETNs, indexes and HOLDRs which are Multiply Listed. 5 A Specialist is an Exchange member who is registered as an options specialist pursuant to Rule 1020(a). An options Specialist includes a Remote Specialist which is a defined as an options specialist in one or more classes that does not have a physical presence on an Exchange floor and is approved by the Exchange pursuant to Rule 501. 6 For purposes of the Pricing Schedule, the term ‘‘Market Maker’’ is utilized to describe fees and rebates applicable to ROTs, SQTs and RSQTs. The term ‘‘ROT, SQT and RSQT’’ applies to transactions for the accounts of Registered Option Traders (‘‘ROTs’’), Streaming Quote Traders (‘‘SQTs’’), and Remote Streaming Quote Traders (‘‘RSQTs’’). E:\FR\FM\19JYN1.SGM 19JYN1 42542 Federal Register / Vol. 77, No. 139 / Thursday, July 19, 2012 / Notices emcdonald on DSK67QTVN1PROD with NOTICES today provides that Firm electronic Options Transaction Charges in Penny Pilot 7 and non-Penny Pilot Options will be reduced to $0.11 per contract for a given month provided the Firm has volume greater than 750,000 electronically-delivered contracts in a month. The Exchange proposes to reduce the amount of the discount by increasing the Options Transaction Charge to $0.13 per contract from $0.11 per contract. While the Exchange desires to continue to incentivize Firms to increase the volume executed on Phlx, the Exchange believes that reducing the Options Transactions Charges to $0.13 per contract is still a significant incentive for Firms. The Exchange also proposes to cap the Qualified Contingent Cross Rebate (‘‘QCC Rebate’’) to be paid in a given month at $275,000. The QCC Rebate is applicable to both electronic QCC Orders (‘‘eQCC’’) 8 and Floor QCC Orders,9 except where the transaction is 7 The Penny Pilot was established in January 2007 and in October 2009 was expanded and extended through December 31, 2010. See Securities Exchange Act Release Nos. 55153 (January 23, 2007), 72 FR 4553 (January 31, 2007)(SR–Phlx– 2006–74)(notice of filing and approval order establishing Penny Pilot); 60873 (October 23, 2009), 74 FR 56675 (November 2, 2009)(SR–Phlx–2009– 91)(notice of filing and immediate effectiveness expanding and extending Penny Pilot); 60966 (November 9, 2009), 74 FR 59331 (November 17, 2009)(SR–Phlx–2009–94)(notice of filing and immediate effectiveness adding seventy-five classes to Penny Pilot); 61454 (February 1, 2010), 75 FR 6233 (February 8, 2010)(SR–Phlx–2010–12)(notice of filing and immediate effectiveness adding seventy-five classes to Penny Pilot); 62028 (May 4, 2010), 75 FR 25890 (May 10, 2010)(SR–Phlx–2010– 65)(notice of filing and immediate effectiveness adding seventy-five classes to Penny Pilot); 62616 (July 30, 2010), 75 FR 47664 (August 6, 2010)(SR– Phlx–2010–103)(notice of filing and immediate effectiveness adding seventy-five classes to Penny Pilot); 63395 (November 30, 2010), 75 FR 76062 (December 7, 2010)(SR–Phlx–2010–167)(notice of filing and immediate effectiveness extending the Penny Pilot); 65976 (December 15, 2011), 76 FR 79247 (December 21, 2011)(SR–Phlx–2011– 172)(notice of filing and immediate effectiveness extending the Penny Pilot); and (SR–Phlx–2012–86) (notice of filing and immediate effectiveness extending the Penny Pilot). See also Exchange Rule 1034. 8 A QCC Order is comprised of an order to buy or sell at least 1000 contracts that is identified as being part of a qualified contingent trade, as that term is defined in Rule 1080(o)(3), coupled with a contra-side order to buy or sell an equal number of contracts. The QCC Order must be executed at a price at or between the National Best Bid and Offer (‘‘NBBO’’) and be rejected if a Customer order is resting on the Exchange book at the same price. A QCC Order shall only be submitted electronically from off the floor to the PHLX XL II System. See Rule 1080(o). See also Securities Exchange Act Release No. 64249 (April 7, 2011), 76 FR 20773 (April 13, 2011) (SR–Phlx–2011–47) (a rule change to establish a QCC Order to facilitate the execution of stock/option Qualified Contingent Trades (‘‘QCTs’’) that satisfy the requirements of the trade through exemption in connection with Rule 611(d) of the Regulation NMS). 9 A Floor QCC Order must: (i) be for at least 1,000 contracts, (ii) meet the six requirements of Rule VerDate Mar<15>2010 15:07 Jul 18, 2012 Jkt 226001 either: (i) Customer-to-Customer; or (ii) a dividend,10 merger 11 or short stock interest strategy 12 and executions subject to the Reversal and Conversion Cap 13 (as defined in Section II). QCC Transaction Fees apply to Sections I and II of the Pricing Schedule and are subject to the Monthly Firm Fee Cap 14 and the Monthly Market Maker Cap.15 The Exchange believes that the proposed cap, while limiting the amount of rebate a market participant may obtain in extremely high industry volume months, will not hinder participants in continuing to execute QCC Orders to obtain the highest possible rebate. The Exchange proposes to eliminate the $0.07 per contract rebate for members executing electronically1080(o)(3) which are modeled on the QCT Exemption, (iii) be executed at a price at or between the NBBO; and (iv) be rejected if a Customer order is resting on the Exchange book at the same price. In order to satisfy the 1,000-contract requirement, a Floor QCC Order must be for 1,000 contracts and could not be, for example, two 500-contract orders or two 500-contract legs. See Rule 1064(e). See also Securities Exchange Act Release No. 64688 (June 16, 2011), 76 FR 36606 (June 22, 2011) (SR–Phlx– 2011–56). 10 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. See Section II of the Pricing Schedule. 11 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. See Section II of the Pricing Schedule. 12 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. See Section II of the Pricing Schedule. 13 Specialist, Market Maker, Professional, Firm and Broker-Dealer options transaction fees in Multiply Listed Options are capped at $500 per day for reversal and conversion strategies executed on the same trading day in the same options class when such members are trading in their own proprietary accounts. 14 Firms are subject to a maximum fee of $75,000 (’’Monthly Firm Fee Cap’’). Firm non-electronic equity option transaction fees and QCC Transaction Fees in the aggregate, for one billing month, may not exceed the Monthly Firm Fee Cap per member organization when such members are trading in their own proprietary account. All dividend, merger, short stock interest and reversal and conversion strategy executions are excluded from the Monthly Firm Fee Cap. The Firm equity options transaction fees are waived for members executing facilitation orders pursuant to Exchange Rule 1064 when such members are trading in their own proprietary account. 15 Specialists and Market Makers are currently subject to a Monthly Market Maker Cap of $550,000 for equity option transaction fees and QCC Transaction Fees. The trading activity of separate Specialist and Market Maker member organizations will be aggregated in calculating the Monthly Market Maker Cap if there is at least 75% common ownership between the member organizations. PO 00000 Frm 00061 Fmt 4703 Sfmt 4703 delivered Customer Orders when that member transacts an average daily volume of 50,000 Customer contracts or greater in a given month. Also, the additional rebate of $0.03 per contract, which is paid to members for electronically-delivered Customer orders that qualified for the $0.07 rebate and added liquidity in a Simple Order in a non-Penny Pilot Option or added or removed liquidity (including auctions) in a Complex Order in a Penny Pilot Option, would be eliminated.16 The Exchange proposes to instead offer a more detailed Customer Rebate Program as described below, which will replace the rebates that are being eliminated. The Exchange proposes to adopt a revised rebate program entitled ‘‘Customer Rebate Program’’ for Multiply Listed Options,17 which has some similarities to the rebates that are being eliminated in Section II of the Pricing Schedule. The proposed Customer Rebate Program will consist of three tiers. The first tier (‘‘Tier 1’’) (0 to 49,999 contracts in a month) will not earn any rebates. This is the case today. The second tier (‘‘Tier 2’’) (50,000 to 99,999 contracts in a month) will remain the same as the current rebate offered today that is being eliminated.18 The third tier (‘‘Tier 3’’) (over 100,000 contracts in a month) will introduce higher rebates as an additional incentive for member organizations to route Customer order flow to the Exchange for execution, with the exception of Category C, which will remain the same as it is today ($0.10 per contract). Each tier or ‘‘Threshold’’ would be calculated by totaling all applicable Multiply-Listed electronically-delivered Customer Orders, except electronic Qualified Contingent Cross Orders (eQCC Orders). PIXL orders are currently excluded from the Threshold computations for the rebates that exist today and are being eliminated; this differs for the Customer Rebate Program. The rebates would be paid for all 16 PIXL Orders and QCC Orders are not eligible for the rebate and are excluded from the calculation of the average daily volume. 17 This includes options overlying equities, ETFs, ETNs, indexes and HOLDRS which are Multiply Listed and excludes SOX, HGX and OSX and the Select Symbols. 18 The Exchange currently offers a rebate of $0.07 per contract, which is paid to members executing electronically-delivered Customer Orders when the member transacts an average daily volume of 50,000 Customer contracts or greater in a given month. Further, an additional rebate of $0.03 per contract is paid to members for those electronicallydelivered Customer orders that: qualified for the $0.07 rebate; and added liquidity in a Simple Order in a non-Penny Pilot Option or added or removed liquidity (including auctions) in a Complex Order in a Penny Pilot Option. This rebate scheme is being eliminated and replaced with the Customer Rebate Program. E:\FR\FM\19JYN1.SGM 19JYN1 42543 Federal Register / Vol. 77, No. 139 / Thursday, July 19, 2012 / Notices electronically delivered Customer orders in a given month as follows: Rebate per contract categories Average daily volume threshold Category A emcdonald on DSK67QTVN1PROD with NOTICES 0 to 49,999 contracts in a month ................................................................................................ 50,000 to 99,999 contracts in a month ....................................................................................... Over 100,000 contracts in a month ............................................................................................. Category A rebates would be paid to members executing electronicallydelivered Customer Simple Orders in Penny Pilot Options, Simple Orders in Non-Penny Pilot Options that removed liquidity and Complex Orders in NonPenny Pilot Options. Category B rebates would be paid to members executing electronically-delivered Customer Complex Orders in Penny Pilot Options and Category C rebates would be paid to members executing electronicallydelivered Customer Simple Orders in Non-Penny Pilot Options that added liquidity. The Threshold would be calculated by totaling Customer volume in Multiply Listed Options that are electronically-delivered, except electronic QCC Orders (eQCC Orders) as defined in Exchange Rule 1080(o) (‘‘Threshold Volume’’). Rebates will be paid on Threshold Volume in a given month, excluding electronicallydelivered Customer volume associated with PIXL.19 The Exchange believes that this proposed Customer Rebate Program will attract additional Customer order flow to the Exchange for the benefit of all market participants through increased liquidity. Finally, the Exchange is proposing to increase the current fee applicable to Specialists and Market Makers that are on the contra-side of an electronicallydelivered and executed Customer order and have reached the Monthly Market Maker Cap. Today, the Exchange assesses Specialists and Market Makers a $0.07 per contract fee, in both Select Symbols and Multiply Listed Symbols (Sections I and II) when contra to an electronically-delivered and executed Customer order and when the Monthly Market Maker Cap is exceeded. PIXL Orders are excluded today. This would remain the same except the Exchange proposes to increase this fee from $0.07 to $0.12 per contract to assist in recouping costs associated with providing a Customer Rebate Program. The Exchange believes that this fee increase would enable the Exchange to offer the Customer Rebate Program as proposed. 2. Statutory Basis The Exchange believes that its proposal to amend its Pricing Schedule is consistent with Section 6(b) of the Act 20 in general, and furthers the objectives of Section 6(b)(4) of the Act 21 in particular, in that it is an equitable allocation of reasonable fees and other charges among Exchange members and other persons using its facilities. Select Symbols The Exchange believes that it is reasonable to remove the Proposed Deleted Symbols from its list of Select Symbols to attract additional order flow to the Exchange. The Exchange believes that applying the fees in Section II of the Pricing Schedule to the Proposed Deleted Symbols, including the opportunity to receive payment for order flow, will continue to attract order flow to the Exchange. The Exchange believes that it is equitable and not unfairly discriminatory to amend its list of Select Symbols to remove the Proposed Deleted Symbols because the list of Select Symbols would apply uniformly to all categories of participants in the same manner. All market participants who trade the Select Symbols would be subject to the rebates and fees in Section I of the Pricing Schedule, which would not include the Proposed Deleted Symbols. Also, all market participants would be uniformly subject to the fees and Customer Rebate Program in Section II, which would include the Proposed Deleted Symbols. Section I—Fee Amendments The Exchange believes its proposal to amend the Specialist and Market Maker Fees for Removing Liquidity in Section I, Part A from $0.38 per contract to $0.39 per contract is reasonable, equitable and not unfairly discriminatory because the Exchange would assess Specialists and Market Makers the same Fee for Removing Liquidity as a Customer. The Exchange notes that Specialists and Market Makers are assessed lower Options 19 PIXL is the Exchange’s price improvement mechanism known as Price Improvement XL or (PIXL SM). VerDate Mar<15>2010 15:07 Jul 18, 2012 Jkt 226001 U.S.C. 78f(b). 21 15 U.S.C. 78f(b)(4). Frm 00062 Fmt 4703 Category C $0.00 0.10 0.12 Sfmt 4703 $0.00 0.10 0.10 Transaction Charges as compared to other market participants, except Customers, because they have burdensome quoting obligations 22 to the market which do not apply to Customers, Professionals, Firms and Broker-Dealers. The proposed differentiation as between Customers, Specialists and Market Makers as compared to Professionals, Firms and Broker-Dealers recognizes the differing contributions made to the liquidity and trading environment on the Exchange by these market participants. The Exchange believes that the increased fees better align the Fees for Removing Liquidity by assessing Customers the same fee as a Specialist and Market Maker. Section II—Electronic Firm Fee Discount The Exchange’s proposal to increase the fee thereby decrease the Electronic Firm Fee Discount for both electronic Penny Pilot and non-Penny Pilot Options from $0.11 per contract to $0.13 per contract is reasonable because the amendment would enable the Exchange to reward market participants that directed Customer orders to the Exchange by paying rebates as proposed herein, which in turn benefits all market participants. The Exchange believes decreasing the Electronic Firm Fee Discount for both electronic Penny Pilot and non-Penny Pilot Options from $0.11 per contract to $0.13 per contract is equitable and not unfairly discriminatory because the Exchange is continuing to incentivize Firms by providing the ability to significantly lower fees and also earn rebates in the Customer Rebate Program. All Firms will continue to have an opportunity to qualify for a lower fee provided they achieve the requisite volume. The Exchange believes this Electronic Firm Fee Discount will continue to act as an incentive to attract electronic Firm volume to the Exchange. QCC Rebate The Exchange believes that its proposal to cap the QCC Rebate at 22 See Rule 1014 titled ‘‘Obligations and Restrictions Applicable to Specialists and Registered Options Traders.’’ 20 15 PO 00000 $0.00 0.07 0.09 Category B E:\FR\FM\19JYN1.SGM 19JYN1 42544 Federal Register / Vol. 77, No. 139 / Thursday, July 19, 2012 / Notices $275,000 per month is reasonable because the Exchange is proposing to provide other incentives in Section II to attract volume. Also, this cap, while limiting the amount of rebate that a market participant would receive for transacting a certain amount of QCC volume, will continue to incentivize market participants to seek to obtain the highest rebate possible. The Exchange believes that its proposal to cap the QCC Rebate at $275,000 per month is equitable and not unfairly discriminatory because all market participants would be uniformly capped at $275,000 per month. Elimination of Rebate The Exchange’s proposal to eliminate the $0.07 per contract rebate for members executing electronicallydelivered Customer Orders when that member transacts an average daily volume of 50,000 Customer contracts or greater in a given month and the additional rebate of $0.03 per contract for electronically-delivered Customer orders that qualified for the $0.07 rebate are reasonable because the elimination of these rebates will enable the Exchange to reward market participants that add liquidity to the Exchange with the proposed Customer Rebate Program and in turn benefit all market participants. The elimination of the twotiered rebate is equitable and not unfairly discriminatory because it would be uniformly eliminated and unavailable to all market participants. In addition, the Customer Rebate Program would be available to these market participants. emcdonald on DSK67QTVN1PROD with NOTICES Customer Rebate The Exchange’s adoption of a Customer Rebate Program in Section II of the Pricing Schedule is reasonable because the Exchange is seeking to incentivize members to route MultiplyListed electronically-delivered Customer orders to the Exchange, with the exception of electronic QCC Orders. The Exchange believes that the proposed Volume Thresholds are reasonable because the Exchange believes that the thresholds are attainable to members desiring to increase their volume to achieve certain rebates and also bring greater Customer liquidity to the Exchange. By incentivizing members to route Customer orders, the Exchange desires to attract Customer orders which benefits all market participants by increasing liquidity on the Exchange. Other exchanges employ incentive VerDate Mar<15>2010 15:07 Jul 18, 2012 Jkt 226001 programs.23 The Exchange believes that its proposed volume thresholds and rates will be competitive as compared to rebate structures at other exchanges and attract order flow to the Exchange. The Exchange also believes that it is reasonable to base rebates not only on volume but on the type of order by creating three categories, A, B and C, which specify the type of order that is eligible for certain rebates within each volume tier or Threshold. The Exchange is not only seeking to incentivize volume in Multiply-Listed Options but also seeks to incentivize market participants to transact certain types of Simple and Complex Orders in both Penny Pilot and non-Penny Pilot Options. The Exchange believes that the proposed calculation of the Volume Threshold, totaling all Multiply-Listed electronically delivered Customer volume, is reasonable because the Exchange believes that too will incentivize members to route MultiplyListed electronically-delivered Customer orders to the Exchange, with the exception of electronic QCC Orders (eQCC Orders). The Exchange believes that its proposal to exclude electronic QCC Orders (eQCC Orders) from the Threshold calculation is reasonable because QCC has its own rebate schedule. Finally, the Exchange believes that excluding PIXL from the rebates is reasonable because the Exchange is not seeking to incentivize members to transact PIXL Orders. Also, today PIXL Orders and QCC Orders are not eligible for the rebate and are excluded from the calculation of the average daily volume. The Exchange assesses PIXL Orders its own fees as set forth in Section IV, Part A of the Pricing Schedule. Certain rebates are available for PIXL Orders as noted in that section of the Pricing Schedule. The Exchange also believes the proposed Customer Rebate Program is equitable and not unfairly discriminatory because all market participants are eligible to receive a rebate provided they meet both the volume and order type requirements. The Exchange believes that incentivizing members to direct Customer order flow to the Exchange will provide all market participants an 23 See the Chicago Board Options Exchange, Incorporated’s (‘‘CBOE’’) Fees Schedule. CBOE offers each Trading Permit Holder (‘‘TPH’’) a credit for each public customer order transmitted by the TPH which is executed electronically in all multiply-listed option classes, excluding QCC trades and executions related to contracts that are routed to one or more exchanges in connection with the Options Order Protection and Locked/Crossed Market Plan, provided the TPH meets certain volume thresholds in a month (Volume Incentive Program). PO 00000 Frm 00063 Fmt 4703 Sfmt 4703 opportunity to interact with that order flow. Also, the Exchange believes it is equitable and not unfairly discriminatory to base rebates not only on volume but on the type of orders because the Exchange would uniformly apply the rebates to all market participants by order type. The Exchange currently offers no rebate for Tier 1 (between 0 and 49,999 contracts in a month). The Exchange currently offers a rebate of $0.07 per contract to members that execute electronicallydelivered Customer orders (Simple or Complex) when transacting an average daily volume of 50,000 contracts.24 This is similar to the Category A rebate in Tier 2 (50,000 to 99,999 contracts in a month) of $0.07 per contract. Further, Categories B 25 and C 26 in Tier 2 would receive a $0.10 per contract rebate similar to today. The Exchange currently pays an additional rebate of $0.03 per contract to members for electronically-delivered Customer orders that qualified for the $0.07 rebate and added liquidity in a Simple Order in a non-Penny Pilot or added or removed liquidity in a Complex Order in a Penny Pilot Option for a total rebate of $0.10 per contract. With respect to Tier 3 (over 100,000 contracts in a month), the Exchange would pay an increased rebate of $0.09 per contract to members that qualify for Category A (today those members receive a $0.07 per contract rebate). Members that qualify for Category B would receive an increased rebate of $0.12 per contract (today those members receive a $0.10 per contract rebate). Members that qualify for Category C would receive the same $0.10 per contract rebate as today. In assessing the threshold categories and rates for rebates, the Exchange proposed rebates that it believes are competitive in light of other rebate structures offered today at other options exchanges. The Exchange believes that the proposed calculation of the Volume Threshold, totaling all Multiply-Listed electronically delivered Customer volume, is equitable and not unfairly discriminatory because the calculation of the Volume Threshold would be uniformly applied to all market 24 The Exchange is proposing to pay a $0.07 rebate to members that qualify for a Category A, Tier 2 rebate for electronically-delivered Customer Simple Orders in Penny Pilot Options, Simple Orders in Non-Penny Pilot Options that remove liquidity and Complex Orders in Non-Penny Pilot Options. 25 A Category B rebate will be paid to members executing electronically-delivered Customer Complex Orders in Penny Pilot Options. 26 A Category C rebate will be paid to members executing electronically-delivered Customer Simple Orders in Non-Penny Pilot Options that add liquidity. E:\FR\FM\19JYN1.SGM 19JYN1 Federal Register / Vol. 77, No. 139 / Thursday, July 19, 2012 / Notices emcdonald on DSK67QTVN1PROD with NOTICES participants. The Exchange believes that its proposal to exclude electronic QCC Orders (eQCC Orders) from the Threshold calculation is equitable and not unfairly discriminatory because no rebate would be paid on QCC Orders as a result of their exclusion from this section, but this would not impact the ability to obtain a rebate for QCC Orders as per the QCC Rebate schedule. Finally, the Exchange believes that excluding PIXL Orders from the rebates is equitable and not unfairly discriminatory because the Exchange would uniformly allow market participants to count PIXL Orders in the Volume Threshold but would uniformly not pay rebates on those orders. The Exchange also believes it is reasonable, equitable and not unfairly discriminatory to only offer rebates for Customer orders and not to other market participants. Customer order flow brings unique benefits to the marketplace in terms of liquidity and order interaction. It is an important Exchange function to provide an opportunity to all market participants to trade against Customer orders. Section II Monthly Market Cap The Exchange’s proposal to increase the current fee applicable to Specialists and Market Makers that are on the contra-side of an electronicallydelivered and executed Customer order and have reached the Monthly Market Maker Cap from $0.07 to $0.12 per contract is reasonable because it would enable the Exchange to offer the proposed Customer Rebate Program to market participants that direct Customer orders to the Exchange and in turn benefits all market participants. The proposed increase to the current fee applicable to Specialists and Market Makers that are on the contra-side of an electronically-delivered and executed Customer order and have reached the Monthly Market Maker Cap from $0.07 to $0.12 per contract is equitable and not unfairly discriminatory because this fee would be uniformly applied to all Specialists and Market Makers that qualified for the Cap and are on the contra-side of an electronicallydelivered and executed Customer order. The Exchange recently amended the Monthly Firm Fee Cap to only apply to non-electronic equity options transaction fees. A Specialist or Market Maker is able to qualify for the Monthly Market Maker Cap without such a limitation as is currently applied to the Monthly Firm Fee Cap. There is no corresponding fee for the Monthly Firm Fee Cap because fees from electronically-delivered and executed volume are not included in the Monthly VerDate Mar<15>2010 15:07 Jul 18, 2012 Jkt 226001 Firm Fee Cap and therefore the Exchange does not need to implement a similar fee to cover the cost of offering rebates for electronically-delivered and executed Customer volume. Miscellaneous The Exchange’s proposal to amend the title of Part A from ‘‘Single contraside’’ to ‘‘Simple Order’’ is reasonable, equitable and not unfairly discriminatory because the Exchange believes the caption ‘‘Simple Orders’’ more accurately describes the types of orders subject to the fees and rebates in Section I, Part A of the Pricing Schedule. This amendment is merely technical in nature and does not impact pricing. The Exchange operates in a highly competitive market, comprised of ten exchanges, in which market participants can easily and readily direct order flow to competing venues if they deem fee and rebate levels at a particular venue to be excessive. Accordingly, the fees that are assessed and the rebates paid by the Exchange must remain competitive with fees charged and rebates paid by other venues and therefore must continue to be reasonable and equitably allocated to those members that opt to direct orders to the Exchange rather than competing venues. 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. To the contrary, the Exchange believes that incentivizing members with a Customer Rebate Program and increasing other fees to allow the Exchange to offer competitive rebates will attract Customer liquidity to the Exchange and benefit all market participants. 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.27 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 PO 00000 27 15 U.S.C. 78s(b)(3)(A)(ii). Frm 00064 Fmt 4703 Sfmt 4703 42545 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 Number SR–Phlx–2012–90 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-2012–90. 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 10:00 a.m. and 3:00 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 E:\FR\FM\19JYN1.SGM 19JYN1 42546 Federal Register / Vol. 77, No. 139 / Thursday, July 19, 2012 / Notices available publicly. All submissions should refer to File Number SR–Phlx– 2012–90 and should be submitted on or before August 9, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.28 Kevin M. O’Neill, Deputy Secretary. (Catalog of Federal Domestic Assistance Numbers 59002 and 59008) and Disadvantaged Business Utilization (OSDBU). Joseph P. Loddo, Acting Associate Administrator for Disaster Assistance. ACTION: [FR Doc. 2012–17243 Filed 7–18–12; 8:45 am] SUMMARY: BILLING CODE 8025–01–M [FR Doc. 2012–17573 Filed 7–18–12; 8:45 am] DEPARTMENT OF STATE BILLING CODE 8011–01–P [Public Notice 7957] SMALL BUSINESS ADMINISTRATION [Disaster Declaration #13103 and #13104] Florida Disaster Number FL–00071 U.S. Small Business Administration. ACTION: Amendment 1. AGENCY: This is an amendment of the Presidential declaration of a major disaster for the State of Florida (FEMA– 4068–DR), dated 07/03/2012. Incident: Tropical Storm Debby. Incident Period: 06/23/2012 and continuing. Effective Date: 07/04/2012. Physical Loan Application Deadline Date: 09/04/2012. EIDL Loan Application Deadline Date: 04/03/2013. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: The notice of the Presidential disaster declaration for the State of Florida, dated 07/03/ 2012 is hereby amended to include the following areas as adversely affected by the disaster: Primary Counties: (Physical Damage and Economic Injury Loans): Clay; Franklin; Hernando; Highlands; Pinellas; Suwannee. Contiguous Counties: (Economic Injury Loans Only): Florida: Charlotte; Citrus; Desoto; Glades; Gulf; Hardee; Lafayette; Madison; Okeechobee; Osceola; Saint Johns. All other information in the original declaration remains unchanged. emcdonald on DSK67QTVN1PROD with NOTICES SUMMARY: 28 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 15:07 Jul 18, 2012 Jkt 226001 In the Matter of the Designation of Ahmed Abdulrahman Sihab Ahmed Sihab as a Specially Designated Global Terrorist Pursuant to Section 1(b) of Executive Order 13224, as Amended Acting under the authority of and in accordance with section 1(b) of Executive Order 13224 of September 23, 2001, as amended by Executive Order 13268 of July 2, 2002, and Executive Order 13284 of January 23, 2003, I hereby determine that the individual known as Ahmed Abdulrahman Sihab Ahmed Sihab, committed, or poses a significant risk of committing, acts of terrorism that threaten the security of U.S. nationals or the national security, foreign policy, or economy of the United States. Consistent with the determination in Section 10 of Executive Order 13224 that ‘‘prior notice to persons determined to be subject to the Order who might have a constitutional presence in the United States would render ineffectual the blocking and other measures authorized in the Order because of the ability to transfer funds instantaneously,’’ I determine that no prior notice needs to be provided to any person subject to this determination who might have a constitutional presence in the United States, because to do so would render ineffectual the measures authorized in the Order. This notice shall be published in the Federal Register. Dated: April 18, 2012. William J. Burns, Deputy Secretary of State. [FR Doc. 2012–17639 Filed 7–18–12; 8:45 am] BILLING CODE 4710–10–P DEPARTMENT OF TRANSPORTATION Office of the Secretary Notice of Funding Availability for the Small Business Transportation Resource Center Program Department of Transportation (DOT), Office of the Secretary of Transportation (OST), Office of Small AGENCY: PO 00000 Frm 00065 Fmt 4703 Sfmt 9990 Notice of Funding Availability; Extension of closing and award dates. This action extends the closing and award dates for a Notice of Funding Availability for the Small Business Transportation Resource Center that was published on June 15, 2012, 77 FR 36034. USDOT OSDBU is extending the closing date to allow eligible entities time to adequately submit a proposal. The submission period for the Notice of Funding Availability published on June 15, 2012 closing on July 16, 2012 is extended until July 31, 2012, 5 p.m. Eastern Standard Time. Also, the notice of award for the competed region on or before August 13, 2012 is extended until August 16, 2012. DATES: Proposals must be electronically submitted to OSDBU via email at SBTRC@dot.gov. ADDRESSES: For further information concerning this notice, contact Ms. Patricia Martin, U.S. Department of Transportation, Office of Small and Disadvantaged Business Utilization, 1200 New Jersey Avenue SE., W56–462, Washington, DC, 20590. Telephone: 1–800–532–1169. Email: patricia.martin@dot.gov. FOR FURTHER INFORMATION CONTACT: In the June 15, 2012 document (Notice No. USDOT– OST–OSDBU–SBTRC2012–10; Docket Number: DOT–OST–2009–0092), the Department of Transportation (DOT), Office of the Secretary (OST), Office of Small and Disadvantaged Business Utilization (OSDBU) announces the opportunity for; (1) Business centered community-based organizations; (2) transportation-related trade associations; (3) colleges and universities; (4) community colleges or; (5) chambers of commerce, registered with the Internal Revenue Service as 501 C(6) or 501 C(3) tax-exempt organizations, to compete for participation in OSDBU’s Small Business Transportation Resource Center (SBTRC) program in the Central Region. SUPPLEMENTARY INFORMATION: Issued in Washington, DC on July 12, 2012. Brandon Neal, Director, Office of Small and Disadvantaged Business Utilization, Office of the Secretary, U.S. Department of Transportation. [FR Doc. 2012–17570 Filed 7–18–12; 8:45 am] BILLING CODE 4910–9X–P E:\FR\FM\19JYN1.SGM 19JYN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 77, Number 139 (Thursday, July 19, 2012)]
[Notices]
[Pages 42541-42546]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-17573]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67439; File No. SR-Phlx-2012-90]


Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Pricing in Select Symbols and Multiply-Listed Options

July 13, 2012.
    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 July 2, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Select Symbols \3\ and fees in 
Section I and amend a fee and adopt a Customer Rebate Program in 
Section II of the Pricing Schedule. The Exchange also proposes to make 
a minor amendment to Section I.
---------------------------------------------------------------------------

    \3\ The Select Symbols are subject to the fees and rebates in 
Section I of the Pricing Schedule. See Section I for a complete list 
of Select Symbols.
---------------------------------------------------------------------------

    The text of the proposed rule change is available on the Exchange's 
Web site at https://www.nasdaqtrader.com/micro.aspx?id=PHLXfilings, at 
the principal office of the Exchange, and at the Commission's Public 
Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to make various amendments to Section I of 
the Pricing Schedule entitled ``Fees and Rebates for Adding and 
Removing Liquidity in Select Symbols.'' The Exchange proposes to delete 
the following Select Symbols from the list of symbols subject to the 
fees and rebates in Section I: Barrick Gold Corporation (``ABX''), eBay 
Inc. (``EBAY''), Corning Inc. (``GLW''), Procter & Gamble Co. (``PG''), 
Potash Corp. of Saskatchewan, Inc. (``POT''), Starbucks Corporation 
(``SBUX''), SanDisk Corp. (``SNDK'') and United Continental Holdings, 
Inc. (``UAL'') (collectively ``Proposed Deleted Symbols''). These 
Proposed Deleted Symbols would be subject to the rebates and fees in 
Section II of the Pricing Schedule entitled ``Multiply Listed Options 
Fees.'' \4\
---------------------------------------------------------------------------

    \4\ Section II includes options overlying equities, ETFs, ETNs, 
indexes and HOLDRs which are Multiply Listed.
---------------------------------------------------------------------------

    The Exchange proposes to amend the title of Section I, Part A from 
``Single contra-side'' to ``Simple Order.'' The Exchange believes this 
amendment better describes the type of orders subject to the fees and 
rebates in Section I, Part A of the Pricing Schedule. The Exchange also 
proposes to increase the Specialist \5\ and Market Maker \6\ Fees for 
Removing Liquidity in Section I, Part A from $0.38 per contract to 
$0.39 per contract. The Exchange believes that the increased fees 
better align the Fees for Removing Liquidity by assessing Customers the 
same fee as a Specialist and Market Maker.
---------------------------------------------------------------------------

    \5\ A Specialist is an Exchange member who is registered as an 
options specialist pursuant to Rule 1020(a). An options Specialist 
includes a Remote Specialist which is a defined as an options 
specialist in one or more classes that does not have a physical 
presence on an Exchange floor and is approved by the Exchange 
pursuant to Rule 501.
    \6\ For purposes of the Pricing Schedule, the term ``Market 
Maker'' is utilized to describe fees and rebates applicable to ROTs, 
SQTs and RSQTs. The term ``ROT, SQT and RSQT'' applies to 
transactions for the accounts of Registered Option Traders 
(``ROTs''), Streaming Quote Traders (``SQTs''), and Remote Streaming 
Quote Traders (``RSQTs'').
---------------------------------------------------------------------------

    The Exchange proposes to amend the Electronic Firm Fee Discount 
which

[[Page 42542]]

today provides that Firm electronic Options Transaction Charges in 
Penny Pilot \7\ and non-Penny Pilot Options will be reduced to $0.11 
per contract for a given month provided the Firm has volume greater 
than 750,000 electronically-delivered contracts in a month. The 
Exchange proposes to reduce the amount of the discount by increasing 
the Options Transaction Charge to $0.13 per contract from $0.11 per 
contract. While the Exchange desires to continue to incentivize Firms 
to increase the volume executed on Phlx, the Exchange believes that 
reducing the Options Transactions Charges to $0.13 per contract is 
still a significant incentive for Firms.
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    \7\ The Penny Pilot was established in January 2007 and in 
October 2009 was expanded and extended through December 31, 2010. 
See Securities Exchange Act Release Nos. 55153 (January 23, 2007), 
72 FR 4553 (January 31, 2007)(SR-Phlx-2006-74)(notice of filing and 
approval order establishing Penny Pilot); 60873 (October 23, 2009), 
74 FR 56675 (November 2, 2009)(SR-Phlx-2009-91)(notice of filing and 
immediate effectiveness expanding and extending Penny Pilot); 60966 
(November 9, 2009), 74 FR 59331 (November 17, 2009)(SR-Phlx-2009-
94)(notice of filing and immediate effectiveness adding seventy-five 
classes to Penny Pilot); 61454 (February 1, 2010), 75 FR 6233 
(February 8, 2010)(SR-Phlx-2010-12)(notice of filing and immediate 
effectiveness adding seventy-five classes to Penny Pilot); 62028 
(May 4, 2010), 75 FR 25890 (May 10, 2010)(SR-Phlx-2010-65)(notice of 
filing and immediate effectiveness adding seventy-five classes to 
Penny Pilot); 62616 (July 30, 2010), 75 FR 47664 (August 6, 
2010)(SR-Phlx-2010-103)(notice of filing and immediate effectiveness 
adding seventy-five classes to Penny Pilot); 63395 (November 30, 
2010), 75 FR 76062 (December 7, 2010)(SR-Phlx-2010-167)(notice of 
filing and immediate effectiveness extending the Penny Pilot); 65976 
(December 15, 2011), 76 FR 79247 (December 21, 2011)(SR-Phlx-2011-
172)(notice of filing and immediate effectiveness extending the 
Penny Pilot); and (SR-Phlx-2012-86) (notice of filing and immediate 
effectiveness extending the Penny Pilot). See also Exchange Rule 
1034.
---------------------------------------------------------------------------

    The Exchange also proposes to cap the Qualified Contingent Cross 
Rebate (``QCC Rebate'') to be paid in a given month at $275,000. The 
QCC Rebate is applicable to both electronic QCC Orders (``eQCC'') \8\ 
and Floor QCC Orders,\9\ except where the transaction is either: (i) 
Customer-to-Customer; or (ii) a dividend,\10\ merger \11\ or short 
stock interest strategy \12\ and executions subject to the Reversal and 
Conversion Cap \13\ (as defined in Section II). QCC Transaction Fees 
apply to Sections I and II of the Pricing Schedule and are subject to 
the Monthly Firm Fee Cap \14\ and the Monthly Market Maker Cap.\15\ The 
Exchange believes that the proposed cap, while limiting the amount of 
rebate a market participant may obtain in extremely high industry 
volume months, will not hinder participants in continuing to execute 
QCC Orders to obtain the highest possible rebate.
---------------------------------------------------------------------------

    \8\ A QCC Order is comprised of an order to buy or sell at least 
1000 contracts that is identified as being part of a qualified 
contingent trade, as that term is defined in Rule 1080(o)(3), 
coupled with a contra-side order to buy or sell an equal number of 
contracts. The QCC Order must be executed at a price at or between 
the National Best Bid and Offer (``NBBO'') and be rejected if a 
Customer order is resting on the Exchange book at the same price. A 
QCC Order shall only be submitted electronically from off the floor 
to the PHLX XL II System. See Rule 1080(o). See also Securities 
Exchange Act Release No. 64249 (April 7, 2011), 76 FR 20773 (April 
13, 2011) (SR-Phlx-2011-47) (a rule change to establish a QCC Order 
to facilitate the execution of stock/option Qualified Contingent 
Trades (``QCTs'') that satisfy the requirements of the trade through 
exemption in connection with Rule 611(d) of the Regulation NMS).
    \9\ A Floor QCC Order must: (i) be for at least 1,000 contracts, 
(ii) meet the six requirements of Rule 1080(o)(3) which are modeled 
on the QCT Exemption, (iii) be executed at a price at or between the 
NBBO; and (iv) be rejected if a Customer order is resting on the 
Exchange book at the same price. In order to satisfy the 1,000-
contract requirement, a Floor QCC Order must be for 1,000 contracts 
and could not be, for example, two 500-contract orders or two 500-
contract legs. See Rule 1064(e). See also Securities Exchange Act 
Release No. 64688 (June 16, 2011), 76 FR 36606 (June 22, 2011) (SR-
Phlx-2011-56).
    \10\ 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. See Section II of the Pricing Schedule.
    \11\ 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. See Section II of the Pricing Schedule.
    \12\ 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. See Section II of the Pricing Schedule.
    \13\ Specialist, Market Maker, Professional, Firm and Broker-
Dealer options transaction fees in Multiply Listed Options are 
capped at $500 per day for reversal and conversion strategies 
executed on the same trading day in the same options class when such 
members are trading in their own proprietary accounts.
    \14\ Firms are subject to a maximum fee of $75,000 (''Monthly 
Firm Fee Cap''). Firm non-electronic equity option transaction fees 
and QCC Transaction Fees in the aggregate, for one billing month, 
may not exceed the Monthly Firm Fee Cap per member organization when 
such members are trading in their own proprietary account. All 
dividend, merger, short stock interest and reversal and conversion 
strategy executions are excluded from the Monthly Firm Fee Cap. The 
Firm equity options transaction fees are waived for members 
executing facilitation orders pursuant to Exchange Rule 1064 when 
such members are trading in their own proprietary account.
    \15\ Specialists and Market Makers are currently subject to a 
Monthly Market Maker Cap of $550,000 for equity option transaction 
fees and QCC Transaction Fees. The trading activity of separate 
Specialist and Market Maker member organizations will be aggregated 
in calculating the Monthly Market Maker Cap if there is at least 75% 
common ownership between the member organizations.
---------------------------------------------------------------------------

    The Exchange proposes to eliminate the $0.07 per contract rebate 
for members executing electronically-delivered Customer Orders when 
that member transacts an average daily volume of 50,000 Customer 
contracts or greater in a given month. Also, the additional rebate of 
$0.03 per contract, which is paid to members for electronically-
delivered Customer orders that qualified for the $0.07 rebate and added 
liquidity in a Simple Order in a non-Penny Pilot Option or added or 
removed liquidity (including auctions) in a Complex Order in a Penny 
Pilot Option, would be eliminated.\16\ The Exchange proposes to instead 
offer a more detailed Customer Rebate Program as described below, which 
will replace the rebates that are being eliminated.
---------------------------------------------------------------------------

    \16\ PIXL Orders and QCC Orders are not eligible for the rebate 
and are excluded from the calculation of the average daily volume.
---------------------------------------------------------------------------

    The Exchange proposes to adopt a revised rebate program entitled 
``Customer Rebate Program'' for Multiply Listed Options,\17\ which has 
some similarities to the rebates that are being eliminated in Section 
II of the Pricing Schedule. The proposed Customer Rebate Program will 
consist of three tiers. The first tier (``Tier 1'') (0 to 49,999 
contracts in a month) will not earn any rebates. This is the case 
today. The second tier (``Tier 2'') (50,000 to 99,999 contracts in a 
month) will remain the same as the current rebate offered today that is 
being eliminated.\18\ The third tier (``Tier 3'') (over 100,000 
contracts in a month) will introduce higher rebates as an additional 
incentive for member organizations to route Customer order flow to the 
Exchange for execution, with the exception of Category C, which will 
remain the same as it is today ($0.10 per contract).
---------------------------------------------------------------------------

    \17\ This includes options overlying equities, ETFs, ETNs, 
indexes and HOLDRS which are Multiply Listed and excludes SOX, HGX 
and OSX and the Select Symbols.
    \18\ The Exchange currently offers a rebate of $0.07 per 
contract, which is paid to members executing electronically-
delivered Customer Orders when the member transacts an average daily 
volume of 50,000 Customer contracts or greater in a given month. 
Further, an additional rebate of $0.03 per contract is paid to 
members for those electronically-delivered Customer orders that: 
qualified for the $0.07 rebate; and added liquidity in a Simple 
Order in a non-Penny Pilot Option or added or removed liquidity 
(including auctions) in a Complex Order in a Penny Pilot Option. 
This rebate scheme is being eliminated and replaced with the 
Customer Rebate Program.
---------------------------------------------------------------------------

    Each tier or ``Threshold'' would be calculated by totaling all 
applicable Multiply-Listed electronically-delivered Customer Orders, 
except electronic Qualified Contingent Cross Orders (eQCC Orders). PIXL 
orders are currently excluded from the Threshold computations for the 
rebates that exist today and are being eliminated; this differs for the 
Customer Rebate Program. The rebates would be paid for all

[[Page 42543]]

electronically delivered Customer orders in a given month as follows:

----------------------------------------------------------------------------------------------------------------
                                                                          Rebate per contract categories
                 Average daily volume threshold                  -----------------------------------------------
                                                                    Category A      Category B      Category C
----------------------------------------------------------------------------------------------------------------
0 to 49,999 contracts in a month................................           $0.00           $0.00           $0.00
50,000 to 99,999 contracts in a month...........................            0.07            0.10            0.10
Over 100,000 contracts in a month...............................            0.09            0.12            0.10
----------------------------------------------------------------------------------------------------------------

    Category A rebates would be paid to members executing 
electronically-delivered Customer Simple Orders in Penny Pilot Options, 
Simple Orders in Non-Penny Pilot Options that removed liquidity and 
Complex Orders in Non-Penny Pilot Options. Category B rebates would be 
paid to members executing electronically-delivered Customer Complex 
Orders in Penny Pilot Options and Category C rebates would be paid to 
members executing electronically-delivered Customer Simple Orders in 
Non-Penny Pilot Options that added liquidity. The Threshold would be 
calculated by totaling Customer volume in Multiply Listed Options that 
are electronically-delivered, except electronic QCC Orders (eQCC 
Orders) as defined in Exchange Rule 1080(o) (``Threshold Volume''). 
Rebates will be paid on Threshold Volume in a given month, excluding 
electronically-delivered Customer volume associated with PIXL.\19\ The 
Exchange believes that this proposed Customer Rebate Program will 
attract additional Customer order flow to the Exchange for the benefit 
of all market participants through increased liquidity.
---------------------------------------------------------------------------

    \19\ PIXL is the Exchange's price improvement mechanism known as 
Price Improvement XL or (PIXL \SM\).
---------------------------------------------------------------------------

    Finally, the Exchange is proposing to increase the current fee 
applicable to Specialists and Market Makers that are on the contra-side 
of an electronically-delivered and executed Customer order and have 
reached the Monthly Market Maker Cap. Today, the Exchange assesses 
Specialists and Market Makers a $0.07 per contract fee, in both Select 
Symbols and Multiply Listed Symbols (Sections I and II) when contra to 
an electronically-delivered and executed Customer order and when the 
Monthly Market Maker Cap is exceeded. PIXL Orders are excluded today. 
This would remain the same except the Exchange proposes to increase 
this fee from $0.07 to $0.12 per contract to assist in recouping costs 
associated with providing a Customer Rebate Program. The Exchange 
believes that this fee increase would enable the Exchange to offer the 
Customer Rebate Program as proposed.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Pricing 
Schedule is consistent with Section 6(b) of the Act \20\ in general, 
and furthers the objectives of Section 6(b)(4) of the Act \21\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among Exchange members and other persons using its 
facilities.
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78f(b).
    \21\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

Select Symbols
    The Exchange believes that it is reasonable to remove the Proposed 
Deleted Symbols from its list of Select Symbols to attract additional 
order flow to the Exchange. The Exchange believes that applying the 
fees in Section II of the Pricing Schedule to the Proposed Deleted 
Symbols, including the opportunity to receive payment for order flow, 
will continue to attract order flow to the Exchange.
    The Exchange believes that it is equitable and not unfairly 
discriminatory to amend its list of Select Symbols to remove the 
Proposed Deleted Symbols because the list of Select Symbols would apply 
uniformly to all categories of participants in the same manner. All 
market participants who trade the Select Symbols would be subject to 
the rebates and fees in Section I of the Pricing Schedule, which would 
not include the Proposed Deleted Symbols. Also, all market participants 
would be uniformly subject to the fees and Customer Rebate Program in 
Section II, which would include the Proposed Deleted Symbols.
Section I--Fee Amendments
    The Exchange believes its proposal to amend the Specialist and 
Market Maker Fees for Removing Liquidity in Section I, Part A from 
$0.38 per contract to $0.39 per contract is reasonable, equitable and 
not unfairly discriminatory because the Exchange would assess 
Specialists and Market Makers the same Fee for Removing Liquidity as a 
Customer. The Exchange notes that Specialists and Market Makers are 
assessed lower Options Transaction Charges as compared to other market 
participants, except Customers, because they have burdensome quoting 
obligations \22\ to the market which do not apply to Customers, 
Professionals, Firms and Broker-Dealers. The proposed differentiation 
as between Customers, Specialists and Market Makers as compared to 
Professionals, Firms and Broker-Dealers recognizes the differing 
contributions made to the liquidity and trading environment on the 
Exchange by these market participants. The Exchange believes that the 
increased fees better align the Fees for Removing Liquidity by 
assessing Customers the same fee as a Specialist and Market Maker.
---------------------------------------------------------------------------

    \22\ See Rule 1014 titled ``Obligations and Restrictions 
Applicable to Specialists and Registered Options Traders.''
---------------------------------------------------------------------------

Section II--Electronic Firm Fee Discount
    The Exchange's proposal to increase the fee thereby decrease the 
Electronic Firm Fee Discount for both electronic Penny Pilot and non-
Penny Pilot Options from $0.11 per contract to $0.13 per contract is 
reasonable because the amendment would enable the Exchange to reward 
market participants that directed Customer orders to the Exchange by 
paying rebates as proposed herein, which in turn benefits all market 
participants.
    The Exchange believes decreasing the Electronic Firm Fee Discount 
for both electronic Penny Pilot and non-Penny Pilot Options from $0.11 
per contract to $0.13 per contract is equitable and not unfairly 
discriminatory because the Exchange is continuing to incentivize Firms 
by providing the ability to significantly lower fees and also earn 
rebates in the Customer Rebate Program. All Firms will continue to have 
an opportunity to qualify for a lower fee provided they achieve the 
requisite volume. The Exchange believes this Electronic Firm Fee 
Discount will continue to act as an incentive to attract electronic 
Firm volume to the Exchange.
QCC Rebate
    The Exchange believes that its proposal to cap the QCC Rebate at

[[Page 42544]]

$275,000 per month is reasonable because the Exchange is proposing to 
provide other incentives in Section II to attract volume. Also, this 
cap, while limiting the amount of rebate that a market participant 
would receive for transacting a certain amount of QCC volume, will 
continue to incentivize market participants to seek to obtain the 
highest rebate possible. The Exchange believes that its proposal to cap 
the QCC Rebate at $275,000 per month is equitable and not unfairly 
discriminatory because all market participants would be uniformly 
capped at $275,000 per month.
Elimination of Rebate
    The Exchange's proposal to eliminate the $0.07 per contract rebate 
for members executing electronically-delivered Customer Orders when 
that member transacts an average daily volume of 50,000 Customer 
contracts or greater in a given month and the additional rebate of 
$0.03 per contract for electronically-delivered Customer orders that 
qualified for the $0.07 rebate are reasonable because the elimination 
of these rebates will enable the Exchange to reward market participants 
that add liquidity to the Exchange with the proposed Customer Rebate 
Program and in turn benefit all market participants. The elimination of 
the two-tiered rebate is equitable and not unfairly discriminatory 
because it would be uniformly eliminated and unavailable to all market 
participants. In addition, the Customer Rebate Program would be 
available to these market participants.
Customer Rebate
    The Exchange's adoption of a Customer Rebate Program in Section II 
of the Pricing Schedule is reasonable because the Exchange is seeking 
to incentivize members to route Multiply-Listed electronically-
delivered Customer orders to the Exchange, with the exception of 
electronic QCC Orders. The Exchange believes that the proposed Volume 
Thresholds are reasonable because the Exchange believes that the 
thresholds are attainable to members desiring to increase their volume 
to achieve certain rebates and also bring greater Customer liquidity to 
the Exchange. By incentivizing members to route Customer orders, the 
Exchange desires to attract Customer orders which benefits all market 
participants by increasing liquidity on the Exchange. Other exchanges 
employ incentive programs.\23\ The Exchange believes that its proposed 
volume thresholds and rates will be competitive as compared to rebate 
structures at other exchanges and attract order flow to the Exchange.
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    \23\ See the Chicago Board Options Exchange, Incorporated's 
(``CBOE'') Fees Schedule. CBOE offers each Trading Permit Holder 
(``TPH'') a credit for each public customer order transmitted by the 
TPH which is executed electronically in all multiply-listed option 
classes, excluding QCC trades and executions related to contracts 
that are routed to one or more exchanges in connection with the 
Options Order Protection and Locked/Crossed Market Plan, provided 
the TPH meets certain volume thresholds in a month (Volume Incentive 
Program).
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    The Exchange also believes that it is reasonable to base rebates 
not only on volume but on the type of order by creating three 
categories, A, B and C, which specify the type of order that is 
eligible for certain rebates within each volume tier or Threshold. The 
Exchange is not only seeking to incentivize volume in Multiply-Listed 
Options but also seeks to incentivize market participants to transact 
certain types of Simple and Complex Orders in both Penny Pilot and non-
Penny Pilot Options. The Exchange believes that the proposed 
calculation of the Volume Threshold, totaling all Multiply-Listed 
electronically delivered Customer volume, is reasonable because the 
Exchange believes that too will incentivize members to route Multiply-
Listed electronically-delivered Customer orders to the Exchange, with 
the exception of electronic QCC Orders (eQCC Orders). The Exchange 
believes that its proposal to exclude electronic QCC Orders (eQCC 
Orders) from the Threshold calculation is reasonable because QCC has 
its own rebate schedule. Finally, the Exchange believes that excluding 
PIXL from the rebates is reasonable because the Exchange is not seeking 
to incentivize members to transact PIXL Orders. Also, today PIXL Orders 
and QCC Orders are not eligible for the rebate and are excluded from 
the calculation of the average daily volume. The Exchange assesses PIXL 
Orders its own fees as set forth in Section IV, Part A of the Pricing 
Schedule. Certain rebates are available for PIXL Orders as noted in 
that section of the Pricing Schedule.
    The Exchange also believes the proposed Customer Rebate Program is 
equitable and not unfairly discriminatory because all market 
participants are eligible to receive a rebate provided they meet both 
the volume and order type requirements. The Exchange believes that 
incentivizing members to direct Customer order flow to the Exchange 
will provide all market participants an opportunity to interact with 
that order flow. Also, the Exchange believes it is equitable and not 
unfairly discriminatory to base rebates not only on volume but on the 
type of orders because the Exchange would uniformly apply the rebates 
to all market participants by order type. The Exchange currently offers 
no rebate for Tier 1 (between 0 and 49,999 contracts in a month). The 
Exchange currently offers a rebate of $0.07 per contract to members 
that execute electronically-delivered Customer orders (Simple or 
Complex) when transacting an average daily volume of 50,000 
contracts.\24\ This is similar to the Category A rebate in Tier 2 
(50,000 to 99,999 contracts in a month) of $0.07 per contract. Further, 
Categories B \25\ and C \26\ in Tier 2 would receive a $0.10 per 
contract rebate similar to today. The Exchange currently pays an 
additional rebate of $0.03 per contract to members for electronically-
delivered Customer orders that qualified for the $0.07 rebate and added 
liquidity in a Simple Order in a non-Penny Pilot or added or removed 
liquidity in a Complex Order in a Penny Pilot Option for a total rebate 
of $0.10 per contract. With respect to Tier 3 (over 100,000 contracts 
in a month), the Exchange would pay an increased rebate of $0.09 per 
contract to members that qualify for Category A (today those members 
receive a $0.07 per contract rebate). Members that qualify for Category 
B would receive an increased rebate of $0.12 per contract (today those 
members receive a $0.10 per contract rebate). Members that qualify for 
Category C would receive the same $0.10 per contract rebate as today. 
In assessing the threshold categories and rates for rebates, the 
Exchange proposed rebates that it believes are competitive in light of 
other rebate structures offered today at other options exchanges.
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    \24\ The Exchange is proposing to pay a $0.07 rebate to members 
that qualify for a Category A, Tier 2 rebate for electronically-
delivered Customer Simple Orders in Penny Pilot Options, Simple 
Orders in Non-Penny Pilot Options that remove liquidity and Complex 
Orders in Non-Penny Pilot Options.
    \25\ A Category B rebate will be paid to members executing 
electronically-delivered Customer Complex Orders in Penny Pilot 
Options.
    \26\ A Category C rebate will be paid to members executing 
electronically-delivered Customer Simple Orders in Non-Penny Pilot 
Options that add liquidity.
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    The Exchange believes that the proposed calculation of the Volume 
Threshold, totaling all Multiply-Listed electronically delivered 
Customer volume, is equitable and not unfairly discriminatory because 
the calculation of the Volume Threshold would be uniformly applied to 
all market

[[Page 42545]]

participants. The Exchange believes that its proposal to exclude 
electronic QCC Orders (eQCC Orders) from the Threshold calculation is 
equitable and not unfairly discriminatory because no rebate would be 
paid on QCC Orders as a result of their exclusion from this section, 
but this would not impact the ability to obtain a rebate for QCC Orders 
as per the QCC Rebate schedule. Finally, the Exchange believes that 
excluding PIXL Orders from the rebates is equitable and not unfairly 
discriminatory because the Exchange would uniformly allow market 
participants to count PIXL Orders in the Volume Threshold but would 
uniformly not pay rebates on those orders.
    The Exchange also believes it is reasonable, equitable and not 
unfairly discriminatory to only offer rebates for Customer orders and 
not to other market participants. Customer order flow brings unique 
benefits to the marketplace in terms of liquidity and order 
interaction. It is an important Exchange function to provide an 
opportunity to all market participants to trade against Customer 
orders.
Section II Monthly Market Cap
    The Exchange's proposal to increase the current fee applicable to 
Specialists and Market Makers that are on the contra-side of an 
electronically-delivered and executed Customer order and have reached 
the Monthly Market Maker Cap from $0.07 to $0.12 per contract is 
reasonable because it would enable the Exchange to offer the proposed 
Customer Rebate Program to market participants that direct Customer 
orders to the Exchange and in turn benefits all market participants.
    The proposed increase to the current fee applicable to Specialists 
and Market Makers that are on the contra-side of an electronically-
delivered and executed Customer order and have reached the Monthly 
Market Maker Cap from $0.07 to $0.12 per contract is equitable and not 
unfairly discriminatory because this fee would be uniformly applied to 
all Specialists and Market Makers that qualified for the Cap and are on 
the contra-side of an electronically-delivered and executed Customer 
order. The Exchange recently amended the Monthly Firm Fee Cap to only 
apply to non-electronic equity options transaction fees. A Specialist 
or Market Maker is able to qualify for the Monthly Market Maker Cap 
without such a limitation as is currently applied to the Monthly Firm 
Fee Cap. There is no corresponding fee for the Monthly Firm Fee Cap 
because fees from electronically-delivered and executed volume are not 
included in the Monthly Firm Fee Cap and therefore the Exchange does 
not need to implement a similar fee to cover the cost of offering 
rebates for electronically-delivered and executed Customer volume.
Miscellaneous
    The Exchange's proposal to amend the title of Part A from ``Single 
contra-side'' to ``Simple Order'' is reasonable, equitable and not 
unfairly discriminatory because the Exchange believes the caption 
``Simple Orders'' more accurately describes the types of orders subject 
to the fees and rebates in Section I, Part A of the Pricing Schedule. 
This amendment is merely technical in nature and does not impact 
pricing.
    The Exchange operates in a highly competitive market, comprised of 
ten exchanges, in which market participants can easily and readily 
direct order flow to competing venues if they deem fee and rebate 
levels at a particular venue to be excessive. Accordingly, the fees 
that are assessed and the rebates paid by the Exchange must remain 
competitive with fees charged and rebates paid by other venues and 
therefore must continue to be reasonable and equitably allocated to 
those members that opt to direct orders to the Exchange rather than 
competing venues.

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. To the contrary, the Exchange 
believes that incentivizing members with a Customer Rebate Program and 
increasing other fees to allow the Exchange to offer competitive 
rebates will attract Customer liquidity to the Exchange and benefit all 
market participants.

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.\27\ 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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    \27\ 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 Number SR-Phlx-2012-90 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-2012-90. 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 
10:00 a.m. and 3:00 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

[[Page 42546]]

available publicly. All submissions should refer to File Number SR-
Phlx-2012-90 and should be submitted on or before August 9, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-17573 Filed 7-18-12; 8:45 am]
BILLING CODE 8011-01-P

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