Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Routing Fees, 69530-69534 [2012-28003]
Download as PDF
<![CDATA[
69530
Federal Register / Vol. 77, No. 223 / Monday, November 19, 2012 / Notices
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 8 and Rule
19b–4(f)(6) thereunder.9 Because the
proposed rule change does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
prior to 30 days from the date on which
it was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act and Rule 19b–4(f)(6)(iii)
thereunder.10
A proposed rule change filed under
Rule 19b–4(f)(6) 11 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b4(f)(6)(iii),12 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest. The
Exchange has asked the Commission to
waive the 30-day operative delay so that
the proposal may become operative
immediately upon filing. The
Commission hereby grants the request.13
Waiving the 30-day operative delay will
allow the Exchange to provide
transparency for how the Exchange
determined the closing price on
November 12, 2012. The Commission
believes it is consistent with the
protection of investors and the public
interest to waive the 30-day operative
delay and, therefore, designates the
proposal as operative upon filing.
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
8 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
10 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Commission
has determined to waive the five-day prefiling
period in this case.
11 17 CFR 240.19b–4(f)(6).
12 17 CFR 240.19b–4(f)(6)(iii).
13 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule change’s impact on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
pmangrum on DSK3VPTVN1PROD with NOTICES
9 17
VerDate Mar<15>2010
14:04 Nov 16, 2012
Jkt 229001
investors, 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:
• 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–NYSE–2012–66 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–NYSE–2012–66. 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 Section, 100 F Street NE.,
Washington, DC 20549–1090. Copies of
the filing will also be available for
inspection and copying at the NYSE’s
principal office and on its Internet Web
site at www.nyse.com. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly.
All submissions should refer to File
Number SR–NYSE–2012–66 and should
be submitted on or before December 10,
2012.
Frm 00097
Fmt 4703
[FR Doc. 2012–28005 Filed 11–16–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68213; File No. SR–Phlx–
2012–129]
Electronic Comments
PO 00000
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Kevin M. O’Neill,
Deputy Secretary.
Sfmt 4703
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to
Routing Fees
November 13, 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 October
31, 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
Routing Fees to adopt new fees which
recoup costs incurred by the Exchange
when routing to various away markets.
The Exchange also proposes to amend
Section VII, Section D to memorialize a
fee currently assessed to members in its
Pricing Schedule.
While changes to the Pricing
Schedule pursuant to this proposal are
effective upon filing, the Exchange has
designated the proposed amendment to
be operative on November 1, 2012.
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
14 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\19NON1.SGM
19NON1
69531
Federal Register / Vol. 77, No. 223 / Monday, November 19, 2012 / Notices
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this filing is to
eliminate the current Routing Fees in
Section V of the Pricing Schedule and
adopt new Routing Fees which recoup
Exchange
costs that the Exchange incurs for
routing and executing orders in equity
options to various away markets.
The Exchange’s Pricing Schedule at
Section V currently includes the
following Routing Fees for routing
Customer, Professional,3 Firm, BrokerDealer, Market Maker 4 and Specialist 5
orders to away markets:
Customer
NYSE AMEX ....................................................................................................................
BATS Penny ....................................................................................................................
BATS non-Penny .............................................................................................................
BOX .................................................................................................................................
BX Options .......................................................................................................................
CBOE ...............................................................................................................................
CBOE orders greater than 99 contracts in RUT, RMN, NDX, MNX, ETFs, ETNs and
HOLDRs .......................................................................................................................
C2 ....................................................................................................................................
ISE ...................................................................................................................................
ISE Select Symbols 13 .....................................................................................................
NYSE ARCA (Penny Pilot) ..............................................................................................
NYSE ARCA (Standard) ..................................................................................................
NOM Penny Pilot Options ...............................................................................................
NOM Non-Penny Pilot Options ........................................................................................
Professional
Firm/brokerdealer/specialist/
market maker
$0.11
0.55
0.86
0.11
0.11
0.11
$0.31
0.55
0.91
0.11
0.54
0.31
$0.55
0.55
0.91
0.55
0.54
0.55
0.29
0.55
0.11
0.31
0.55
0.11
0.54
0.86
0.31
0.56
0.29
0.39
0.55
0.11
0.54
0.91
0.55
0.55
0.55
0.55
0.55
0.55
0.55
0.91
13 These fees are applicable to orders routed to ISE that are subject to Rebates and Fees for Adding and Removing Liquidity in Select Symbols. See ISE’s Schedule of Fees for the complete list of symbols that are subject to these fees.
pmangrum on DSK3VPTVN1PROD with NOTICES
The Exchange proposes to adopt new
Routing Fees when routing and
executing orders in equity options to
BATS Exchange, Inc. (‘‘BATS’’), BOX
Options Exchange LLC (‘‘BOX’’),
NASDAQ OMX BX, Inc. (‘‘BX
Options’’), C2 Options Exchange,
Incorporated (‘‘C2’’), Chicago Board
Options Exchange, Incorporated
(‘‘CBOE’’), International Securities
Exchange, LLC (‘‘ISE’’), NASDAQ
Options Market (‘‘NOM’’), NYSE Amex
LLC (‘‘NYSE Amex’’) and NYSE Arca,
Inc. (‘‘NYSE Arca’’).
Today, the Exchange calculates
Routing Fees by assessing certain
Exchange costs related to routing orders
to away markets plus the away market’s
transaction fee. The Exchange incurs a
fee when it utilizes Nasdaq Options
Services LLC (‘‘NOS’’), a member of the
Exchange and the Exchange’s exclusive
order router.6 NOS is utilized by the
Exchange’s fully automated options
trading system, PHLX XL®,7 to route
orders in options listed and open for
trading on the PHLX XL system to
destination markets. Each time NOS
routes to away markets NOS incurs
approximately $0.06 per contract in
clearing-related cost and, in the case of
certain exchanges, a transaction fee is
also charged in certain symbols, which
fees are passed through to the Exchange.
The Exchange currently recoups
clearing and transaction charges
incurred by the Exchange as well as
certain other costs incurred by the
Exchange when routing to away
markets, such as administrative and
technical costs associated with
operating NOS, membership fees at
away markets, and technical costs
associated with routing options. Today,
the Exchange’s Routing Fees include a
$0.06 clearing-related cost and another
$0.05 per contract fee associated with
administrative and technical costs for
operating NOS ($0.11 per contract in
total) in addition to the away market’s
transaction fee. The Exchange does not
assess actual transaction fees in all cases
today, but rather has limited fees in
certain circumstances. In those cases the
Exchange does not recover all of its
costs for routing to the away market.
Each time an away market modifies its
transaction fees the Exchange files a
proposed rule change to amend its
Routing Fees to reflect a Routing Fee
which equates to the current away
market’s transaction fee plus an
additional $0.11 per contract for costs
incurred by the Exchange.8
The Exchange proposes to amend its
Routing Fees to specify in its rule text
that the Exchange will assess the
transaction fee that is being assessed by
the away market plus a specified fixed
fee which represents a cost incurred by
the Exchange for routing an order to a
destination market. The transaction fee
3 The term ‘‘professional’’ means any person or
entity that (i) is not a broker or dealer in securities,
and (ii) places more than 390 orders in listed
options per day on average during a calendar month
for its own beneficial account(s). See Rule
1000(b)(14).
4 A ‘‘Market Maker’’ includes Registered Options
Traders (‘‘ROTs’’) (Rule 1014(b)(i) and (ii), which
include Streaming Quote Traders (‘‘SQTs’’) (See
Rule 1014(b)(ii)(A)) and Remote Streaming Quote
Traders (‘‘RSQTs’’) (See Rule 1014(b)(ii)(B)).
5 A Specialist is an Exchange member who is
registered as an options specialist pursuant to Rule
1020(a).
6 In May 2009, the Exchange adopted Rule
1080(m)(iii)(A) to establish Nasdaq Options
Services LLC (‘‘NOS’’), a member of the Exchange,
as the Exchange’s exclusive order router. See
Securities Exchange Act Release No. 59995 (May
28, 2009), 74 FR 26750 (June 3, 2009) (SR–Phlx–
2009–32).
7 This proposal refers to ‘‘PHLX XL’’ as the
Exchange’s automated options trading system. In
May 2009 the Exchange enhanced the system and
adopted corresponding rules referring to the system
as ‘‘Phlx XL II.’’ See Securities Exchange Act
Release No. 59995 (May 28, 2009), 74 FR 26750
(June 3, 2009) (SR–Phlx–2009–32). The Exchange
intends to submit a separate technical proposed
rule change that would change all references to the
system from ‘‘Phlx XL II’’ to ‘‘PHLX XL’’ for
branding purposes.
8 In some cases the Exchange filed a rule change
which noted that the Exchange would not assess the
actual transaction charge, but a lower amount
where the transaction fees at an away market were
higher than other markets. All Routing Fees are
available on the Exchange’s Pricing Schedule at
Section V.
VerDate Mar<15>2010
14:04 Nov 16, 2012
Jkt 229001
PO 00000
Frm 00098
Fmt 4703
Sfmt 4703
E:\FR\FM\19NON1.SGM
19NON1
69532
Federal Register / Vol. 77, No. 223 / Monday, November 19, 2012 / Notices
pmangrum on DSK3VPTVN1PROD with NOTICES
would be the actual charge assessed by
the away exchange at the time that the
order was entered into the Exchange’s
trading system. This transaction fee
would be calculated on an order-byorder basis since different away markets
charge different amounts.9 The
Exchange would also assess a fixed fee
that represents the cost to the Exchange
for routing the order to the away market.
In analyzing its costs, the Exchange took
into account clearing costs,10
administrative and technical costs
associated with operating NOS,
membership fees at away markets and
regulatory costs. With respect to BATS,
BOX, C2, CBOE, ISE, NYSE Amex and
NYSE Arca the Exchange proposes to
assess a $0.10 per contract fee in
addition to the away market’s
transaction fee.11 The Exchange
currently assesses $0.11 per contract for
costs incurred by the Exchange. This
proposal would reduce those fixed costs
to $0.10 per contract. While the clearing
cost itself was lowered by OCC, the
Exchange, in analyzing its actual costs,
has determined to assess a $0.10 per
contract fixed fee to represent the
overall cost to the Exchange for
technical, administrative, clearing,
regulatory, compliance and other costs,
which is in addition to the transaction
fee assessed by the away market.12
The Exchange also analyzed costs
related to routing to BX Options and
NOM and determined the costs are
lower as compared to other away
markets because NOS is utilized by all
three exchanges to route orders.13
Because Phlx, BX Options and NOM all
utilize NOS, the cost to the Exchange is
less as compared to routing to other
away markets. In addition the fixed
costs are reduced because NOS is
owned and operated by NASDAQ OMX
and the three exchanges and NOS share
common technology and related
operational functions. The Exchange
9 This is similar to the methodology utilized by
ISE in assessing Routing Fees. See ISE’s Fee
Schedule.
10 The Options Clearing Corporation (‘‘OCC’’)
recently amended its clearing fee from $0.03 per
contract side to $0.01 per contract side. See
Securities Exchange Act Release No. 68025 (October
10, 2012), 77 FR 63398 (October 16, 2012) (SR–
OCC–2012–18).
11 The $0.10 per contract fixed fee would apply
to all options exchanges other than BX Options and
NOM, which are discussed separately in this
proposal. The Exchange anticipates that if other
options exchanges are approved by the Commission
after the filing of this proposal, those exchanges
would be assessed the $0.10 per contract fee
applicable to ‘‘all other options exchanges.’’
12 The Exchange will assess the actual transaction
fees that are in place at the various away markets
and will no longer limit those transaction fees as
it does today in certain circumstances.
13 See Chapter VI, Section 11 of the BX Options
and NOM Rules.
VerDate Mar<15>2010
14:04 Nov 16, 2012
Jkt 229001
proposes to assess a $0.04 per contract
fixed fee in addition to the away
market’s transaction fee to route to BX
Options and NOM. This proposal would
reduce the fixed fees assessed today on
average to route to BX Options and
NOM from $0.11 to $0.04 per contract.
For all Routing Fees, the transaction
fee is based on the away market’s
transaction fee or rebate for particular
market participants and in the case that
there is no transaction fee or rebate
assessed by the away market, the only
fee assessed would be the $0.04 or $0.10
per contract fixed fee assessed by the
Exchange to recoup its costs. As with all
fees, the Exchange may adjust these
Routing Fees in response to competitive
conditions by filing a new proposed rule
change.
Finally, the Exchange notes in the
proposed rule text in the Pricing
Schedule that the fee assessed for
routing shall be the actual transaction
fee assessed or rebate paid by the away
market. The Exchange is proposing to
pay a market participant a rebate offered
by an away market where there is such
a rebate. Any rebate available would be
netted against a fee assessed by the
Exchange. For example, if a Customer
order is routed to BOX, and BOX offers
a customer rebate of $0.20 per contract,
the Exchange would assess a $0.10 per
contract fixed fee which would net
against the rebate ($0.20 per contract in
this example). The market participant
for whom the customer contract was
routed would receive a $0.10 per
contract rebate. Today the market
participant does not receive a rebate and
only pays the current $0.11 per contract
Routing Fee.
The Exchange is also proposing to
memorialize a fee that is currently
assessed on members and included in
Exchange Rule 1092 titled ‘‘Obvious
Error and Catastrophic Errors.’’ Rule
1092(f)(ii) states that [a]n Options
Exchange Official 14 will determine
whether a transaction(s) qualifies as a
Catastrophic Error. If it is determined
that a Catastrophic Error has occurred,
the Options Exchange Official will
adjust the execution price(s) of the
transaction(s) according to Rule 1092. If
it is determined that a Catastrophic
Error has not occurred, the member
requesting the determination will be
subject to a charge of $5,000. The
Exchange has memorialized its fees
within the Pricing Schedule in order
that all fees are readily located in one
document. The Exchange is proposing
to memorialize the Catastrophic Fee
14 An Option Exchange Official is an Exchange
staff member or contract employee designated as
such by the Chief Regulatory Officer.
PO 00000
Frm 00099
Fmt 4703
Sfmt 4703
pursuant to Rule 1092 in Chapter VII,
Part D of the Pricing Schedule for ease
of reference.
2. Statutory Basis
The Exchange believes that its
proposal to amend its Pricing Schedule
is consistent with Section 6(b) of the
Act 15 in general, and furthers the
objectives of Section 6(b)(4) of the Act 16
in particular, in that it is an equitable
allocation of reasonable fees and other
charges among Exchange members.
The Exchange believes that the
proposed Routing Fees are reasonable
because they seek to recoup costs that
are incurred by the Exchange when
routing Customer, Professional, Firm,
Broker-Dealer, Specialist and Market
Maker orders to away markets on behalf
of members. Each destination market’s
transaction charge varies and there is a
cost incurred by the Exchange when
routing orders to away markets. The
costs to the Exchange include clearing
costs, administrative and technical costs
associated with operating NOS,
membership fees at away markets, and
technical costs associated with routing
options. The Exchange believes that the
proposed Routing Fees would enable
the Exchange to recover the costs it
incurs to route orders to away markets
in addition to transaction fees assessed
to market participants for the execution
of Customer, Professional, Firm, BrokerDealer, Specialist and Market Maker
orders by the away market.
In addition, the Exchange notes that
while it currently assesses a fixed fee of
$0.11 per contract for costs incurred by
the Exchange, the proposal would
reduce the fixed fee to $0.10 per
contract for non-NASDAQ OMX
exchanges. The Exchange believes that
the proposed fee is reasonable because
while the per contract clearing fee itself
was lowered by OCC (from $0.03 to
$0.01 per contract side), the Exchange,
in analyzing its actual costs, has
determined to assess a $0.10 per
contract fee to represent the overall cost
to the Exchange for technical,
administrative, clearing, regulatory,
compliance and other costs, in addition
to the transaction fee assessed by the
away market. The clearing cost was only
one component of the $0.11 per contract
fee and other costs, which comprise the
proposed $0.10 per contract fee, are not
recouped today. Also, the Exchange will
assess the actual transaction fees that
are in place at the various away markets
and will no longer limit those
transaction fees as it does today in
certain circumstances. The Exchange
15 15
16 15
E:\FR\FM\19NON1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
19NON1
pmangrum on DSK3VPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 223 / Monday, November 19, 2012 / Notices
believes that it is reasonable for it to
recoup its actual costs associated with
routing orders to away markets. Also,
market participants whose orders routed
to away markets would be entitled to
receive rebates offered by away markets,
which rebates would net against fees
assessed by the Exchange for routing
orders. The Exchange believes that the
opportunity to collect a rebate, which is
not the case today, will reduce Routing
Fees.
In addition, the Exchange believes
that it is equitable and not unfairly
discriminatory to assess a fixed cost of
$0.10 per contract, which is mostly
comprised of technology, infrastructure
and away market non-transaction fee
costs, to route orders to non-NASDAQ
OMX away markets because the
Exchange would be assessing an overall
lower fixed fee. While today, the $0.11
per contract fee is mostly comprised of
clearing costs, the proposed $0.10 per
contract fixed fee is based on costs
attributable to routing to non-NASDAQ
OMX away markets, which costs are not
assessed today. The proposed $0.10 per
contract fixed fee would be assessed
uniformly on all orders routed to nonNASDAQ OMX markets in addition to
the actual away market transaction fee
assessed by the destination market.
The Exchange believes that it is
equitable and not unfairly
discriminatory to assess a fixed cost of
$0.04 per contract to route orders to
NASDAQ OMX away markets (BX
Options and NOM) because the cost, in
terms of actual cash outlays, to the
Exchange to route to those markets is
lower. For example, costs related to
routing to BX Options and NOM are
lower as compared to other away
markets because NOS is utilized by all
three exchanges to route orders.17 NOS
and the three NASDAQ OMX options
markets have a common data center and
staff that are responsible for the day-today operations of NOS. Because the
three exchanges are in a common data
center, Routing Fees are reduced
because costly expenses related to, for
example, telecommunication lines to
obtain connectivity are avoided when
routing orders in this instance. The
costs related to connectivity to route
orders to other NASDAQ OMX
exchanges are de minimis. When
routing orders to non-NASDAQ OMX
exchanges, the Exchange incurs costly
connectivity charges related to
telecommunication lines and other
related costs when routing orders. The
proposed fixed fee for routing orders to
non-NASDAQ OMX exchanges is
17 See Chapter VI, Section 11 of the BX Options
and NOM Rules.
VerDate Mar<15>2010
14:04 Nov 16, 2012
Jkt 229001
therefore increased as compared to the
fees for routing orders to NASDAQ
OMX exchanges (BX Options and
NOM), $0.10 per contract versus $0.04
per contract, respectively. The proposed
$0.04 per contract fixed fee would be
assessed uniformly on all orders routed
to NASDAQ OMX markets in addition
to the actual away market transaction
fee assessed by the destination market.
The Exchange also believes that it is
equitable and not unfairly
discriminatory for market participants
to receive rebates on orders routed to
away markets that pay rebates. Today,
the Exchange does not pay such rebates
when routing orders. The Exchange
would pay rebates offered by away
markets uniformly to market
participants when their orders are
routed to a destination market that
offers a rebate.
The Exchange believes it is
reasonable, equitable and not unfairly
discriminatory to pass along savings
realized by leveraging NASDAQ OMX’s
infrastructure and scale to market
participants when those orders are
routed to BX Options and NOM.18 It is
important to note with respect to
routing to an away market that orders
are routed to away markets based on
price first. PHLX XL will route orders to
away markets where the Exchange’s
disseminated bid or offer is inferior to
the national best bid (best offer)
(‘‘NBBO’’) price.19 Market participants
may submit orders to the Exchange as
ineligible for routing or ‘‘DNR’’ to avoid
incurring the Routing Fees proposed
herein.20
The Exchange also believes its
proposal to add the Catastrophic Error
Fee to the Pricing Schedule is
reasonable, equitable and not unfairly
discriminatory because the Exchange
has listed all fees it assesses and rebates
paid to its members and member
18 Today, the Exchange assesses a $0.11 per
contract fixed fee for routing orders to BX Options
and NOM. That fee is proposed to be reduced to a
$0.04 per contract fixed fee, which would be in
addition to the actual transaction fee assessed by
the away market.
19 See Rule 1080(m). The Phlx XL II system will
contemporaneously route an order marked as an
Intermarket Sweep Order (‘‘ISO’’) to each away
market disseminating prices better than the
Exchange’s price, for the lesser of: (a) The
disseminated size of such away markets, or (b) the
order size and, if order size remains after such
routing, trade at the Exchange’s disseminated bid or
offer up to its disseminated size. If contracts still
remain unexecuted after routing, they are posted on
the book. Once on the book, should the order
subsequently be locked or crossed by another
market center, the Phlx XL II system will not route
the order to the locking or crossing market center,
with some exceptions noted in Rule 1080(m).
20 See Rule 1066(h) (Certain Types of Orders
Defined) and 1080(b)(i)(A) (PHLX XL and PHLX XL
II).
PO 00000
Frm 00100
Fmt 4703
Sfmt 4703
69533
organizations within the Pricing
Schedule. The Exchange believes that
memorializing all fees and rebates
within the Pricing Schedule provides an
easy reference for members and member
organizations. The Exchange is not
establishing a new fee, but rather simply
codifying the Catastrophic Error Fee,
which is noted in Rule 1092, within the
Pricing Schedule.
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, Phlx Routing Fees seek to
recoup costs for Routing Orders to other
exchanges on behalf of its members.
Options Participants may choose to
mark the order as ineligible for routing
to avoid incurring these fees.21
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.22 At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act. If the Commission
takes such action, the Commission shall
institute proceedings to determine
whether the proposed rule should be
approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
21 Id.
22 15
E:\FR\FM\19NON1.SGM
U.S.C. 78s(b)(3)(A)(ii).
19NON1
69534
Federal Register / Vol. 77, No. 223 / Monday, November 19, 2012 / Notices
Number SR–Phlx–2012–129 on the
subject line.
SECURITIES AND EXCHANGE
COMMISSION
Paper Comments
[Release No. 34–68211; File No. SR–NYSE–
2012–64]
• 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–2012–129. 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–Phlx–2012–129 and should
be submitted on or before December 10,
2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–28003 Filed 11–16–12; 8:45 am]
pmangrum on DSK3VPTVN1PROD with NOTICES
BILLING CODE 8011–01–P
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Extending the
Temporary Suspension of Those
Aspects of Rules 36.20 and 36.21 That
Would Not Permit Floor Brokers To
Use Personal Portable Phone Devices
on the Trading Floor Following the
Aftermath of Hurricane Sandy Until the
Earlier of When Phone Service Is Fully
Restored or Friday, November 16, 2012
November 9, 2012.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on November
9, 2012, New York Stock Exchange LLC
(‘‘NYSE’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to extend the
temporary suspension of those aspects
of Rules 36.20 and 36.21 that would not
permit Floor brokers to use personal
portable phone devices on the Trading
Floor following the aftermath of
Hurricane Sandy until the earlier of
when phone service is fully restored on
Friday, November 16, 2012. The
proposed rule change is available on the
Exchange’s Web site at www.nyse.com,
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
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.
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
23 17
CFR 200.30–3(a)(12).
VerDate Mar<15>2010
14:04 Nov 16, 2012
Jkt 229001
PO 00000
Frm 00101
Fmt 4703
Sfmt 4703
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
On Thursday, November 1, 2012, the
Exchange filed a rule proposal to
temporarily suspend those aspects of
Rules 36.20, 36.21, and 36.30 that
would not permit Floor brokers and
Designated Market Makers (‘‘DMMs’’) to
use personal portable phone devices on
the Trading Floor 4 following the
aftermath of Hurricane Sandy and
during the period that phone service
was not fully functional.5 Pursuant to
that filing, all other aspects of those
rules remained applicable and the
temporary suspensions of Rule 36
requirements were in effect beginning
the first day trading resumed following
Hurricane Sandy until Friday,
November 2, 2012.
On November 5, 2012, although
power had been restored to the
downtown Manhattan vicinity, other
services were not yet fully operational.
Among other things, the telephone
services provided by third-party carriers
to the Exchange were still not fully
operational on the Trading Floor, which
continued to impact the ability of Floor
members to communicate from the
Trading Floor as permitted by Rule 36.
Accordingly, the Exchange filed to
extend the temporary suspension of
those aspects of Rules 36.20, 36.21, and
36.30 that would not permit Floor
brokers and DMMs to use personal
portable phone devices on the Trading
Floor to the earlier of phone service
being restored or November 9, 2012,6
which was subject to the same terms
and conditions of the temporary
suspension filed for October 31, 2012
through November 2, 2012, including
the record retention requirements
related to any use of personal portable
phones.7
Since filing the extension, the
Exchange has been advised by its thirdparty carrier that the damage to the
telephone connections is more extensive
4 Pursuant to Rule 6A, the Trading Floor is
defined as the restricted-access physical areas
designated by the Exchange for the trading of
securities, but does not include the physical
locations where NYSE Amex Options are traded.
5 See Securities Exchange Act Release No. 68137
(Nov. 1, 2012) (SR–NYSE–2012–58).
6 See Securities Exchange Act Release No. 68161
(Nov. 5, 2012) (SR–NYSE–2012–61).
7 See supra note 5 (notice that describes the terms
and conditions of the temporary suspension).
E:\FR\FM\19NON1.SGM
19NON1
]]>Agencies
[Federal Register Volume 77, Number 223 (Monday, November 19, 2012)]
[Notices]
[Pages 69530-69534]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-28003]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68213; File No. SR-Phlx-2012-129]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
Routing Fees
November 13, 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 October 31, 2012, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'')
filed with the Securities and Exchange Commission (``SEC'' or
``Commission'') the proposed rule change as described in Items I, II,
and III, below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its Routing Fees to adopt new fees
which recoup costs incurred by the Exchange when routing to various
away markets. The Exchange also proposes to amend Section VII, Section
D to memorialize a fee currently assessed to members in its Pricing
Schedule.
While changes to the Pricing Schedule pursuant to this proposal are
effective upon filing, the Exchange has designated the proposed
amendment to be operative on November 1, 2012.
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
[[Page 69531]]
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this filing is to eliminate the current Routing Fees
in Section V of the Pricing Schedule and adopt new Routing Fees which
recoup costs that the Exchange incurs for routing and executing orders
in equity options to various away markets.
The Exchange's Pricing Schedule at Section V currently includes the
following Routing Fees for routing Customer, Professional,\3\ Firm,
Broker-Dealer, Market Maker \4\ and Specialist \5\ orders to away
markets:
---------------------------------------------------------------------------
\3\ The term ``professional'' means any person or entity that
(i) is not a broker or dealer in securities, and (ii) places more
than 390 orders in listed options per day on average during a
calendar month for its own beneficial account(s). See Rule
1000(b)(14).
\4\ A ``Market Maker'' includes Registered Options Traders
(``ROTs'') (Rule 1014(b)(i) and (ii), which include Streaming Quote
Traders (``SQTs'') (See Rule 1014(b)(ii)(A)) and Remote Streaming
Quote Traders (``RSQTs'') (See Rule 1014(b)(ii)(B)).
\5\ A Specialist is an Exchange member who is registered as an
options specialist pursuant to Rule 1020(a).
----------------------------------------------------------------------------------------------------------------
Firm/broker-
dealer/
Exchange Customer Professional specialist/
market maker
----------------------------------------------------------------------------------------------------------------
NYSE AMEX................................................. $0.11 $0.31 $0.55
BATS Penny................................................ 0.55 0.55 0.55
BATS non-Penny............................................ 0.86 0.91 0.91
BOX....................................................... 0.11 0.11 0.55
BX Options................................................ 0.11 0.54 0.54
CBOE...................................................... 0.11 0.31 0.55
CBOE orders greater than 99 contracts in RUT, RMN, NDX, 0.29 0.31 0.55
MNX, ETFs, ETNs and HOLDRs...............................
C2........................................................ 0.55 0.56 0.55
ISE....................................................... 0.11 0.29 0.55
ISE Select Symbols \13\................................... 0.31 0.39 0.55
NYSE ARCA (Penny Pilot)................................... 0.55 0.55 0.55
NYSE ARCA (Standard)...................................... 0.11 0.11 0.55
NOM Penny Pilot Options................................... 0.54 0.54 0.55
NOM Non-Penny Pilot Options............................... 0.86 0.91 0.91
----------------------------------------------------------------------------------------------------------------
\13\ These fees are applicable to orders routed to ISE that are subject to Rebates and Fees for Adding and
Removing Liquidity in Select Symbols. See ISE's Schedule of Fees for the complete list of symbols that are
subject to these fees.
The Exchange proposes to adopt new Routing Fees when routing and
executing orders in equity options to BATS Exchange, Inc. (``BATS''),
BOX Options Exchange LLC (``BOX''), NASDAQ OMX BX, Inc. (``BX
Options''), C2 Options Exchange, Incorporated (``C2''), Chicago Board
Options Exchange, Incorporated (``CBOE''), International Securities
Exchange, LLC (``ISE''), NASDAQ Options Market (``NOM''), NYSE Amex LLC
(``NYSE Amex'') and NYSE Arca, Inc. (``NYSE Arca'').
Today, the Exchange calculates Routing Fees by assessing certain
Exchange costs related to routing orders to away markets plus the away
market's transaction fee. The Exchange incurs a fee when it utilizes
Nasdaq Options Services LLC (``NOS''), a member of the Exchange and the
Exchange's exclusive order router.\6\ NOS is utilized by the Exchange's
fully automated options trading system, PHLX XL[supreg],\7\ to route
orders in options listed and open for trading on the PHLX XL system to
destination markets. Each time NOS routes to away markets NOS incurs
approximately $0.06 per contract in clearing-related cost and, in the
case of certain exchanges, a transaction fee is also charged in certain
symbols, which fees are passed through to the Exchange. The Exchange
currently recoups clearing and transaction charges incurred by the
Exchange as well as certain other costs incurred by the Exchange when
routing to away markets, such as administrative and technical costs
associated with operating NOS, membership fees at away markets, and
technical costs associated with routing options. Today, the Exchange's
Routing Fees include a $0.06 clearing-related cost and another $0.05
per contract fee associated with administrative and technical costs for
operating NOS ($0.11 per contract in total) in addition to the away
market's transaction fee. The Exchange does not assess actual
transaction fees in all cases today, but rather has limited fees in
certain circumstances. In those cases the Exchange does not recover all
of its costs for routing to the away market. Each time an away market
modifies its transaction fees the Exchange files a proposed rule change
to amend its Routing Fees to reflect a Routing Fee which equates to the
current away market's transaction fee plus an additional $0.11 per
contract for costs incurred by the Exchange.\8\
---------------------------------------------------------------------------
\6\ In May 2009, the Exchange adopted Rule 1080(m)(iii)(A) to
establish Nasdaq Options Services LLC (``NOS''), a member of the
Exchange, as the Exchange's exclusive order router. See Securities
Exchange Act Release No. 59995 (May 28, 2009), 74 FR 26750 (June 3,
2009) (SR-Phlx-2009-32).
\7\ This proposal refers to ``PHLX XL'' as the Exchange's
automated options trading system. In May 2009 the Exchange enhanced
the system and adopted corresponding rules referring to the system
as ``Phlx XL II.'' See Securities Exchange Act Release No. 59995
(May 28, 2009), 74 FR 26750 (June 3, 2009) (SR-Phlx-2009-32). The
Exchange intends to submit a separate technical proposed rule change
that would change all references to the system from ``Phlx XL II''
to ``PHLX XL'' for branding purposes.
\8\ In some cases the Exchange filed a rule change which noted
that the Exchange would not assess the actual transaction charge,
but a lower amount where the transaction fees at an away market were
higher than other markets. All Routing Fees are available on the
Exchange's Pricing Schedule at Section V.
---------------------------------------------------------------------------
The Exchange proposes to amend its Routing Fees to specify in its
rule text that the Exchange will assess the transaction fee that is
being assessed by the away market plus a specified fixed fee which
represents a cost incurred by the Exchange for routing an order to a
destination market. The transaction fee
[[Page 69532]]
would be the actual charge assessed by the away exchange at the time
that the order was entered into the Exchange's trading system. This
transaction fee would be calculated on an order-by-order basis since
different away markets charge different amounts.\9\ The Exchange would
also assess a fixed fee that represents the cost to the Exchange for
routing the order to the away market. In analyzing its costs, the
Exchange took into account clearing costs,\10\ administrative and
technical costs associated with operating NOS, membership fees at away
markets and regulatory costs. With respect to BATS, BOX, C2, CBOE, ISE,
NYSE Amex and NYSE Arca the Exchange proposes to assess a $0.10 per
contract fee in addition to the away market's transaction fee.\11\ The
Exchange currently assesses $0.11 per contract for costs incurred by
the Exchange. This proposal would reduce those fixed costs to $0.10 per
contract. While the clearing cost itself was lowered by OCC, the
Exchange, in analyzing its actual costs, has determined to assess a
$0.10 per contract fixed fee to represent the overall cost to the
Exchange for technical, administrative, clearing, regulatory,
compliance and other costs, which is in addition to the transaction fee
assessed by the away market.\12\
---------------------------------------------------------------------------
\9\ This is similar to the methodology utilized by ISE in
assessing Routing Fees. See ISE's Fee Schedule.
\10\ The Options Clearing Corporation (``OCC'') recently amended
its clearing fee from $0.03 per contract side to $0.01 per contract
side. See Securities Exchange Act Release No. 68025 (October 10,
2012), 77 FR 63398 (October 16, 2012) (SR-OCC-2012-18).
\11\ The $0.10 per contract fixed fee would apply to all options
exchanges other than BX Options and NOM, which are discussed
separately in this proposal. The Exchange anticipates that if other
options exchanges are approved by the Commission after the filing of
this proposal, those exchanges would be assessed the $0.10 per
contract fee applicable to ``all other options exchanges.''
\12\ The Exchange will assess the actual transaction fees that
are in place at the various away markets and will no longer limit
those transaction fees as it does today in certain circumstances.
---------------------------------------------------------------------------
The Exchange also analyzed costs related to routing to BX Options
and NOM and determined the costs are lower as compared to other away
markets because NOS is utilized by all three exchanges to route
orders.\13\ Because Phlx, BX Options and NOM all utilize NOS, the cost
to the Exchange is less as compared to routing to other away markets.
In addition the fixed costs are reduced because NOS is owned and
operated by NASDAQ OMX and the three exchanges and NOS share common
technology and related operational functions. The Exchange proposes to
assess a $0.04 per contract fixed fee in addition to the away market's
transaction fee to route to BX Options and NOM. This proposal would
reduce the fixed fees assessed today on average to route to BX Options
and NOM from $0.11 to $0.04 per contract.
---------------------------------------------------------------------------
\13\ See Chapter VI, Section 11 of the BX Options and NOM Rules.
---------------------------------------------------------------------------
For all Routing Fees, the transaction fee is based on the away
market's transaction fee or rebate for particular market participants
and in the case that there is no transaction fee or rebate assessed by
the away market, the only fee assessed would be the $0.04 or $0.10 per
contract fixed fee assessed by the Exchange to recoup its costs. As
with all fees, the Exchange may adjust these Routing Fees in response
to competitive conditions by filing a new proposed rule change.
Finally, the Exchange notes in the proposed rule text in the
Pricing Schedule that the fee assessed for routing shall be the actual
transaction fee assessed or rebate paid by the away market. The
Exchange is proposing to pay a market participant a rebate offered by
an away market where there is such a rebate. Any rebate available would
be netted against a fee assessed by the Exchange. For example, if a
Customer order is routed to BOX, and BOX offers a customer rebate of
$0.20 per contract, the Exchange would assess a $0.10 per contract
fixed fee which would net against the rebate ($0.20 per contract in
this example). The market participant for whom the customer contract
was routed would receive a $0.10 per contract rebate. Today the market
participant does not receive a rebate and only pays the current $0.11
per contract Routing Fee.
The Exchange is also proposing to memorialize a fee that is
currently assessed on members and included in Exchange Rule 1092 titled
``Obvious Error and Catastrophic Errors.'' Rule 1092(f)(ii) states that
[a]n Options Exchange Official \14\ will determine whether a
transaction(s) qualifies as a Catastrophic Error. If it is determined
that a Catastrophic Error has occurred, the Options Exchange Official
will adjust the execution price(s) of the transaction(s) according to
Rule 1092. If it is determined that a Catastrophic Error has not
occurred, the member requesting the determination will be subject to a
charge of $5,000. The Exchange has memorialized its fees within the
Pricing Schedule in order that all fees are readily located in one
document. The Exchange is proposing to memorialize the Catastrophic Fee
pursuant to Rule 1092 in Chapter VII, Part D of the Pricing Schedule
for ease of reference.
---------------------------------------------------------------------------
\14\ An Option Exchange Official is an Exchange staff member or
contract employee designated as such by the Chief Regulatory
Officer.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal to amend its Pricing
Schedule is consistent with Section 6(b) of the Act \15\ in general,
and furthers the objectives of Section 6(b)(4) of the Act \16\ in
particular, in that it is an equitable allocation of reasonable fees
and other charges among Exchange members.
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The Exchange believes that the proposed Routing Fees are reasonable
because they seek to recoup costs that are incurred by the Exchange
when routing Customer, Professional, Firm, Broker-Dealer, Specialist
and Market Maker orders to away markets on behalf of members. Each
destination market's transaction charge varies and there is a cost
incurred by the Exchange when routing orders to away markets. The costs
to the Exchange include clearing costs, administrative and technical
costs associated with operating NOS, membership fees at away markets,
and technical costs associated with routing options. The Exchange
believes that the proposed Routing Fees would enable the Exchange to
recover the costs it incurs to route orders to away markets in addition
to transaction fees assessed to market participants for the execution
of Customer, Professional, Firm, Broker-Dealer, Specialist and Market
Maker orders by the away market.
In addition, the Exchange notes that while it currently assesses a
fixed fee of $0.11 per contract for costs incurred by the Exchange, the
proposal would reduce the fixed fee to $0.10 per contract for non-
NASDAQ OMX exchanges. The Exchange believes that the proposed fee is
reasonable because while the per contract clearing fee itself was
lowered by OCC (from $0.03 to $0.01 per contract side), the Exchange,
in analyzing its actual costs, has determined to assess a $0.10 per
contract fee to represent the overall cost to the Exchange for
technical, administrative, clearing, regulatory, compliance and other
costs, in addition to the transaction fee assessed by the away market.
The clearing cost was only one component of the $0.11 per contract fee
and other costs, which comprise the proposed $0.10 per contract fee,
are not recouped today. Also, the Exchange will assess the actual
transaction fees that are in place at the various away markets and will
no longer limit those transaction fees as it does today in certain
circumstances. The Exchange
[[Page 69533]]
believes that it is reasonable for it to recoup its actual costs
associated with routing orders to away markets. Also, market
participants whose orders routed to away markets would be entitled to
receive rebates offered by away markets, which rebates would net
against fees assessed by the Exchange for routing orders. The Exchange
believes that the opportunity to collect a rebate, which is not the
case today, will reduce Routing Fees.
In addition, the Exchange believes that it is equitable and not
unfairly discriminatory to assess a fixed cost of $0.10 per contract,
which is mostly comprised of technology, infrastructure and away market
non-transaction fee costs, to route orders to non-NASDAQ OMX away
markets because the Exchange would be assessing an overall lower fixed
fee. While today, the $0.11 per contract fee is mostly comprised of
clearing costs, the proposed $0.10 per contract fixed fee is based on
costs attributable to routing to non-NASDAQ OMX away markets, which
costs are not assessed today. The proposed $0.10 per contract fixed fee
would be assessed uniformly on all orders routed to non-NASDAQ OMX
markets in addition to the actual away market transaction fee assessed
by the destination market.
The Exchange believes that it is equitable and not unfairly
discriminatory to assess a fixed cost of $0.04 per contract to route
orders to NASDAQ OMX away markets (BX Options and NOM) because the
cost, in terms of actual cash outlays, to the Exchange to route to
those markets is lower. For example, costs related to routing to BX
Options and NOM are lower as compared to other away markets because NOS
is utilized by all three exchanges to route orders.\17\ NOS and the
three NASDAQ OMX options markets have a common data center and staff
that are responsible for the day-to-day operations of NOS. Because the
three exchanges are in a common data center, Routing Fees are reduced
because costly expenses related to, for example, telecommunication
lines to obtain connectivity are avoided when routing orders in this
instance. The costs related to connectivity to route orders to other
NASDAQ OMX exchanges are de minimis. When routing orders to non-NASDAQ
OMX exchanges, the Exchange incurs costly connectivity charges related
to telecommunication lines and other related costs when routing orders.
The proposed fixed fee for routing orders to non-NASDAQ OMX exchanges
is therefore increased as compared to the fees for routing orders to
NASDAQ OMX exchanges (BX Options and NOM), $0.10 per contract versus
$0.04 per contract, respectively. The proposed $0.04 per contract fixed
fee would be assessed uniformly on all orders routed to NASDAQ OMX
markets in addition to the actual away market transaction fee assessed
by the destination market. The Exchange also believes that it is
equitable and not unfairly discriminatory for market participants to
receive rebates on orders routed to away markets that pay rebates.
Today, the Exchange does not pay such rebates when routing orders. The
Exchange would pay rebates offered by away markets uniformly to market
participants when their orders are routed to a destination market that
offers a rebate.
---------------------------------------------------------------------------
\17\ See Chapter VI, Section 11 of the BX Options and NOM Rules.
---------------------------------------------------------------------------
The Exchange believes it is reasonable, equitable and not unfairly
discriminatory to pass along savings realized by leveraging NASDAQ
OMX's infrastructure and scale to market participants when those orders
are routed to BX Options and NOM.\18\ It is important to note with
respect to routing to an away market that orders are routed to away
markets based on price first. PHLX XL will route orders to away markets
where the Exchange's disseminated bid or offer is inferior to the
national best bid (best offer) (``NBBO'') price.\19\ Market
participants may submit orders to the Exchange as ineligible for
routing or ``DNR'' to avoid incurring the Routing Fees proposed
herein.\20\
---------------------------------------------------------------------------
\18\ Today, the Exchange assesses a $0.11 per contract fixed fee
for routing orders to BX Options and NOM. That fee is proposed to be
reduced to a $0.04 per contract fixed fee, which would be in
addition to the actual transaction fee assessed by the away market.
\19\ See Rule 1080(m). The Phlx XL II system will
contemporaneously route an order marked as an Intermarket Sweep
Order (``ISO'') to each away market disseminating prices better than
the Exchange's price, for the lesser of: (a) The disseminated size
of such away markets, or (b) the order size and, if order size
remains after such routing, trade at the Exchange's disseminated bid
or offer up to its disseminated size. If contracts still remain
unexecuted after routing, they are posted on the book. Once on the
book, should the order subsequently be locked or crossed by another
market center, the Phlx XL II system will not route the order to the
locking or crossing market center, with some exceptions noted in
Rule 1080(m).
\20\ See Rule 1066(h) (Certain Types of Orders Defined) and
1080(b)(i)(A) (PHLX XL and PHLX XL II).
---------------------------------------------------------------------------
The Exchange also believes its proposal to add the Catastrophic
Error Fee to the Pricing Schedule is reasonable, equitable and not
unfairly discriminatory because the Exchange has listed all fees it
assesses and rebates paid to its members and member organizations
within the Pricing Schedule. The Exchange believes that memorializing
all fees and rebates within the Pricing Schedule provides an easy
reference for members and member organizations. The Exchange is not
establishing a new fee, but rather simply codifying the Catastrophic
Error Fee, which is noted in Rule 1092, within the Pricing Schedule.
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, Phlx Routing
Fees seek to recoup costs for Routing Orders to other exchanges on
behalf of its members. Options Participants may choose to mark the
order as ineligible for routing to avoid incurring these fees.\21\
---------------------------------------------------------------------------
\21\ Id.
---------------------------------------------------------------------------
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.\22\ 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.
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------
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
[[Page 69534]]
Number SR-Phlx-2012-129 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-2012-129. 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-Phlx-2012-129 and
should be submitted on or before December 10, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
---------------------------------------------------------------------------
\23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-28003 Filed 11-16-12; 8:45 am]
BILLING CODE 8011-01-P
