Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX LLC Relating to Professional Options Transaction Charges, 1898-1901 [2013-00256]

Download as PDF 1898 Federal Register / Vol. 78, No. 6 / Wednesday, January 9, 2013 / Notices and MNX options for other options exchanges, and the Exchange believes that harmonizing the standard across options markets will enable market participants to handle trading in NDX and MNX options similarly regardless of which options market in which they are trading. 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 that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change: (1) Does not significantly affect the protection of investors or the public interest; (2) does not impose any significant burden on competition; and (3) by its terms does not become operative for 30 days after the date of this filing, 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 24 and Rule 19b–4(f)(6) thereunder.25 A proposed rule change filed under Rule 19b–4(f)(6) normally does not become operative for 30 days after the date of filing. However, Rule 19b– 4(f)(6)(iii) permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange requests that the Commission waive the 30-day operative delay so that it can list and trade NDX and MNX options with no position limits without delay. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest.26 The srobinson on DSK4SPTVN1PROD with 24 15 U.S.C. 78s(b)(3)(A). 25 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires a self-regulatory organization to provide the Commission with 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 Exchange has fulfilled this requirement. 26 For purposes only of waiving the 30-day operative delay, the Commission has also VerDate Mar<15>2010 16:39 Jan 08, 2013 Jkt 229001 Commission notes the proposal is substantively identical to prior proposed rule changes and existing rules of other exchanges, and does not raise any new regulatory issues.27 For these reasons, the Commission designates the proposed rule change as operative upon filing. 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. IV. Solicitation of Comments 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– NYSEArca–2012–140 and should be submitted on or before January 30, 2013. 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: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.28 Kevin M. O’Neill, Deputy Secretary. Electronic Comments [FR Doc. 2013–00196 Filed 1–8–13; 8:45 am] • 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–NYSEArca–2012–140 on the subject line. BILLING CODE 8011–01–P Paper Comments Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX LLC Relating to Professional Options Transaction Charges • 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–NYSEArca–2012–140. 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 considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 27 See, e.g., Security Exchange Act Release Nos. 57654 (April 11, 2008), 73 FR 21003 (April 17, 2008) (SR–NASDAQ–2008–028) and 57936 (June 6, 2008), 73 FR 33481 (June 12, 2008) (SR–Phlx–2008– 36). See also NYSE MKT Rule 904C, CBOE Rule 24.4, and Phlx Rule 1001A. PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–68577; File No. SR–Phlx– 2012–141] January 3, 2013. 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 December 21, 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 certain electronic Professional 3 Options 28 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 The term ‘‘Professional’’ means any person or entity that (i) is not a broker or dealer in securities, 1 15 E:\FR\FM\09JAN1.SGM 09JAN1 Federal Register / Vol. 78, No. 6 / Wednesday, January 9, 2013 / Notices Transaction Charges in Section II 4 of the Exchange’s Pricing Schedule entitled ‘‘Multiply Listed Options.’’ 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 January 2, 2013. The text of the proposed rule change is available on the Exchange’s Web site at https:// nasdaqomxphlx.cchwallstreet.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 Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change srobinson on DSK4SPTVN1PROD with 1. Purpose The Exchange proposes to amend Section II of the Exchange’s Pricing Schedule to increase the electronic Professional Options Transaction Charges for both Penny Pilot Options 5 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 Section II of the Pricing Schedule includes options overlying equities, ETFs, ETNs, and indexes which are Multiply Listed. 5 The Penny Pilot was established in January 2007; and in October 2009, it was expanded and extended through June 30, 2012. See Securities Exchange Act Release Nos. 55153 (January 23, 2007), 72 FR 4553 (January 31, 2007) (SR–Phlx– 2006–74) (notice of filing and approval order establishing Penny Pilot); 60873 (October 23, 2009), 74 FR 56675 (November 2, 2009) (SR–Phlx–2009– 91) (notice of filing and immediate effectiveness expanding and extending Penny Pilot); 60966 (November 9, 2009), 74 FR 59331 (November 17, 2009) (SR–Phlx–2009–94) (notice of filing and immediate effectiveness adding seventy-five classes to Penny Pilot); 61454 (February 1, 2010), 75 FR 6233 (February 8, 2010) (SR–Phlx–2010–12) (notice of filing and immediate effectiveness adding seventy-five classes to Penny Pilot); 62028 (May 4, 2010), 75 FR 25890 (May 10, 2010) (SR–Phlx–2010– 65) (notice of filing and immediate effectiveness adding seventy-five classes to Penny Pilot); 62616 (July 30, 2010), 75 FR 47664 (August 6, 2010) (SR– Phlx–2010–103) (notice of filing and immediate effectiveness adding seventy-five classes to Penny VerDate Mar<15>2010 16:39 Jan 08, 2013 Jkt 229001 and non-Penny Pilot Options.6 The Exchange believes that increasing the electronic Professional Options Transaction Charges in Penny Pilot and non-Penny Pilot Options will allow the Exchange to compete more effectively. The Exchange also believes that the proposed fees will operate to assist the Exchange in recouping increased costs generally tied to supporting a larger number of options classes, option series and overall transaction volume. Specifically, the Exchange proposes to increase the electronic Professional Options Transaction Charges for both Penny Pilot Options and non-Penny Pilot Options from $0.25 to $0.30 per contract. The Exchange is not proposing to increase the floor Professional Options Transaction Charges or any other electronic Professional transaction charges. The Exchange also proposes to amend its Pricing Schedule at Section II to add another column to the Professional fees to differentiate electronic and floor fees as it does today with other market participants.7 The Exchange also proposes a technical amendment to the Specialist,8 Market Maker,9 BrokerDealer 10 and Firm 11 transaction fees to correct the Pricing Schedule to note an ‘‘N/A’’ for electronic FLEX 12 and Cabinet 13 Options pricing instead of Pilot); 63395 (November 30, 2010), 75 FR 76062 (December 7, 2010) (SR–Phlx–2010–167) (notice of filing and immediate effectiveness extending the Penny Pilot); 65976 (December 15, 2011), 76 FR 79247 (December 21, 2011) (SR–Phlx–2011–172) (notice of filing and immediate effectiveness extending the Penny Pilot); and 67326 (June 29, 2012), 77 FR 40126 (July 6, 2012) (SR–Phlx–2012– 86) (notice of filing and immediate effectiveness extending the Penny Pilot). See also Exchange Rule 1034. 6 Non-Penny Pilot refers to options classes not in the Penny Pilot. 7 Today, the Specialist, Market Maker, BrokerDealer and Firm fees are differentiated between electronic and firm fees. 8 A ‘‘Specialist’’ is an Exchange member who is registered as an options specialist pursuant to Rule 1020(a). 9 A ‘‘Market Maker’’ includes Registered Options Traders (Rule 1014(b)(i) and (ii)), which includes Streaming Quote Traders (see Rule 1014(b)(ii)(A)) and Remote Streaming Quote Traders (see Rule 1014(b)(ii)(B)). Directed Participants are also market makers. 10 Broker-Dealers are assessed a Penny Pilot Options Transaction Charge of $0.45 per contract for electronic orders and a non-Penny Pilot Options Transaction Charge of $0.60 for electronic orders. 11 Firms are assessed a Penny Pilot Options Transaction Charge of $0.40 per contract for electronic orders and a non-Penny Pilot Options Transaction Charge of $0.45 for electronic orders. 12 A FLEX option is a customized option that provides parties to the transaction with the ability to fix terms including the exercise style, expiration date, and certain exercise prices. See Exchange Rule 1079. FLEX Options are a trademark of the Chicago Board Options Exchange. 13 An ‘‘accommodation’’ or ‘‘cabinet’’ trade refers to trades in listed options on the Exchange that are PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 1899 $0.10 per contract. While the $0.10 per contract fee is noted on the Pricing Schedule, no market participant has been assessed that fee because FLEX and Cabinet Options are transacted on the Exchange’s trading floor and are not transacted electronically.14 The Exchange proposes to note ‘‘N/A’’ for those electronic fees because these types of transactions are not able to be executed electronically on the Exchange and this would correct the Pricing Schedule to reflect no fee is being assessed. 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 and other persons using its facilities. The Exchange’s proposal to increase the electronic Professional Options Transaction Charges in both Penny Pilot and non-Penny Pilot Options is reasonable because of the greater costs incurred by the Exchange associated with supporting a larger number of options classes, option series and overall transaction volume. Also, the Exchange believes increasing the electronic Professional Options Transaction Charges in both Penny Pilot and non-Penny Pilot Options from $0.25 to $0.30 per contract is reasonable because the $0.05 per contract increase would allow the Exchange to recoup the aforementioned costs while also continuing to assess a Professional a rate that is lower than Broker-Dealer and Firm electronic rates. Also, the increased Professional fees are comparable with electronic Professional fees at other options exchanges.17 worthless or not actively traded. Cabinet trading is generally conducted in accordance with Exchange Rules, except as provided in Exchange Rule 1059 entitled ‘‘Accommodation Trading’’, which sets forth specific procedures for engaging in cabinet trading below $1 per option contract. Cabinet or accommodation trading of option contracts is intended to accommodate persons wishing to effect closing transactions in those series of options dealt in on the Exchange for which there is no auction market. 14 The Exchange’s systems do not allow for FLEX or Cabinet transactions to be executed electronically. 15 15 U.S.C. 78f(b). 16 15 U.S.C. 78f(b)(4). 17 The Chicago Board Options Exchange Incorporated (‘‘CBOE’’) assesses professionals and voluntary professionals a $0.30 per contract transaction fee for electronic orders. See CBOE’s Fees Schedule. See also NYSE Amex LLC’s (‘‘NYSE Amex’’) Fee Schedule, which assesses Professional Customers a $0.32 per contract fee for electronic E:\FR\FM\09JAN1.SGM Continued 09JAN1 1900 Federal Register / Vol. 78, No. 6 / Wednesday, January 9, 2013 / Notices srobinson on DSK4SPTVN1PROD with The Exchange’s proposal to increase the electronic Professional Options Transaction Charges in both Penny Pilot and non-Penny Pilot Options is equitable and not unfairly discriminatory because Professionals would continue to be assessed lower fees as compared to Broker-Dealers and Firms with respect to electronic options transactions charges. Market Makers and Specialists would be assessed lower fees, both electronic and floor, as compared to Professionals, because Market Makers and Specialists have burdensome quoting obligations 18 to the market which do not apply to Professionals, Customers, Firms and Broker-Dealers. Customers are not assessed Options Transactions Charges in either Penny Pilot or non-Penny Pilot Options because Customer order flow brings liquidity to the market, which in turn benefits all market participants. Broker-Dealers and Firms today pay higher fees as compared to a Professional for electronic transactions and this is not changing. The Professional Options Transaction Charges in both Penny Pilot and nonPenny Pilot Options for non-electronic transactions or floor transactions would remain unchanged. The Exchange believes that assessing higher electronic Options Transaction Charges in both Penny Pilot and nonPenny Pilot Options of $0.30 per contract as compared to a floor Options Transaction Charge in both Penny Pilot and non-Penny Pilot Options of $0.25 per contract is reasonable, equitable and not unfairly discriminatory because these fees recognize the distinction between the floor order entry model and the electronic model and the proposed fees respond to competition along the same lines.19 Floor participants incur costs associated with accessing the floor, i.e. need for a floor broker, and other costs which are not born by electronic members. Today, the Exchange assesses different fees for electronic as compared to floor transactions for Firms, Broker-Dealers, Specialists and Market Makers in Section II of the Pricing Schedule. The Exchange is proposing to likewise distinguish electronic and floor Professional Options Transactions Charges in both Penny and non-Penny Pilot Options. Other options exchanges likewise distinguish floor and electronic fees for Professionals.20 The Exchange believes that the proposed fees are in line with similar fees offered on other exchanges. The Exchange operates in a highly competitive market, comprised of eleven exchanges, in which market participants can easily and readily direct order flow to competing venues if they deem fee and rebate levels at a particular venue to be excessive. orders which take liquidity from 1 to 16,999 contracts. 18 See Exchange Rule 1014 entitled ‘‘Obligations and Restrictions Applicable to Specialists and Registered Options Traders.’’ 19 A transaction resulting from an order that was electronically delivered utilizes Phlx XL II. See Exchange Rules 1014 and 1080. Electronically delivered orders do not include orders transacted on the Exchange floor. A transaction resulting from an order that is non-electronically-delivered is represented on the trading floor by a floor broker. See Exchange Rule 1063. All orders will be either electronically or non-electronically delivered. The foregoing rule change has become effective pursuant to Section VerDate Mar<15>2010 16:39 Jan 08, 2013 Jkt 229001 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. The Exchange believes that the proposed electronic Professional Options Transaction Charges in Penny and nonPenny Pilot Options remain competitive with fees at other options exchanges. The Exchange believes that the proposed fees are competitive and do not misalign the differentials currently assessed with respect to other market participants. Market participants can easily and readily direct order flow to competing venues if they deem fee and rebate levels at a particular venue to be excessive. Accordingly, the fees that are assessed and the rebates paid by the Exchange must remain competitive with fees charged and rebates paid by other venues and therefore must continue to be reasonable and equitably allocated to those members that opt to direct orders to the Exchange rather than competing venues. 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 20 CBOE assesses a Professional and Voluntary Professional a $0.25 per contract manual fee in Penny and Non-Penny Classes and assesses a $0.45 per contract electronic fee in Penny and a $0.60 per contract electronic fee in Non-Penny Pilot Options. NYSE Amex assesses a $0.25 per contract fee for manual Professional Customer transactions and a tiered electronic Professional Customer rate starting at $.32 per contract for electronic orders which take liquidity from 1 to 16,999 contracts. PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 19(b)(3)(A)(ii) of the Act.21 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: 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–2012–141 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–2012–141. 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 21 15 E:\FR\FM\09JAN1.SGM U.S.C. 78s(b)(3)(A)(ii). 09JAN1 Federal Register / Vol. 78, No. 6 / Wednesday, January 9, 2013 / Notices 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–2012–141 and should be submitted on or before January 30, 2013. Regulatory Authority (‘‘FINRA’’). The text of the proposed rule change is available on the Exchange’s Internet Web site at https://www.ise.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Kevin M. O’Neill, Deputy Secretary. In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B and C below, of the most significant aspects of such statements. [FR Doc. 2013–00256 Filed 1–8–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 3468570; File No. SR–ISE– 2012–82] A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Make Non-Substantive, Technical Corrections to ISE Rules 1. Purpose January 3, 2013. srobinson on DSK4SPTVN1PROD with Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on December 21, 2012, the International Securities Exchange, LLC (the ‘‘Exchange’’ or ‘‘ISE’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the selfregulatory 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 the Substance of the Proposed Rule Change The Exchange proposes to make a number of non-substantive, technical corrections to its rules. Examples of such technical corrections include updating ISE rule number citations and cross references, correcting typographical errors, deleting obsolete rule text, and updating references to outdated terms, such as changing references from the National Association of Securities Dealers (‘‘NASD’’) to Financial Industry 22 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 16:39 Jan 08, 2013 Jkt 229001 II. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change The Exchange is proposing to make a number of non-substantive, technical corrections to its rules. Examples of such technical corrections include updating ISE rule number citations and cross references, correcting typographical errors, deleting obsolete rule text, and updating references to outdated terms, such as changing references from NASD to FINRA. Following is a narrative description of each of the corrections: • The Table of Contents to the ISE Rules is being amended to reflect that ISE Rule 718 is now ‘‘Reserved’’ since ISE Rule 718 (Accommodation Liquidations (Cabinet Trades)) was deleted. • The Table of Contents is being amended to make conforming changes to the title of ISE Rule 720 (Obvious and Catastrophic Errors) so that it matches the title as it appears in the rules. • ISE Rule 210 (Liability for Payment of Fees) is being amended to update an incorrect rule cross-reference number in paragraph (a). • ISE Rule 312 (Limitation on Affiliation between the Exchange and Members) is being amended to delete references in paragraph (a) to Maple Merger Sub LLC because that subsidiary no longer exists. Paragraphs (b) and (c) are being deleted since the Exchange is no longer affiliated with Direct Edge ECN LLC (‘‘DE ECN’’), DE ECN is no longer a facility of the Exchange, and ISE (including its affiliates) no longer PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 1901 maintains an ownership interest in Ballista Securities LLC. Since paragraphs (b) and (c) are being deleted, the opening paragraph no longer needs to be designated as paragraph (a), so the (a) is being deleted. • ISE Rule 604 (Continuing Education for Registered Persons) is being amended to change a reference in paragraph (b) from NASD to FINRA and brackets are being changed to parentheses wherever they appear throughout the rule. • ISE Rule 704 (Collection and Dissemination of Quotations) is being amended to change references in paragraphs (a) and (b) from Rule 11Ac1– 1 to Rule 602 of Regulation NMS. • ISE Rule 713 (Priority of Quotes and Orders) is being amended to update an incorrect rule cross-reference number in paragraph (a), as well as to add nonsubstantive words to correct the sentence structure of paragraph (a). Additionally, Supplementary Material .03 to ISE Rule 713 was amended to update an incorrect rule cross-reference number in paragraph (d). • ISE Rule 715 (Types of Orders) is being amended to correct the defined term of ‘‘Priority Customer Orders’’ in paragraph (g), and to correct the defined term of ‘‘Add Liquidity Order’’ in paragraph (n). In addition, Supplementary Material .02 to ISE Rule 713 is being moved into ISE Rule 713 itself as new paragraphs (o), (p), and (q), since ISE has fully-migrated to its new trading system, Optimise. Thus, it is no longer necessary to separately maintain those order types in the Supplementary Material. • ISE Rule 718 (Accommodation Liquidations (Cabinet Trades)) is being deleted in its entirety, since that trading functionality is not offered in Optimise, and therefore not possible on the Exchange. ISE Rule 718 is now ‘‘Reserved.’’ • ISE Rule 722 (Complex Orders) is being amended to delete the obsolete clause to ISE’s Optimise platform in Supplementary Material .03 and .04. In addition, ISE Supplementary Material .05 is being amended to correct the defined term ‘‘Priority Customer Orders’’, to insert a missing word, and to update an incorrect rule crossreference number. • ISE Rule 723 (Price Improvement Mechanism for Crossing Transactions) is being amended to delete paragraph (d)(6) since that trading functionality is not offered in Optimise. As a result, the corresponding sentence that crossreferenced paragraph (d)(6) is being deleted from Supplementary Material .05 and .09. E:\FR\FM\09JAN1.SGM 09JAN1

Agencies

[Federal Register Volume 78, Number 6 (Wednesday, January 9, 2013)]
[Notices]
[Pages 1898-1901]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-00256]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68577; File No. SR-Phlx-2012-141]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX LLC Relating 
to Professional Options Transaction Charges

January 3, 2013.
    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 December 21, 2012, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I, II, 
and III, below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend certain electronic Professional \3\ 
Options

[[Page 1899]]

Transaction Charges in Section II \4\ of the Exchange's Pricing 
Schedule entitled ``Multiply Listed Options.''
---------------------------------------------------------------------------

    \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\ Section II of the Pricing Schedule includes options 
overlying equities, ETFs, ETNs, and indexes which are Multiply 
Listed.
---------------------------------------------------------------------------

    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 January 2, 2013.
    The text of the proposed rule change is available on the Exchange's 
Web site at https://nasdaqomxphlx.cchwallstreet.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 Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The Exchange proposes to amend Section II of the Exchange's Pricing 
Schedule to increase the electronic Professional Options Transaction 
Charges for both Penny Pilot Options \5\ and non-Penny Pilot 
Options.\6\ The Exchange believes that increasing the electronic 
Professional Options Transaction Charges in Penny Pilot and non-Penny 
Pilot Options will allow the Exchange to compete more effectively. The 
Exchange also believes that the proposed fees will operate to assist 
the Exchange in recouping increased costs generally tied to supporting 
a larger number of options classes, option series and overall 
transaction volume.
---------------------------------------------------------------------------

    \5\ The Penny Pilot was established in January 2007; and in 
October 2009, it was expanded and extended through June 30, 2012. 
See Securities Exchange Act Release Nos. 55153 (January 23, 2007), 
72 FR 4553 (January 31, 2007) (SR-Phlx-2006-74) (notice of filing 
and approval order establishing Penny Pilot); 60873 (October 23, 
2009), 74 FR 56675 (November 2, 2009) (SR-Phlx-2009-91) (notice of 
filing and immediate effectiveness expanding and extending Penny 
Pilot); 60966 (November 9, 2009), 74 FR 59331 (November 17, 2009) 
(SR-Phlx-2009-94) (notice of filing and immediate effectiveness 
adding seventy-five classes to Penny Pilot); 61454 (February 1, 
2010), 75 FR 6233 (February 8, 2010) (SR-Phlx-2010-12) (notice of 
filing and immediate effectiveness adding seventy-five classes to 
Penny Pilot); 62028 (May 4, 2010), 75 FR 25890 (May 10, 2010) (SR-
Phlx-2010-65) (notice of filing and immediate effectiveness adding 
seventy-five classes to Penny Pilot); 62616 (July 30, 2010), 75 FR 
47664 (August 6, 2010) (SR-Phlx-2010-103) (notice of filing and 
immediate effectiveness adding seventy-five classes to Penny Pilot); 
63395 (November 30, 2010), 75 FR 76062 (December 7, 2010) (SR-Phlx-
2010-167) (notice of filing and immediate effectiveness extending 
the Penny Pilot); 65976 (December 15, 2011), 76 FR 79247 (December 
21, 2011) (SR-Phlx-2011-172) (notice of filing and immediate 
effectiveness extending the Penny Pilot); and 67326 (June 29, 2012), 
77 FR 40126 (July 6, 2012) (SR-Phlx-2012-86) (notice of filing and 
immediate effectiveness extending the Penny Pilot). See also 
Exchange Rule 1034.
    \6\ Non-Penny Pilot refers to options classes not in the Penny 
Pilot.
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    Specifically, the Exchange proposes to increase the electronic 
Professional Options Transaction Charges for both Penny Pilot Options 
and non-Penny Pilot Options from $0.25 to $0.30 per contract. The 
Exchange is not proposing to increase the floor Professional Options 
Transaction Charges or any other electronic Professional transaction 
charges.
    The Exchange also proposes to amend its Pricing Schedule at Section 
II to add another column to the Professional fees to differentiate 
electronic and floor fees as it does today with other market 
participants.\7\ The Exchange also proposes a technical amendment to 
the Specialist,\8\ Market Maker,\9\ Broker-Dealer \10\ and Firm \11\ 
transaction fees to correct the Pricing Schedule to note an ``N/A'' for 
electronic FLEX \12\ and Cabinet \13\ Options pricing instead of $0.10 
per contract. While the $0.10 per contract fee is noted on the Pricing 
Schedule, no market participant has been assessed that fee because FLEX 
and Cabinet Options are transacted on the Exchange's trading floor and 
are not transacted electronically.\14\ The Exchange proposes to note 
``N/A'' for those electronic fees because these types of transactions 
are not able to be executed electronically on the Exchange and this 
would correct the Pricing Schedule to reflect no fee is being assessed.
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    \7\ Today, the Specialist, Market Maker, Broker-Dealer and Firm 
fees are differentiated between electronic and firm fees.
    \8\ A ``Specialist'' is an Exchange member who is registered as 
an options specialist pursuant to Rule 1020(a).
    \9\ A ``Market Maker'' includes Registered Options Traders (Rule 
1014(b)(i) and (ii)), which includes Streaming Quote Traders (see 
Rule 1014(b)(ii)(A)) and Remote Streaming Quote Traders (see Rule 
1014(b)(ii)(B)). Directed Participants are also market makers.
    \10\ Broker-Dealers are assessed a Penny Pilot Options 
Transaction Charge of $0.45 per contract for electronic orders and a 
non-Penny Pilot Options Transaction Charge of $0.60 for electronic 
orders.
    \11\ Firms are assessed a Penny Pilot Options Transaction Charge 
of $0.40 per contract for electronic orders and a non-Penny Pilot 
Options Transaction Charge of $0.45 for electronic orders.
    \12\ A FLEX option is a customized option that provides parties 
to the transaction with the ability to fix terms including the 
exercise style, expiration date, and certain exercise prices. See 
Exchange Rule 1079. FLEX Options are a trademark of the Chicago 
Board Options Exchange.
    \13\ An ``accommodation'' or ``cabinet'' trade refers to trades 
in listed options on the Exchange that are worthless or not actively 
traded. Cabinet trading is generally conducted in accordance with 
Exchange Rules, except as provided in Exchange Rule 1059 entitled 
``Accommodation Trading'', which sets forth specific procedures for 
engaging in cabinet trading below $1 per option contract. Cabinet or 
accommodation trading of option contracts is intended to accommodate 
persons wishing to effect closing transactions in those series of 
options dealt in on the Exchange for which there is no auction 
market.
    \14\ The Exchange's systems do not allow for FLEX or Cabinet 
transactions to be executed electronically.
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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 and other persons using its 
facilities.
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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(4).
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    The Exchange's proposal to increase the electronic Professional 
Options Transaction Charges in both Penny Pilot and non-Penny Pilot 
Options is reasonable because of the greater costs incurred by the 
Exchange associated with supporting a larger number of options classes, 
option series and overall transaction volume. Also, the Exchange 
believes increasing the electronic Professional Options Transaction 
Charges in both Penny Pilot and non-Penny Pilot Options from $0.25 to 
$0.30 per contract is reasonable because the $0.05 per contract 
increase would allow the Exchange to recoup the aforementioned costs 
while also continuing to assess a Professional a rate that is lower 
than Broker-Dealer and Firm electronic rates. Also, the increased 
Professional fees are comparable with electronic Professional fees at 
other options exchanges.\17\
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    \17\ The Chicago Board Options Exchange Incorporated (``CBOE'') 
assesses professionals and voluntary professionals a $0.30 per 
contract transaction fee for electronic orders. See CBOE's Fees 
Schedule. See also NYSE Amex LLC's (``NYSE Amex'') Fee Schedule, 
which assesses Professional Customers a $0.32 per contract fee for 
electronic orders which take liquidity from 1 to 16,999 contracts.

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[[Page 1900]]

    The Exchange's proposal to increase the electronic Professional 
Options Transaction Charges in both Penny Pilot and non-Penny Pilot 
Options is equitable and not unfairly discriminatory because 
Professionals would continue to be assessed lower fees as compared to 
Broker-Dealers and Firms with respect to electronic options 
transactions charges. Market Makers and Specialists would be assessed 
lower fees, both electronic and floor, as compared to Professionals, 
because Market Makers and Specialists have burdensome quoting 
obligations \18\ to the market which do not apply to Professionals, 
Customers, Firms and Broker-Dealers. Customers are not assessed Options 
Transactions Charges in either Penny Pilot or non-Penny Pilot Options 
because Customer order flow brings liquidity to the market, which in 
turn benefits all market participants. Broker-Dealers and Firms today 
pay higher fees as compared to a Professional for electronic 
transactions and this is not changing. The Professional Options 
Transaction Charges in both Penny Pilot and non-Penny Pilot Options for 
non-electronic transactions or floor transactions would remain 
unchanged.
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    \18\ See Exchange Rule 1014 entitled ``Obligations and 
Restrictions Applicable to Specialists and Registered Options 
Traders.''
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    The Exchange believes that assessing higher electronic Options 
Transaction Charges in both Penny Pilot and non-Penny Pilot Options of 
$0.30 per contract as compared to a floor Options Transaction Charge in 
both Penny Pilot and non-Penny Pilot Options of $0.25 per contract is 
reasonable, equitable and not unfairly discriminatory because these 
fees recognize the distinction between the floor order entry model and 
the electronic model and the proposed fees respond to competition along 
the same lines.\19\ Floor participants incur costs associated with 
accessing the floor, i.e. need for a floor broker, and other costs 
which are not born by electronic members. Today, the Exchange assesses 
different fees for electronic as compared to floor transactions for 
Firms, Broker-Dealers, Specialists and Market Makers in Section II of 
the Pricing Schedule. The Exchange is proposing to likewise distinguish 
electronic and floor Professional Options Transactions Charges in both 
Penny and non-Penny Pilot Options. Other options exchanges likewise 
distinguish floor and electronic fees for Professionals.\20\ The 
Exchange believes that the proposed fees are in line with similar fees 
offered on other exchanges.
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    \19\ A transaction resulting from an order that was 
electronically delivered utilizes Phlx XL II. See Exchange Rules 
1014 and 1080. Electronically delivered orders do not include orders 
transacted on the Exchange floor. A transaction resulting from an 
order that is non-electronically-delivered is represented on the 
trading floor by a floor broker. See Exchange Rule 1063. All orders 
will be either electronically or non-electronically delivered.
    \20\ CBOE assesses a Professional and Voluntary Professional a 
$0.25 per contract manual fee in Penny and Non-Penny Classes and 
assesses a $0.45 per contract electronic fee in Penny and a $0.60 
per contract electronic fee in Non-Penny Pilot Options. NYSE Amex 
assesses a $0.25 per contract fee for manual Professional Customer 
transactions and a tiered electronic Professional Customer rate 
starting at $.32 per contract for electronic orders which take 
liquidity from 1 to 16,999 contracts.
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    The Exchange operates in a highly competitive market, comprised of 
eleven exchanges, in which market participants can easily and readily 
direct order flow to competing venues if they deem fee and rebate 
levels at a particular venue to be excessive.

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. The Exchange believes that the 
proposed electronic Professional Options Transaction Charges in Penny 
and non-Penny Pilot Options remain competitive with fees at other 
options exchanges. The Exchange believes that the proposed fees are 
competitive and do not misalign the differentials currently assessed 
with respect to other market participants. Market participants can 
easily and readily direct order flow to competing venues if they deem 
fee and rebate levels at a particular venue to be excessive. 
Accordingly, the fees that are assessed and the rebates paid by the 
Exchange must remain competitive with fees charged and rebates paid by 
other venues and therefore must continue to be reasonable and equitably 
allocated to those members that opt to direct orders to the Exchange 
rather than competing venues.

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

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\21\ At any time within 60 days of the 
filing of the proposed rule change, the Commission summarily may 
temporarily suspend such rule change if it appears to the Commission 
that such action is necessary or appropriate in the public interest, 
for the protection of investors, or otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.
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    \21\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

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-2012-141 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-2012-141. 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

[[Page 1901]]

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-2012-141 and 
should be submitted on or before January 30, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-00256 Filed 1-8-13; 8:45 am]
BILLING CODE 8011-01-P
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