Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify Phlx's Fee Schedule Governing Order Execution on its NASDAQ OMX PSX Facility, 47894-47896 [2012-19667]

Download as PDF 47894 Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–67601; File No. SR–Phlx– 2012–102] Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify Phlx’s Fee Schedule Governing Order Execution on its NASDAQ OMX PSX Facility August 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 July 31, 2012, NASDAQ OMX PHLX LLC (‘‘Phlx’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Phlx proposes to modify Phlx’s fee schedule governing order execution on its NASDAQ OMX PSX (‘‘PSX’’) facility. Phlx will implement the proposed change on August 1, 2012. The text of the proposed rule change is available at https:// nasdaqomxphlx.cchwallstreet.com/ nasdaqomxphlx/phlx/, at Phlx’s principal office, on the Commission’s Web site at https://www.sec.gov, and at the Commission’s Public Reference Room. mstockstill on DSK4VPTVN1PROD with NOTICES 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 self-regulatory organization 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 those 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 parts of such statements. 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Mar<15>2010 18:02 Aug 09, 2012 Jkt 226001 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Phlx is proposing to modify its fee schedule governing order execution on PSX. Effective July 2, 2012, Phlx made a number of modifications to the PSX fee schedule.3 Because these changes have negatively impacted PSX’s market share, Phlx is proposing to revert to the fee schedule in effect prior to July 2, 2012. Under the fee schedule in effect during July 2012, for securities priced at $1 or more per share, an order that accessed liquidity through a market participant identifier (‘‘MPID’’) through which a market participant provided an average daily volume of 25,000 or more shares of liquidity or accessed an average daily volume of 3.5 million or more shares of liquidity during the month paid no fee when accessing liquidity. Other orders that accessed liquidity paid $0.0005 per share executed. For securities priced at less than $1, the fee was 0.10% of the total transaction cost. Under the prior schedule, to which PSX is reverting, PSX will charge $0.0019 per share executed for orders that access liquidity in securities listed on the New York Stock Exchange (‘‘NYSE’’) priced at $1 or more per share; and $0.0027 per share executed for other liquidityaccessing orders priced at $1 or more per share. For securities priced under $1, PSX will revert to the prior fee of 0.20% of the total transaction cost. Also, during July 2012, for securities priced at $1 or more per share, Phlx charged $0.0002 per share executed for an order that provided liquidity through an MPID through which a market participant provided an average daily volume of 10 million or more shares of liquidity during the month, and charged $0.0005 per share executed for other orders that provided liquidity. Under the prior schedule, to which PSX is reverting, PSX will offer a credit to liquidity providers in securities priced at $1 or more per share that varies based on the type and size of the liquidityproviding order and the market on which the stock is listed. Specifically: • For liquidity provided through displayed orders with an original order size 4 of 2,000 or more shares, the credit 3 Securities Exchange Act Release No. 67387 (July 10, 2012), 77 FR 41838 (July 16, 2012) (SR–Phlx– 2012–87). 4 An order will be treated as the original order if it is decremented due to executions. However, orders that are modified by the PSX Participant entering the order or by System processes other PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 will be $0.0018 per share executed for securities listed on NYSE and $0.0026 per share executed for other orders; • For liquidity provided through displayed orders with an original order size of less than 2,000 shares, the credit will be $0.0016 per share executed for securities listed on NYSE and $0.0024 per share executed for other orders; • For liquidity provided through Minimum Life Orders,5 the credit will be $0.0018 per share executed for securities listed on NYSE and $0.0026 per share executed for other orders; • For liquidity provided through nondisplayed orders, the credit will be $0.0005 per share executed for securities listed on NYSE and $0.0010 per share executed for other orders. For securities priced below $1, Phlx will continue neither to charge a fee nor to pay a rebate with respect to orders that provide liquidity. This aspect of the PSX fee schedule was not changed in July. 2. Statutory Basis Phlx believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,6 in general, and with Sections 6(b)(4) and (5) of the Act,7 in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility or system which Phlx operates or controls, and is not designed to permit unfair discrimination between customers, issuers, brokers or dealers. All similarly situated members are subject to the same fee structure, and access to Phlx is offered on fair and nondiscriminatory terms. The pricing change that PSX made for July 2012 was premised on the belief that market participants might be attracted to a pricing model under which both liquidity accessors and liquidity providers were assessed a very low fee (ranging from $0 to $0.0005). In fact, the decrease in market share experienced by PSX has demonstrated that PSX’s market participants preferred the maker-taker model that was previously in effect. Under that model, accessors of liquidity are charged a fee ranging from $0.0019 to $0.0027 per share executed for stocks priced at $1 or more, and 0.20% of the transaction cost for lower priced stocks. The Exchange than execution and decrementation will be treated as a new order. 5 ‘‘Minimum Life Orders’’ are orders that may not be cancelled by the entering participant for a period of 100 milliseconds following receipt. All Minimum Life Orders must be designated as Displayed Orders. 6 15 U.S.C. 78f. 7 15 U.S.C. 78f(b)(4) and (5). E:\FR\FM\10AUN1.SGM 10AUN1 mstockstill on DSK4VPTVN1PROD with NOTICES Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Notices believes that these fees are reasonable because they are consistent with the limitations imposed by SEC Rule 610 8 on access fees. The Exchange further believes that the proposed access fees are consistent with an equitable allocation of fees, in that they are set at levels that allow the Exchange to pay a credit to liquidity providers that is only slightly less than the corresponding access fee. Because the payment of such credits encourage liquidity providers to post orders in PSX, they also benefit liquidity accessors by increasing the likelihood of execution at or near the inside market. The Exchange further believes that charging a lower fee with respect to securities listed on NYSE than securities listed on other exchanges is not unfairly discriminatory because the charges assessed by NYSE for executing orders are generally lower than those charged by other exchanges. In addition, pricing incentives that focus on securities listed on particular listing venues are not uncommon,9 and provide means by which venues such as Phlx may compete more effectively with listing venues such as NYSE. Phlx further believes that the proposed rebates for liquidity providers are reasonable because they are set at levels that had previously been effective at attracting liquidity-providing orders to PSX. In addition, Phlx believes that the proposed rebates reflect an equitable allocation of fees because they are slightly lower than the corresponding access fees. Moreover, to the extent that the level of rebates varies based on the type of order providing liquidity, the Exchange believes that the variation is not unreasonably discriminatory. Specifically, the Exchange will pay higher rebates with respect to Minimum Life Orders and displayed orders with an original size of 2,000 or more shares because the Exchange believes that the market benefits from the presence of stable orders and orders with larger size; specifically, the Exchange believes that such orders have the potential to allow market participants to trade larger volumes at more predictable prices. Accordingly, the Exchange believes that it is not unreasonably discriminatory to pay higher rebates with respect to such orders, while paying lower rebates with respect to smaller orders and nondisplayed orders. Phlx also believes that it is not unreasonably discriminatory to pay lower rebates for NYSE-listed securities than for other securities, since 8 17 CFR 242.610. e.g., Securities Exchange Act Release No. 66322 (February 3, 2012), 77 FR 6831 (February 9, 2012) (SR–NASDAQ–2012–020) (pricing incentives focused on securities listed on exchanges other than The NASDAQ Stock Market or NYSE). 9 See, VerDate Mar<15>2010 18:02 Aug 09, 2012 Jkt 226001 47895 the rebates paid must be correspondingly lower to allow PSX to charge a lower access fee with respect to such securities. Finally, Phlx notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive. In such an environment, Phlx must continually adjust its fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Phlx believes that the proposed rule change reflects this competitive environment because it is designed to create pricing incentives for greater use of PSX’s trading services. IV. Solicitation of Comments B. Self-Regulatory Organization’s Statement on Burden on Competition • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. Phlx does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. Because the market for order execution is extremely competitive, members may readily opt to disfavor Phlx’s execution services if they believe that alternatives offer them better value. The proposed change is designed to enhance competition by using pricing incentives to encourage greater use of PSX’s trading services. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments were neither solicited nor 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.10 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. 10 15 PO 00000 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–2012–102 on the subject line. Paper Comments All submissions should refer to File Number SR–Phlx–2012–102. 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 publicly available. All submissions should refer to File Number SR–Phlx– 2012–102 and should be submitted on or before August 31, 2012. U.S.C. 78s(b)(3)(A)(ii). Frm 00096 Fmt 4703 Sfmt 4703 E:\FR\FM\10AUN1.SGM 10AUN1 47896 Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–19667 Filed 8–9–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–67594; File No. SR– NASDAQ–2012–093] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify NASDAQ’s Fee Schedule Governing Order Routing August 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 July 31, 2012, The NASDAQ Stock Market LLC (‘‘NASDAQ’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change NASDAQ proposes to modify NASDAQ’s fee schedule governing order routing. NASDAQ will implement the proposed change on August 1, 2012. The text of the proposed rule change is available at https://nasdaq.cchwallstreet. com, at NASDAQ’s principal office, and at the Commission’s Public Reference Room. mstockstill on DSK4VPTVN1PROD with NOTICES 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 self-regulatory organization 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 those statements may be examined at the places specified in Item III [sic] below. The Exchange has prepared summaries, set forth in sections A, B, 11 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Mar<15>2010 18:02 Aug 09, 2012 Jkt 226001 and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose NASDAQ is making a minor modification to the schedule governing fees for use of its routing services. Effective August 1, 2012, the NASDAQ OMX PSX (‘‘PSX’’) facility of NASDAQ OMX PHLX LLC (‘‘Phlx’’) has increased the fees that it charges for accessing liquidity.3 Accordingly, NASDAQ is making a conforming change to the fee that it charges for routing directed orders to PSX, increasing the charge from $0.0005 per share executed to $0.0029 per share executed. 2. Statutory Basis NASDAQ believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,4 in general, and with Sections 6(b)(4) and (5) of the Act,5 in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility or system which NASDAQ operates or controls, and is not designed to permit unfair discrimination between customers, issuers, brokers or dealers. All similarly situated members are subject to the same fee structure, and access to NASDAQ is offered on fair and nondiscriminatory terms. The change is reasonable because the proposed fee for routing directed orders to PSX reflects the fact that PSX is increasing the fee that it charges NASDAQ with respect to such orders.6 The change is consistent 3 See SR–Phlx–2012–102 (July 31, 2012). In making this change, Phlx undid a pricing change made for July 2012 and reverted to the pricing in effect prior to July 2, 2012. See Securities Exchange Act Release No. 67387 (July 10, 2012), 77 FR 41838 (July 16, 2012) (SR–Phlx–2012–87). Similarly, NASDAQ adjusted its routing fees in July 2012 to reflect the change made by Phlx and is now reverting to the fees formerly in effect. See Securities Exchange Act Release No. 67355 (July 5, 2012), 77 FR 40926 (July 11, 2012) (SR–NASDAQ– 2012–079). 4 15 U.S.C. 78f. 5 15 U.S.C. 78f(b)(4) and (5). 6 Depending on the listing venue of the security, NASDAQ will be charged either $0.0019 or $0.0027 per share executed. NASDAQ believes that it is appropriate to charge a markup with respect to directed orders to reflect the costs of offering routing services and the value of such services. Notably, in all instances NASDAQ charges a markup with respect to the special processing associated with the use of directed orders. NASDAQ further notes that it does not currently charge a markup with respect to non-directed orders that are routed to PSX, so the markup with respect to directed orders provides an opportunity PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 with an equitable allocation of fees because it will bring the economic attributes of routing directed orders to PSX more in line with the cost of executing orders there. Finally, the change is not unfairly discriminatory because it applies solely to members that opt to route directed orders to PSX. Finally, NASDAQ notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive. In such an environment, NASDAQ must continually adjust its fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. NASDAQ believes that the proposed rule change reflects this competitive environment because it is designed to ensure that the charges for use of the NASDAQ routing facility to route to PSX reflect an increase in the cost of such routing. B. Self-Regulatory Organization’s Statement on Burden on Competition NASDAQ does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. Because the market for order execution is extremely competitive, members may readily opt to disfavor NASDAQ’s routing services if they believe that alternatives offer them better value. The proposed change is designed to ensure that the charges for use of the NASDAQ routing facility to route to PSX reflect an increase in the cost of such routing, thereby ensuring that it does not incur a loss when routing to PSX. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor 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 to recoup a portion of the general costs associated with operating a routing service. Although the amount of the markup varies depending on the listing venue of the security, NASDAQ believes that it is not inappropriate to charge a uniform fee for the service of routing directed orders to a particular venue, and further notes that the fee for routing directed orders to PSX is lower than the $0.0035 per share executed fee for routing directed orders to other venues. 7 15 U.S.C. 78s(b)(3)(a)(ii) [sic]. E:\FR\FM\10AUN1.SGM 10AUN1

Agencies

[Federal Register Volume 77, Number 155 (Friday, August 10, 2012)]
[Notices]
[Pages 47894-47896]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-19667]



[[Page 47894]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67601; File No. SR-Phlx-2012-102]


Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Modify 
Phlx's Fee Schedule Governing Order Execution on its NASDAQ OMX PSX 
Facility

August 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 July 31, 2012, NASDAQ OMX PHLX LLC (``Phlx'' or the ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') a 
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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Phlx proposes to modify Phlx's fee schedule governing order 
execution on its NASDAQ OMX PSX (``PSX'') facility. Phlx will implement 
the proposed change on August 1, 2012. The text of the proposed rule 
change is available at https://nasdaqomxphlx.cchwallstreet.com/nasdaqomxphlx/phlx/, at Phlx's principal office, on the Commission's 
Web site at https://www.sec.gov, and at the Commission's Public 
Reference Room.

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

    In its filing with the Commission, the self-regulatory organization 
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 those 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 parts of such statements.

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

1. Purpose
    Phlx is proposing to modify its fee schedule governing order 
execution on PSX. Effective July 2, 2012, Phlx made a number of 
modifications to the PSX fee schedule.\3\ Because these changes have 
negatively impacted PSX's market share, Phlx is proposing to revert to 
the fee schedule in effect prior to July 2, 2012.
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    \3\ Securities Exchange Act Release No. 67387 (July 10, 2012), 
77 FR 41838 (July 16, 2012) (SR-Phlx-2012-87).
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    Under the fee schedule in effect during July 2012, for securities 
priced at $1 or more per share, an order that accessed liquidity 
through a market participant identifier (``MPID'') through which a 
market participant provided an average daily volume of 25,000 or more 
shares of liquidity or accessed an average daily volume of 3.5 million 
or more shares of liquidity during the month paid no fee when accessing 
liquidity. Other orders that accessed liquidity paid $0.0005 per share 
executed. For securities priced at less than $1, the fee was 0.10% of 
the total transaction cost. Under the prior schedule, to which PSX is 
reverting, PSX will charge $0.0019 per share executed for orders that 
access liquidity in securities listed on the New York Stock Exchange 
(``NYSE'') priced at $1 or more per share; and $0.0027 per share 
executed for other liquidity-accessing orders priced at $1 or more per 
share. For securities priced under $1, PSX will revert to the prior fee 
of 0.20% of the total transaction cost.
    Also, during July 2012, for securities priced at $1 or more per 
share, Phlx charged $0.0002 per share executed for an order that 
provided liquidity through an MPID through which a market participant 
provided an average daily volume of 10 million or more shares of 
liquidity during the month, and charged $0.0005 per share executed for 
other orders that provided liquidity. Under the prior schedule, to 
which PSX is reverting, PSX will offer a credit to liquidity providers 
in securities priced at $1 or more per share that varies based on the 
type and size of the liquidity-providing order and the market on which 
the stock is listed. Specifically:
     For liquidity provided through displayed orders with an 
original order size \4\ of 2,000 or more shares, the credit will be 
$0.0018 per share executed for securities listed on NYSE and $0.0026 
per share executed for other orders;
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    \4\ An order will be treated as the original order if it is 
decremented due to executions. However, orders that are modified by 
the PSX Participant entering the order or by System processes other 
than execution and decrementation will be treated as a new order.
---------------------------------------------------------------------------

     For liquidity provided through displayed orders with an 
original order size of less than 2,000 shares, the credit will be 
$0.0016 per share executed for securities listed on NYSE and $0.0024 
per share executed for other orders;
     For liquidity provided through Minimum Life Orders,\5\ the 
credit will be $0.0018 per share executed for securities listed on NYSE 
and $0.0026 per share executed for other orders;
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    \5\ ``Minimum Life Orders'' are orders that may not be cancelled 
by the entering participant for a period of 100 milliseconds 
following receipt. All Minimum Life Orders must be designated as 
Displayed Orders.
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     For liquidity provided through non-displayed orders, the 
credit will be $0.0005 per share executed for securities listed on NYSE 
and $0.0010 per share executed for other orders.
    For securities priced below $1, Phlx will continue neither to 
charge a fee nor to pay a rebate with respect to orders that provide 
liquidity. This aspect of the PSX fee schedule was not changed in July.
2. Statutory Basis
    Phlx believes that the proposed rule change is consistent with the 
provisions of Section 6 of the Act,\6\ in general, and with Sections 
6(b)(4) and (5) of the Act,\7\ in particular, in that it provides for 
the equitable allocation of reasonable dues, fees and other charges 
among members and issuers and other persons using any facility or 
system which Phlx operates or controls, and is not designed to permit 
unfair discrimination between customers, issuers, brokers or dealers. 
All similarly situated members are subject to the same fee structure, 
and access to Phlx is offered on fair and non-discriminatory terms.
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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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    The pricing change that PSX made for July 2012 was premised on the 
belief that market participants might be attracted to a pricing model 
under which both liquidity accessors and liquidity providers were 
assessed a very low fee (ranging from $0 to $0.0005). In fact, the 
decrease in market share experienced by PSX has demonstrated that PSX's 
market participants preferred the maker-taker model that was previously 
in effect. Under that model, accessors of liquidity are charged a fee 
ranging from $0.0019 to $0.0027 per share executed for stocks priced at 
$1 or more, and 0.20% of the transaction cost for lower priced stocks. 
The Exchange

[[Page 47895]]

believes that these fees are reasonable because they are consistent 
with the limitations imposed by SEC Rule 610 \8\ on access fees. The 
Exchange further believes that the proposed access fees are consistent 
with an equitable allocation of fees, in that they are set at levels 
that allow the Exchange to pay a credit to liquidity providers that is 
only slightly less than the corresponding access fee. Because the 
payment of such credits encourage liquidity providers to post orders in 
PSX, they also benefit liquidity accessors by increasing the likelihood 
of execution at or near the inside market. The Exchange further 
believes that charging a lower fee with respect to securities listed on 
NYSE than securities listed on other exchanges is not unfairly 
discriminatory because the charges assessed by NYSE for executing 
orders are generally lower than those charged by other exchanges. In 
addition, pricing incentives that focus on securities listed on 
particular listing venues are not uncommon,\9\ and provide means by 
which venues such as Phlx may compete more effectively with listing 
venues such as NYSE.
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    \8\ 17 CFR 242.610.
    \9\ See, e.g., Securities Exchange Act Release No. 66322 
(February 3, 2012), 77 FR 6831 (February 9, 2012) (SR-NASDAQ-2012-
020) (pricing incentives focused on securities listed on exchanges 
other than The NASDAQ Stock Market or NYSE).
---------------------------------------------------------------------------

    Phlx further believes that the proposed rebates for liquidity 
providers are reasonable because they are set at levels that had 
previously been effective at attracting liquidity-providing orders to 
PSX. In addition, Phlx believes that the proposed rebates reflect an 
equitable allocation of fees because they are slightly lower than the 
corresponding access fees. Moreover, to the extent that the level of 
rebates varies based on the type of order providing liquidity, the 
Exchange believes that the variation is not unreasonably 
discriminatory. Specifically, the Exchange will pay higher rebates with 
respect to Minimum Life Orders and displayed orders with an original 
size of 2,000 or more shares because the Exchange believes that the 
market benefits from the presence of stable orders and orders with 
larger size; specifically, the Exchange believes that such orders have 
the potential to allow market participants to trade larger volumes at 
more predictable prices. Accordingly, the Exchange believes that it is 
not unreasonably discriminatory to pay higher rebates with respect to 
such orders, while paying lower rebates with respect to smaller orders 
and non-displayed orders. Phlx also believes that it is not 
unreasonably discriminatory to pay lower rebates for NYSE-listed 
securities than for other securities, since the rebates paid must be 
correspondingly lower to allow PSX to charge a lower access fee with 
respect to such securities.
    Finally, Phlx notes that it operates in a highly competitive market 
in which market participants can readily favor competing venues if they 
deem fee levels at a particular venue to be excessive. In such an 
environment, Phlx must continually adjust its fees to remain 
competitive with other exchanges and with alternative trading systems 
that have been exempted from compliance with the statutory standards 
applicable to exchanges. Phlx believes that the proposed rule change 
reflects this competitive environment because it is designed to create 
pricing incentives for greater use of PSX's trading services.

B. Self-Regulatory Organization's Statement on Burden on Competition

    Phlx does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended. Because the market 
for order execution is extremely competitive, members may readily opt 
to disfavor Phlx's execution services if they believe that alternatives 
offer them better value. The proposed change is designed to enhance 
competition by using pricing incentives to encourage greater use of 
PSX's trading services.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    Written comments were neither solicited nor 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.\10\ 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.
---------------------------------------------------------------------------

    \10\ 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-2012-102 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-2012-102. 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 publicly available. All 
submissions should refer to File Number SR-Phlx-2012-102 and should be 
submitted on or before August 31, 2012.


[[Page 47896]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-19667 Filed 8-9-12; 8:45 am]
BILLING CODE 8011-01-P
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