Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Establish Transaction Fees for Options on Treasury Securities, 14597-14600 [2013-05123]
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Federal Register / Vol. 78, No. 44 / Wednesday, March 6, 2013 / Notices
shares of a Fund in excess of the limit
in section 12(d)(1)(A)(i), an Investing
Fund will notify the Fund of the
investment. At such time, the Investing
Fund will also transmit to the Fund a
list of the names of each Investing Fund
Affiliate and Underwriting Affiliate. The
Investing Fund will notify the Fund of
any changes to the list of the names as
soon as reasonably practicable after a
change occurs. The Fund and the
Investing Fund will maintain and
preserve a copy of the order, the
Participation Agreement, and the list
with any updated information for the
duration of the investment and for a
period of not less than six years
thereafter, the first two years in an
easily accessible place.
9. Prior to approving any advisory
contract under section 15 of the Act, the
Board of each Investing Fund, including
a majority of the Disinterested Directors,
will find that the advisory fees charged
under such advisory contracts are based
on services provided that will be in
addition to, rather than duplicative of,
the services provided under the
advisory contract(s) of any Fund in
which the Investing Fund may invest.
These findings and their basis will be
recorded fully in the minute books of
the appropriate Investing Fund.
10. An Investing Fund Adviser will
waive fees otherwise payable to it by the
Investing Fund in an amount at least
equal to any compensation (including
fees received pursuant to a plan adopted
by a Fund under Rule 12b–1 under the
Act) received from a Fund by the
Investing Fund Adviser, or an affiliated
person of the Investing Fund Adviser,
other than any advisory fees paid to the
Investing Fund Adviser or its affiliated
person by the Fund, in connection with
the investment by the Investing Fund in
the Fund. Any Investing Fund
Subadviser will waive fees otherwise
payable to the Investing Fund
Subadviser, directly or indirectly, by the
Investing Fund in an amount at least
equal to any compensation received
from a Fund by the Investing Fund
Subadviser, or an affiliated person of the
Investing Fund Subadviser, other than
any advisory fees paid to the Investing
Fund Subadviser or its affiliated person
by the Fund, in connection with the
investment by the Investing Fund in the
Fund made at the direction of the
Investing Fund Subadviser. In the event
that the Investing Fund Subadviser
waives fees, the benefit of the waiver
will be passed through to the Investing
Fund.
11. Any sales charges and/or service
fees charged with respect to shares of an
Investing Fund will not exceed the
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limits applicable to a fund of funds as
set forth in NASD Conduct Rule 2830.
12. No Fund will acquire securities of
any investment company or company
relying on section 3(c)(1) or 3(c)(7) of
the Act in excess of the limits contained
in section 12(d)(1)(A) of the Act, except
to the extent permitted by exemptive
relief from the Commission permitting
the Fund to purchase shares of other
investment companies for short-term
cash management purposes.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Kevin O’Neill,
Deputy Secretary.
[FR Doc. 2013–05167 Filed 3–5–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69005; File No. SR–Phlx–
2013–16]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Establish
Transaction Fees for Options on
Treasury Securities
February 28, 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 February
19, 2013, 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 the Substance
of the Proposed Rule Change
The Exchange proposes to amend its
Fee Schedule to create fees for options
on Treasury securities.3
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Subsection (a)(1) of proposed Rule 1001D states
that the term ‘‘Treasury securities’’ (also known as
Treasury debt securities) means a bond or note or
other evidence of indebtedness that is a direct
obligation of, or an obligation guaranteed as to
principal or interest by, the United States or a
corporation in which the United States has a direct
or indirect interest (except debt securities
guaranteed as to timely payment of principal and
interest by the Government National Mortgage
Association). Securities issued or guaranteed by
individual departments or agencies of the United
States are sometimes referred to by the title of the
2 17
PO 00000
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14597
While changes to the Fee Schedule
pursuant to this proposal are effective
upon filing, the Exchange has
designated these changes to be operative
on March 1, 2013. The Exchange will
begin trading Options on Treasury
Securities on February 19, 2013. From
February 19, 2013 through February 28,
2013, the fees and rebates proposed
herein will not be applicable. Exchange
members and member organizations
will be assessed $0.00 Options
Transaction Charges and will receive
$0.00 Options Transactions Rebates.
The text of the proposed rule change
is provided in Exhibit 5. The text of the
proposed rule change is also 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 the
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to create new fees titled
‘‘Options on Treasury Securities’’ to
support options overlying certain
treasury securities (‘‘Options on
Treasury Securities’’),4 as well as to
offer to discounted pricing to Customers
and Specialists and Market Makers and
rebates to Specialists and Market
Makers to encourage these market
participants to trade Options on
Treasury Securities.
The Options on Treasury Securities
will trade on the Exchange as a Singly
department or agency involved (e.g., a ‘‘Treasury
security’’ is a debt instrument that is issued by the
United States Treasury).
4 See Securities Exchange Release Act No. 67976
(October 4, 2012), 77 FR 61794 (October 11, 2012)
(SR–Phlx–2012–105) (approval order).
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Listed Option.5 The Exchange proposes
to add these fees to Section III of the Fee
Schedule titled ‘‘Singly Listed
Options.’’ 6 Specifically, the Exchange is
proposing to assess the following per
contract fees and rebates on market
Customer
Options Transaction Rebate—Electronic .........................................
Options Transaction Charge—Electronic ........................................
Options Transaction Charge—Floor12 7 ..........................................
The Exchange believes that the $0.05
rebate per contract for electronic
Options Transactions for Specialists and
Market Makers should encourage them
to offer options on treasury securities to
their customers.
The charge for Options Transactions
per contract, both electronic and floor,
will be $0.15 for Customers and $0.20
for Professionals,8 Firms and BrokerDealers. Specialists and Market Makers
will not be charged for electronic
Options Transactions, but charged $0.10
for floor Options Transactions.
However, for all market participants
floor Options Transaction charges will
apply to the first 500 contracts only,
meaning that each additional contract
will not be assessed a floor options
transaction charge. This volume
discount on trading Options on
Treasury Securities will serve to
increase order flow, which, in turn, will
provide increased liquidity to the
market and benefit all participants.
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While changes to the Fee Schedule
pursuant to this proposal are effective
upon filing, the Exchange has
designated these changes to be operative
on March 1, 2013. The Exchange will
begin trading Options on Treasury
Securities on February 19, 2013. From
February 19, 2013 through February 28,
2013, the fees and rebates proposed
herein will not be applicable. Exchange
members and member organizations
will be assessed $0.00 Options
Transaction Charges and will receive
$0.00 Options Transactions Rebates.
5 A Singly Listed Option means an option that is
only listed on the Exchange and is not listed by any
other national securities exchange.
6 Section III of the Fee Schedule includes options
overlying currencies, equities, exchange-traded
funds (‘‘ETFs’’), exchange-traded notes (‘‘ETNs’’),
and indexes.
7 The Commission notes that proposed footnote
12 of Section III of the Fee Schedule states ‘‘Options
Transaction Charge—Floor will apply to the first
500 contract only. Each additional contract will be
assessed an options transaction charge—floor of
$0.00.’’
8 The Exchange defines a ‘‘professional’’ as any
person or entity that (i) is not a broker or dealer in
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N/A
$0.15
0.15
Professional
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) of the Act 9
in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act 10
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 believes that the
proposed fees for Options on Treasury
Securities are equitable, reasonable and
not unfairly discriminatory because the
Exchange is seeking to recoup the
operational and development costs
associated with the Options on Treasury
Securities product, a proprietary
product of the Exchange, while also
encouraging members and member
organizations to trade Options on
Treasury Securities by assessing a floor
options transaction charge that will
apply only to the first 500 contracts and,
thereafter, each additional contract will
not be assessed an options transaction
charge. It is also reasonable and
equitable to offer a floor volume
discount on trading Options on
Treasury Securities because all market
participants are treated equally and
order flow will provide increased
liquidity to the market and benefit all
participants. Institutional investors
trade in large size and typically utilize
floor brokers on certain trades and the
proposed pricing better aligns the fees
with other similar derivatives in the
market place. In addition, the concept of
offering a volume discount to
incentivize order flow is not novel.11
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) (hereinafter
‘‘Professional’’).
9 15 U.S.C. 78f(b).
10 15 U.S.C. 78f(b)(4).
11 See CBOE’s Fees Schedule. CBOE has a sliding
scale for its proprietary products whereby
transaction fees are reduced when a Clearing
Trading Permit Holder reaches certain volume
thresholds in multiply listed options on CBOE in
a month.
12 See Securities Exchange Release Act No. 64096
(March 18, 2011), 76 FR 16646 (March 24, 2011)
(SR–Phlx–2011–34).
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Specialist and
market maker
N/A
$0.20
0.20
2. Statutory Basis
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participants to trade Options on
Treasury Securities:
$0.05
N/A
0.10
Firm
N/A
$0.20
0.20
BrokerDealer
N/A
$0.20
0.20
The Exchange has previously stated
that it incurs higher costs for Singly
Listed options as compared to Multiply
Listed options.12 The Chicago Board
Options Exchange, Incorporated
(‘‘CBOE’’) noted in a comment letter
dated June 21, 2010, that CBOE relies
upon fees to recoup licensing costs
incurred on options products that use
third-party proprietary indexes as
benchmarks (such as the S&P 500®), and
to generate returns on its investments
for its own popular proprietary products
(such as The CBOE Volatility Index®
(‘‘VIX®’’) Options).13 The Exchange
agrees with CBOE’s position and while
the Exchange continues to assert that
Singly Listed products incur higher
costs and therefore market participants
should be assessed higher fees as
compared to Multiply Listed products,
the Exchange is proposing to offer a
volume discount, as a means to promote
this new infant product.14
The Exchange believes that the
proposed fees for Options on Treasury
Securities are equitable because all
market participants would be assessed
lower fees for transacting electronic and
floor Options on Treasury Securities
(except Specialists and Market Makers
that will not be charged at all for
electronic transactions) as compared to
other Singly Listed indexes (other than
Alpha and MSCI Index Options).
Specifically, Customers would be
assessed $0.15 per contract to transact
either electronic or floor Options on
Treasury Securities as compared to
$0.35 per contract for Singly Listed
index options (other than Alpha and
MSCI Index Options). Specialists,15
13 See CBOE’s Comment Letter dated June 21,
2010 to the Proposed Amendments to Rule 610 of
Regulation NMS, File No. S7–09–10. CBOE further
noted that options exchanges expend considerable
resources on research and development related to
new product offerings and options exchanges incur
large licensing costs for many products.
14 If the Exchange determines to increase the
pricing for options overlying Options on Treasury
Securities at a later date, the Exchange would file
a proposal with the Commission.
15 A Specialist is an Exchange member who is
registered as an options specialist pursuant to Rule
1020(a).
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Registered Options Traders,16 SQTs,17
and RSQTs 18 (collectively ‘‘market
makers’’) 19 would be assessed no fee for
transacting electronic Options on
Treasury Securities and $0.10 per
contract for transacting floor Options on
Treasury Securities, as compared to the
$0.40 per contract fee such Specialists
and Market Makers are assessed for
Singly Listed index options (other than
Alpha and MSCI Index Options).
Professionals, Firms and Broker-Dealers
would be assessed $0.20 per contract to
transact either electronic or floor
Options on Treasury Securities, as
compared to $0.60 per contract for all
other Singly Listed index options (other
than Alpha and MSCI Index Options).
Specialists and Market Makers would be
assessed $0.10 per contract to transact
floor Options on Treasury Securities, as
compared to $0.40 per contract for all
other Singly Listed index options (other
than Alpha and MSCI Index Options).
The Exchange believes that it is
equitable and not unfairly
discriminatory to assess lower fees of
$0.15 per contract for electronic and
floor Options Transactions on Treasury
Securities for Customers and no fee for
electronic and $0.10 per contract for
floor Options Transactions on Treasury
Securities for Specialists and Market
Makers, as well as to offer a $0.05 rebate
per contract for electronic Options
Transactions on Treasury Securities for
Specialists and Market Makers, in
recognition of the differing
contributions these participants provide
to the market place. Increased Customer
liquidity benefits all market participants
seeking to provide liquidity to
Customers. Additionally, the most
critical form of advertising for an
exchange’s new product is the
16 A Registered Options Trader (‘‘ROT’’) includes
a Streaming Quote Trader (‘‘SQT’’), a Remote
Streaming Quote Trader (‘‘RSQT’’) and a Non-SQT
ROT, which by definition is neither a SQT or a
RSQT. A ROT is defined in Exchange Rule 1014(b)
as a regular member or a foreign currency options
participant of the Exchange located on the trading
floor who has received permission from the
Exchange to trade in options for his own account.
See Exchange Rule 1014 (b)(i) and (ii).
17 An SQT is defined in Exchange Rule
1014(b)(ii)(A) as an ROT who has received
permission from the Exchange to generate and
submit option quotations electronically in options
to which such SQT is assigned.
18 A RSQT is defined Exchange Rule in
1014(b)(ii)(B) as an ROT that is a member or
member organization with no physical trading floor
presence who has received permission from the
Exchange to generate and submit option quotations
electronically in options to which such RSQT has
been assigned. An RSQT may only submit such
quotations electronically from off the floor of the
Exchange.
19 The Exchange market maker category includes
Specialists (see Rule 1020) and ROTs (Rule
1014(b)(i) and (ii), which includes SQTs (see Rule
1014(b)(ii)(A)) and RSQTs (see Rule 1014(b)(ii)(B)).
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electronic quotations produced by
Specialists and Market Makers and
disseminated to the investing public.
Wide markets can impede the growth of
a product and to ensure the best
possible quotes are available to the
market place the Exchange will offer a
rebate to create the incentive for
Specialists and Market Makers to offer
their best bids and offers without the
impact of a fee. All Specialists and
Market Makers, even an ROT, can avail
themselves of this pricing by posting
bids and/or offers in the electronic
market. Electronic bids and offers act, in
part, to attract orders to the floor, which
provides floor participants
opportunities to trade—the pricing
reflects these differing benefits and
contributions to the fledgling treasury
options market place.
The Exchange also believes that
offering discounted pricing to market
participants for transacting 500 or more
contracts on Options on Treasury
Securities further provides benefits to
market participants such as to increase
order flow, which, in turn, will provide
increased liquidity to the market and
benefit all participants. The Exchange
believes it is reasonable, equitable and
not unfairly discriminatory to assess a
Professional, Firm and Broker-Dealer a
per contract fee of $0.20 per contract for
transacting Options on Treasury
Securities because the Exchange is
assessing all market participants, except
Customers and Specialists and Market
Makers, the same rate to transact
Options on Treasury Securities. The
Exchange believes that the price
differentiation between Customers and
Specialists and Market Makers as
compared to Professionals, Firms and
Broker-Dealers is justified and not
unfairly discriminatory because
Customers order flow brings unique
benefits to the market which benefits all
market participants through increased
liquidity and Specialists and Market
Makers have obligations to the market
and regulatory requirements,20 which
normally do not apply to other market
participants. They have obligations to
make continuous markets, engage in a
course of dealings reasonably calculated
to contribute to the maintenance of a
fair and orderly market, and not make
bids or offers or enter into transactions
that are inconsistent with a course of
dealings. The proposed differentiation
as between Customers and Specialists
and Market Makers and other market
participants recognizes the differing
contributions made to the liquidity and
20 See Rule 1014 titled ‘‘Obligations and
Restrictions Applicable to Specialists and
Registered Options Traders.’’
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14599
trading environment on the Exchange by
these market participants, as well as the
differing mix of orders entered.
The Exchange believes that the
proposed fees are reasonable and not
unfairly discriminatory because the fees
are consistent with price differentiation
that exists today at all option exchanges.
For example, CBOE assesses different
rates for certain proprietary indexes as
compared to other index products
transacted at CBOE. VIX options and
The S&P 500® Index options (‘‘SPXSM’’)
are assessed different fees than other
indexes.21 In addition, the concept of
offering a volume discount to
incentivize order flow is not novel.22
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 by offering
Options on Treasury Securities it will
encourage order flow to be directed to
the Exchange, which will benefit all
market participants by increasing
liquidity on the Exchange. The
Exchange will assess such fees on all
market participants (except Specialists
and Market Makers for electronic
Options Transactions). Additionally,
Specialists and Market Makers are
eligible to qualify for a rebate on
electronic Options Transactions. The
Exchange believes these pricing
amendments do not impose a burden on
competition but rather that the proposed
rule change will continue to promote
competition on the Exchange.
The Exchange believes that the
adoption of the proposed fees and
rebates for Options on Treasury
Securities will not impose any
unnecessary burden on intramarket
competition because even though these
options will be listed solely on the
Exchange, the Exchange operates in a
highly competitive market, comprised of
eleven exchanges, any of which that can
determine to trade similar products.
Also, Options on Treasury Securities
should result in increased options
volume and greater trading
opportunities for all market
participants.
Accordingly, the fees that are assessed
and the rebates paid by the Exchange
described in the above proposal are
influenced by these robust market forces
and therefore must remain competitive
with fees charged and rebates paid by
other venues on other products and
21 See
CBOE’s Fees Schedule.
footnote 11.
22 Supra
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similar or less than fees assessed on
other singly-listed options and therefore
must continue to be reasonable and
equitably allocated.
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.23 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:
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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–2013–16 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–2013–16. 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
23 15
U.S.C. 78s(b)(3)(A)(ii).
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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 on official business
days between the hours of 10:00 a.m.
and 3:00 p.m. Copies of such filing also
will be available for inspection and
copying at the principal offices 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–
2013–16, and should be submitted on or
before March 27, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–05123 Filed 3–5–13; 8:45 am]
BILLING CODE 8011–01–P
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to list and
trade fourteen series of the iShares Trust
under NYSE Arca Equities Rule 8.600.
The text of 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.
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
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69008; File No. SR–
NYSEArca–2013–18]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change To List and Trade
Fourteen Series of the iShares Trust
Under NYSE Arca Equities Rule 8.600
February 28, 2013.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’ or ‘‘Exchange Act’’) 2 and Rule
19b–4 thereunder,3 notice is hereby
given that, on February 14, 2013, NYSE
Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE
Arca’’) filed with the Securities and
Exchange Commission (the
‘‘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.
The Exchange proposes to list and
trade shares (‘‘Shares’’) of iShares
Australian Dollar Cash Rate Fund;
iShares British Pound Cash Rate Fund;
iShares Canadian Dollar Cash Rate
Fund; iShares Chinese Offshore
Renminbi Cash Rate Fund; iShares Euro
Cash Rate Fund; iShares Japanese Yen
Cash Rate Fund; iShares Mexican Peso
Cash Rate Fund; iShares New Zealand
Dollar Cash Rate Fund; iShares
Norwegian Krone Cash Rate Fund;
iShares Singapore Dollar Cash Rate
Fund; iShares Swedish Krona Cash Rate
Fund; iShares Swiss Franc Cash Rate
Fund; iShares Thai Offshore Baht Cash
Rate Fund; and iShares Turkish Lira
Cash Rate Fund (each, a ‘‘Fund’’ and,
collectively, the ‘‘Funds’’) under NYSE
Arca Equities Rule 8.600, which governs
the listing and trading of Managed Fund
24 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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[Federal Register Volume 78, Number 44 (Wednesday, March 6, 2013)]
[Notices]
[Pages 14597-14600]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-05123]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69005; File No. SR-Phlx-2013-16]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Establish
Transaction Fees for Options on Treasury Securities
February 28, 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 February 19, 2013, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'')
filed with the Securities and Exchange Commission (``SEC'' or
``Commission'') the proposed rule change as described in Items I, II,
and III, below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange proposes to amend its Fee Schedule to create fees for
options on Treasury securities.\3\
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\3\ Subsection (a)(1) of proposed Rule 1001D states that the
term ``Treasury securities'' (also known as Treasury debt
securities) means a bond or note or other evidence of indebtedness
that is a direct obligation of, or an obligation guaranteed as to
principal or interest by, the United States or a corporation in
which the United States has a direct or indirect interest (except
debt securities guaranteed as to timely payment of principal and
interest by the Government National Mortgage Association).
Securities issued or guaranteed by individual departments or
agencies of the United States are sometimes referred to by the title
of the department or agency involved (e.g., a ``Treasury security''
is a debt instrument that is issued by the United States Treasury).
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While changes to the Fee Schedule pursuant to this proposal are
effective upon filing, the Exchange has designated these changes to be
operative on March 1, 2013. The Exchange will begin trading Options on
Treasury Securities on February 19, 2013. From February 19, 2013
through February 28, 2013, the fees and rebates proposed herein will
not be applicable. Exchange members and member organizations will be
assessed $0.00 Options Transaction Charges and will receive $0.00
Options Transactions Rebates.
The text of the proposed rule change is provided in Exhibit 5. The
text of the proposed rule change is also 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 the
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to create new fees
titled ``Options on Treasury Securities'' to support options overlying
certain treasury securities (``Options on Treasury Securities''),\4\ as
well as to offer to discounted pricing to Customers and Specialists and
Market Makers and rebates to Specialists and Market Makers to encourage
these market participants to trade Options on Treasury Securities.
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\4\ See Securities Exchange Release Act No. 67976 (October 4,
2012), 77 FR 61794 (October 11, 2012) (SR-Phlx-2012-105) (approval
order).
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The Options on Treasury Securities will trade on the Exchange as a
Singly
[[Page 14598]]
Listed Option.\5\ The Exchange proposes to add these fees to Section
III of the Fee Schedule titled ``Singly Listed Options.'' \6\
Specifically, the Exchange is proposing to assess the following per
contract fees and rebates on market participants to trade Options on
Treasury Securities:
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\5\ A Singly Listed Option means an option that is only listed
on the Exchange and is not listed by any other national securities
exchange.
\6\ Section III of the Fee Schedule includes options overlying
currencies, equities, exchange-traded funds (``ETFs''), exchange-
traded notes (``ETNs''), and indexes.
----------------------------------------------------------------------------------------------------------------
Specialist and Broker-
Customer Professional market maker Firm Dealer
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Options Transaction Rebate--Electronic... N/A N/A $0.05 N/A N/A
Options Transaction Charge--Electronic... $0.15 $0.20 N/A $0.20 $0.20
Options Transaction Charge--Floor12 \7\.. 0.15 0.20 0.10 0.20 0.20
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The Exchange believes that the $0.05 rebate per contract for
electronic Options Transactions for Specialists and Market Makers
should encourage them to offer options on treasury securities to their
customers.
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\7\ The Commission notes that proposed footnote 12 of Section
III of the Fee Schedule states ``Options Transaction Charge--Floor
will apply to the first 500 contract only. Each additional contract
will be assessed an options transaction charge--floor of $0.00.''
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The charge for Options Transactions per contract, both electronic
and floor, will be $0.15 for Customers and $0.20 for Professionals,\8\
Firms and Broker-Dealers. Specialists and Market Makers will not be
charged for electronic Options Transactions, but charged $0.10 for
floor Options Transactions. However, for all market participants floor
Options Transaction charges will apply to the first 500 contracts only,
meaning that each additional contract will not be assessed a floor
options transaction charge. This volume discount on trading Options on
Treasury Securities will serve to increase order flow, which, in turn,
will provide increased liquidity to the market and benefit all
participants.
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\8\ The Exchange defines a ``professional'' as 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)
(hereinafter ``Professional'').
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While changes to the Fee Schedule pursuant to this proposal are
effective upon filing, the Exchange has designated these changes to be
operative on March 1, 2013. The Exchange will begin trading Options on
Treasury Securities on February 19, 2013. From February 19, 2013
through February 28, 2013, the fees and rebates proposed herein will
not be applicable. Exchange members and member organizations will be
assessed $0.00 Options Transaction Charges and will receive $0.00
Options Transactions Rebates.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \9\ in general, and furthers
the objectives of Sections 6(b)(4) and 6(b)(5) of the Act \10\ 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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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the proposed fees for Options on
Treasury Securities are equitable, reasonable and not unfairly
discriminatory because the Exchange is seeking to recoup the
operational and development costs associated with the Options on
Treasury Securities product, a proprietary product of the Exchange,
while also encouraging members and member organizations to trade
Options on Treasury Securities by assessing a floor options transaction
charge that will apply only to the first 500 contracts and, thereafter,
each additional contract will not be assessed an options transaction
charge. It is also reasonable and equitable to offer a floor volume
discount on trading Options on Treasury Securities because all market
participants are treated equally and order flow will provide increased
liquidity to the market and benefit all participants. Institutional
investors trade in large size and typically utilize floor brokers on
certain trades and the proposed pricing better aligns the fees with
other similar derivatives in the market place. In addition, the concept
of offering a volume discount to incentivize order flow is not
novel.\11\
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\11\ See CBOE's Fees Schedule. CBOE has a sliding scale for its
proprietary products whereby transaction fees are reduced when a
Clearing Trading Permit Holder reaches certain volume thresholds in
multiply listed options on CBOE in a month.
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The Exchange has previously stated that it incurs higher costs for
Singly Listed options as compared to Multiply Listed options.\12\ The
Chicago Board Options Exchange, Incorporated (``CBOE'') noted in a
comment letter dated June 21, 2010, that CBOE relies upon fees to
recoup licensing costs incurred on options products that use third-
party proprietary indexes as benchmarks (such as the S&P 500[supreg]),
and to generate returns on its investments for its own popular
proprietary products (such as The CBOE Volatility Index[supreg]
(``VIX[supreg]'') Options).\13\ The Exchange agrees with CBOE's
position and while the Exchange continues to assert that Singly Listed
products incur higher costs and therefore market participants should be
assessed higher fees as compared to Multiply Listed products, the
Exchange is proposing to offer a volume discount, as a means to promote
this new infant product.\14\
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\12\ See Securities Exchange Release Act No. 64096 (March 18,
2011), 76 FR 16646 (March 24, 2011) (SR-Phlx-2011-34).
\13\ See CBOE's Comment Letter dated June 21, 2010 to the
Proposed Amendments to Rule 610 of Regulation NMS, File No. S7-09-
10. CBOE further noted that options exchanges expend considerable
resources on research and development related to new product
offerings and options exchanges incur large licensing costs for many
products.
\14\ If the Exchange determines to increase the pricing for
options overlying Options on Treasury Securities at a later date,
the Exchange would file a proposal with the Commission.
\15\ A Specialist is an Exchange member who is registered as an
options specialist pursuant to Rule 1020(a).
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The Exchange believes that the proposed fees for Options on
Treasury Securities are equitable because all market participants would
be assessed lower fees for transacting electronic and floor Options on
Treasury Securities (except Specialists and Market Makers that will not
be charged at all for electronic transactions) as compared to other
Singly Listed indexes (other than Alpha and MSCI Index Options).
Specifically, Customers would be assessed $0.15 per contract to
transact either electronic or floor Options on Treasury Securities as
compared to $0.35 per contract for Singly Listed index options (other
than Alpha and MSCI Index Options). Specialists,\15\
[[Page 14599]]
Registered Options Traders,\16\ SQTs,\17\ and RSQTs \18\ (collectively
``market makers'') \19\ would be assessed no fee for transacting
electronic Options on Treasury Securities and $0.10 per contract for
transacting floor Options on Treasury Securities, as compared to the
$0.40 per contract fee such Specialists and Market Makers are assessed
for Singly Listed index options (other than Alpha and MSCI Index
Options). Professionals, Firms and Broker-Dealers would be assessed
$0.20 per contract to transact either electronic or floor Options on
Treasury Securities, as compared to $0.60 per contract for all other
Singly Listed index options (other than Alpha and MSCI Index Options).
Specialists and Market Makers would be assessed $0.10 per contract to
transact floor Options on Treasury Securities, as compared to $0.40 per
contract for all other Singly Listed index options (other than Alpha
and MSCI Index Options).
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\16\ A Registered Options Trader (``ROT'') includes a Streaming
Quote Trader (``SQT''), a Remote Streaming Quote Trader (``RSQT'')
and a Non-SQT ROT, which by definition is neither a SQT or a RSQT. A
ROT is defined in Exchange Rule 1014(b) as a regular member or a
foreign currency options participant of the Exchange located on the
trading floor who has received permission from the Exchange to trade
in options for his own account. See Exchange Rule 1014 (b)(i) and
(ii).
\17\ An SQT is defined in Exchange Rule 1014(b)(ii)(A) as an ROT
who has received permission from the Exchange to generate and submit
option quotations electronically in options to which such SQT is
assigned.
\18\ A RSQT is defined Exchange Rule in 1014(b)(ii)(B) as an ROT
that is a member or member organization with no physical trading
floor presence who has received permission from the Exchange to
generate and submit option quotations electronically in options to
which such RSQT has been assigned. An RSQT may only submit such
quotations electronically from off the floor of the Exchange.
\19\ The Exchange market maker category includes Specialists
(see Rule 1020) and ROTs (Rule 1014(b)(i) and (ii), which includes
SQTs (see Rule 1014(b)(ii)(A)) and RSQTs (see Rule 1014(b)(ii)(B)).
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The Exchange believes that it is equitable and not unfairly
discriminatory to assess lower fees of $0.15 per contract for
electronic and floor Options Transactions on Treasury Securities for
Customers and no fee for electronic and $0.10 per contract for floor
Options Transactions on Treasury Securities for Specialists and Market
Makers, as well as to offer a $0.05 rebate per contract for electronic
Options Transactions on Treasury Securities for Specialists and Market
Makers, in recognition of the differing contributions these
participants provide to the market place. Increased Customer liquidity
benefits all market participants seeking to provide liquidity to
Customers. Additionally, the most critical form of advertising for an
exchange's new product is the electronic quotations produced by
Specialists and Market Makers and disseminated to the investing public.
Wide markets can impede the growth of a product and to ensure the best
possible quotes are available to the market place the Exchange will
offer a rebate to create the incentive for Specialists and Market
Makers to offer their best bids and offers without the impact of a fee.
All Specialists and Market Makers, even an ROT, can avail themselves of
this pricing by posting bids and/or offers in the electronic market.
Electronic bids and offers act, in part, to attract orders to the
floor, which provides floor participants opportunities to trade--the
pricing reflects these differing benefits and contributions to the
fledgling treasury options market place.
The Exchange also believes that offering discounted pricing to
market participants for transacting 500 or more contracts on Options on
Treasury Securities further provides benefits to market participants
such as to increase order flow, which, in turn, will provide increased
liquidity to the market and benefit all participants. The Exchange
believes it is reasonable, equitable and not unfairly discriminatory to
assess a Professional, Firm and Broker-Dealer a per contract fee of
$0.20 per contract for transacting Options on Treasury Securities
because the Exchange is assessing all market participants, except
Customers and Specialists and Market Makers, the same rate to transact
Options on Treasury Securities. The Exchange believes that the price
differentiation between Customers and Specialists and Market Makers as
compared to Professionals, Firms and Broker-Dealers is justified and
not unfairly discriminatory because Customers order flow brings unique
benefits to the market which benefits all market participants through
increased liquidity and Specialists and Market Makers have obligations
to the market and regulatory requirements,\20\ which normally do not
apply to other market participants. They have obligations to make
continuous markets, engage in a course of dealings reasonably
calculated to contribute to the maintenance of a fair and orderly
market, and not make bids or offers or enter into transactions that are
inconsistent with a course of dealings. The proposed differentiation as
between Customers and Specialists and Market Makers and other market
participants recognizes the differing contributions made to the
liquidity and trading environment on the Exchange by these market
participants, as well as the differing mix of orders entered.
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\20\ See Rule 1014 titled ``Obligations and Restrictions
Applicable to Specialists and Registered Options Traders.''
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The Exchange believes that the proposed fees are reasonable and not
unfairly discriminatory because the fees are consistent with price
differentiation that exists today at all option exchanges. For example,
CBOE assesses different rates for certain proprietary indexes as
compared to other index products transacted at CBOE. VIX options and
The S&P 500[supreg] Index options (``SPX\SM\'') are assessed different
fees than other indexes.\21\ In addition, the concept of offering a
volume discount to incentivize order flow is not novel.\22\
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\21\ See CBOE's Fees Schedule.
\22\ Supra footnote 11.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange believes that by
offering Options on Treasury Securities it will encourage order flow to
be directed to the Exchange, which will benefit all market participants
by increasing liquidity on the Exchange. The Exchange will assess such
fees on all market participants (except Specialists and Market Makers
for electronic Options Transactions). Additionally, Specialists and
Market Makers are eligible to qualify for a rebate on electronic
Options Transactions. The Exchange believes these pricing amendments do
not impose a burden on competition but rather that the proposed rule
change will continue to promote competition on the Exchange.
The Exchange believes that the adoption of the proposed fees and
rebates for Options on Treasury Securities will not impose any
unnecessary burden on intramarket competition because even though these
options will be listed solely on the Exchange, the Exchange operates in
a highly competitive market, comprised of eleven exchanges, any of
which that can determine to trade similar products. Also, Options on
Treasury Securities should result in increased options volume and
greater trading opportunities for all market participants.
Accordingly, the fees that are assessed and the rebates paid by the
Exchange described in the above proposal are influenced by these robust
market forces and therefore must remain competitive with fees charged
and rebates paid by other venues on other products and
[[Page 14600]]
similar or less than fees assessed on other singly-listed options and
therefore must continue to be reasonable and equitably allocated.
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.\23\ 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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\23\ 15 U.S.C. 78s(b)(3)(A)(ii).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-Phlx-2013-16 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-2013-16. 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 on
official business days between the hours of 10:00 a.m. and 3:00 p.m.
Copies of such filing also will be available for inspection and copying
at the principal offices 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-2013-16, and should be submitted on
or before March 27, 2013.
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\24\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-05123 Filed 3-5-13; 8:45 am]
BILLING CODE 8011-01-P
