Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Strategy Fee Caps, 25771-25774 [2013-10352]

Download as PDF Federal Register / Vol. 78, No. 85 / Thursday, May 2, 2013 / Notices amendment would revise a provision that describes certain circumstances in which a national securities exchange must cease to be a Member of OPRA. The proposed OPRA Plan amendment was published for comment in the Federal Register on January 22, 2013.4 The Commission received no comment letters in response to the Notice. This order approves the proposed OPRA Plan amendment. II. Description of the Proposal The purpose of the proposed OPRA Plan amendment is to revise certain language contained in Section 3.5 of the OPRA Plan. Section 3.5 currently provides, in part, as follows: ‘‘The membership status [in OPRA] of a Member shall terminate effective as of . . . the last day of the calendar quarter in which the Member has ceased maintaining a market for the trading of securities option contracts.’’ 5 Under the current language, a Member that ceases to maintain a market for the trading of securities option contracts late in a calendar quarter would have little or no time in which to resume maintaining such a market if it wanted to remain a Member of OPRA. OPRA proposes to amend Section 3.5 so that a national securities exchange that ceases to maintain a market for the trading of options may remain a Member of OPRA for an additional calendar quarter after the quarter in which it stops maintaining a market in options. the proposed OPRA Plan amendment is consistent with Section 11A of the Act 7 and Rule 608 thereunder 8 in that it is appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, and to remove impediments to, and perfect the mechanism of, a national market system. The proposed change to Section 3.5 of the OPRA Plan is designed to allow additional time within which an existing OPRA Member may maintain its membership in OPRA if the Member stops maintaining a market in securities. Specifically, the amendment would provide an exchange that temporarily ceases to maintain a market for the trading of options with additional flexibility with respect to the date by which it must resume maintaining a market for the trading of options or lose its membership status in OPRA. The Commission believes that OPRA’s proposal is consistent with Section 11A of the Act 9 and Rule 608 thereunder.10 (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III, below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. IV. Conclusion 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. It is therefore ordered, pursuant to Section 11A of the Act,11 and Rule 608 thereunder,12 that the proposed OPRA Plan amendment (SR–OPRA–2012–07) be, and it hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Kevin M. O’Neill, Deputy Secretary. sroberts on DSK5SPTVN1PROD with NOTICES III. Discussion After careful review, the Commission finds that the proposed OPRA Plan amendment is consistent with the requirements of the Act and the rules and regulations thereunder.6 Specifically, the Commission finds that [FR Doc. 2013–10351 Filed 5–1–13; 8:45 am] The OPRA Plan provides for the collection and dissemination of last sale and quotation information on options that are traded on the participant exchanges. The eleven participants to the OPRA Plan are BATS Exchange, Inc., BOX Options Exchange, LLC, Chicago Board Options Exchange, Incorporated, C2 Options Exchange, Incorporated, International Securities Exchange, LLC, Miami International Securities Exchange, LLC, NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, NASDAQ Stock Market LLC, NYSE MKT LLC, and NYSE Arca, Inc. 4 See Securities Exchange Act Release No. 68655 (January 15, 2013), 78 FR 4505 (‘‘Notice’’). 5 OPRA is organized as a limited liability company, and the OPRA Plan is the Limited Liability Company Agreement of OPRA. The OPRA Plan therefore uses the vocabulary typically used in Limited Liability Company Agreements, and therefore refers to the national security exchanges that are participants in OPRA as ‘‘Members,’’ and to their participation in OPRA as ‘‘membership.’’ 6 In approving this proposed OPRA Plan Amendment, the Commission has considered its impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Strategy Fee Caps VerDate Mar<15>2010 16:50 May 01, 2013 Jkt 229001 25771 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–69465; File No. SR–Phlx– 2013–40] April 26, 2013. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1, and Rule 19b–4 2 thereunder, notice is hereby given that on April 17, 2013, NASDAQ OMX PHLX LLC 7 15 U.S.C. 78k–1. CFR 242.608. 9 15 U.S.C. 78k–1. 10 17 CFR 242.608. 11 15 U.S.C. 78k–1. 12 17 CFR 242.608. 13 17 CFR 200.30–3(a)(29). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 8 17 PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Strategy Fee Caps. 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 April 18, 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. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this filing is to amend the Strategy Fee Caps which are currently located in Section II, entitled ‘‘Multiply Listed Options.’’ 3 Today, the Exchange caps certain dividend, merger, short stock interest and reversal and conversion floor option transactions. The Exchange is proposing to reformat the manner in which the caps are presented by first defining each strategy and then creating a table to display the caps. The Exchange also proposes to also amend the reversal and conversion cap. First, the Exchange proposes to relocate the definitions of the various 3 This includes options overlying equities, ETFs, ETNs and indexes which are Multiply Listed. E:\FR\FM\02MYN1.SGM 02MYN1 25772 Federal Register / Vol. 78, No. 85 / Thursday, May 2, 2013 / Notices sroberts on DSK5SPTVN1PROD with NOTICES strategies, which are currently in Section II, and define them under a heading ‘‘Strategies and Definitions.’’ Today, the Exchange defines a dividend strategy as transactions done to achieve a dividend arbitrage involving the purchase, sale and exercise of in-themoney options of the same class, executed the first business day prior to the date on which the underlying stock goes ex-dividend. The Exchange defines a merger strategy as transactions done to achieve a merger arbitrage involving the purchase, sale and exercise of options of the same class and expiration date, executed the first business day prior to the date on which shareholders of record are required to elect their respective form of consideration, i.e., cash or stock. The Exchange defines a short stock interest strategy as transactions done to achieve a short stock interest arbitrage involving the purchase, sale and exercise of in-themoney options of the same class. The Exchange defines reversal and conversion strategies as transactions that employ calls and puts of the same strike price and the underlying stock. Reversals are established by combining a short stock position with a short put and a long call position that shares the same strike and expiration. Conversions employ long positions in the underlying stock that accompany long puts and short calls sharing the same strike and expiration. The Exchange is not proposing to amend the definitions which are currently in the rule text of the Pricing Schedule. The Exchange is proposing to simply relocate these definitions. Today, Specialist,4 Market Maker,5 Professional,6 Firm 7 and Broker-Dealer 8 floor option transaction charges in Multiply Listed Options are capped at $1,250 for dividend, merger and short stock interest strategies executed on the same trading day in the same options class, and option transaction charges in 4 A ‘‘Specialist’’ is an Exchange member who is registered as an options specialist pursuant to Rule 1020(a). 5 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. 6 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). 7 The term ‘‘Firm’’ applies to any transaction that is identified by a member or member organization for clearing in the Firm range at OCC. 8 The term ‘‘Broker-Dealer’’ applies to any transaction which is not subject to any of the other transaction fees applicable within a particular category. VerDate Mar<15>2010 16:50 May 01, 2013 Jkt 229001 Multiply Listed Options are capped at $750 for reversal and conversion strategies executed on the same trading day in the same options class when such members are trading in their own proprietary accounts. Floor option transaction charges in Multiply Listed Options for dividend, merger, short stock interest and reversal and conversion strategies combined are further capped at $35,000 per member organization, per month when such members are trading in their own proprietary accounts (‘‘Monthly Strategy Cap’’). Reversal and conversion strategy executions are not included in the Monthly Strategy Cap for a Firm. To qualify for a strategy fee cap, the buy and sell side of a transaction must originate from the Exchange floor. The Exchange will continue to offer a fee cap of $1,250 for dividend, merger and short stock interest strategies that are executed on the same trading day in the same options class when such members are trading in their own proprietary account on the Exchange’s trading floor. With respect to the reversal and conversion fee cap, the Exchange will amend the fee cap to: (i) Lower the $750 fee cap to $700; and (ii) continue to offer such a rebate on floor options transactions executed on the same trading day in the same options class, but will not require transactions to be in a member’s own proprietary account, as is the case today. Floor option transaction charges in Multiply Listed Options for dividend, merger, short stock interest and reversal and conversion strategies combined will continue to be capped at $35,000 per member organization, per month when such members are trading in their own proprietary accounts (‘‘Monthly Strategy Cap’’), except for Firm. As is the case today, reversal and conversion strategy executions will not be included in the Monthly Strategy Cap for a Firm. The Exchange proposes to note for purposes of clarity in the Pricing Schedule that, as is the case today, reversal and conversion strategy executions (as defined in this Section II) are included in the Monthly Firm Fee Cap.9 9 Firms are subject to a maximum fee of $75,000 (‘‘Monthly Firm Fee Cap’’). Firm Floor Option Transaction Charges and QCC Transaction Fees, as defined in this section above, in the aggregate, for one billing month may not exceed the Monthly Firm Fee Cap per member organization when such members are trading in their own proprietary account. All dividend, merger, and short stock interest strategy executions (as defined in this Section II) are excluded from the Monthly Firm Fee Cap. Reversal and conversion strategy executions (as defined in this Section II) are included in the Monthly Firm Fee Cap. QCC Transaction Fees are included in the calculation of the Monthly Firm Fee Cap. PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 2. Statutory Basis The Exchange believes that its proposal to amend its Pricing Schedule is consistent with Section 6(b) of the Act 10 in general, and furthers the objectives of Section 6(b)(4) of the Act,11 in particular, in that it is an equitable allocation of reasonable fees and other charges among Exchange members. The Exchange believes that creating a strategy definition section in the Pricing Schedule and relocating all of the definitions to this section is reasonable, equitable and not unfairly discriminatory because the definitions are not being amended, but rather simply grouped together for ease of reference. The Exchange also believes that it is reasonable, equitable and not unfairly discriminatory to display the strategy fee caps in a table format for ease of reference. The Exchange is not amending the dividend, merger and short stock interest fee caps nor is the Exchange amending the Monthly Strategy Cap, but will display those strategy fee caps in a table format on the Pricing Schedule. The Exchange believes that amending the reversal and conversion strategy to offer a lower fee cap and eliminate the requirement that the transaction must be executed in a member’s own proprietary account is reasonable because the Exchange believes that a greater number of market participants will be incentivized to transact a greater number of reversal and conversion strategies on the Exchange’s trading floor to benefit from the lower fee cap and ability to apply all reversal and conversion strategies executed on the same trading day in the same options class on the Exchange’s trading floor. The Exchange believes that offering a lower fee cap for reversal and conversion strategies and not requiring that the transactions be executed in a member’s own proprietary account, as compared to other dividend, merger and short stock interest strategy executions which have a higher cap ($1,250) and require members to execute transactions in their own proprietary accounts, is reasonable because the Exchange desires to specifically incentivize market participants to transact reversal and conversion strategies and believes this proposal offers market participants competitive fee caps. In addition, the Exchange believes that it is reasonable to continue to require that all fee cap strategies, which combine executions for purposes of the Monthly Strategy Cap, must be traded in the member’s 10 15 11 15 E:\FR\FM\02MYN1.SGM U.S.C. 78f(b). U.S.C. 78f(b)(4). 02MYN1 Federal Register / Vol. 78, No. 85 / Thursday, May 2, 2013 / Notices sroberts on DSK5SPTVN1PROD with NOTICES own proprietary account. The Exchange believes that it reasonable to continue to impose the same requirements as today on all members for purpose of qualifying for the Monthly Strategy Cap. In addition, other options exchanges offer similar fee caps, namely NYSE Arca, Inc. (‘‘NYSE Arca’’),12 NYSE Amex, Inc. (‘‘NYSE Amex’’) 13 and the Chicago Board Options Exchange, Incorporated (‘‘CBOE’’) 14 for strategies. The Exchange believes that amending the reversal and conversion strategy to offer a lower fee cap and eliminate the requirement that the transaction must be executed in a member’s own proprietary account is equitable and not unfairly discriminatory because the Exchange is proposing to continue to offer the reversal and conversion fee cap to all market participants, except for Customers.15 All market participants that are assessed transaction fees will have an opportunity to cap floor option transaction charges in Multiply Listed Options. The Exchange believes that offering a lower fee cap for reversal and conversion strategies and not requiring that the transactions be executed in the member’s own proprietary account, as compared to other dividend, merger and short stock interest strategy executions which have a higher cap ($1,250) and require members execute transactions in their own proprietary accounts, is equitable and not unfairly discriminatory because the Exchange believes this incentive is necessary to create further trading opportunities for members on the Exchange’s trading floor and is being offered uniformly to all floor members. The Exchange believes a similar incentive is not necessary for dividend, merger and short stock interest strategies. In addition, the Exchange believes that it is equitable and not unfairly discriminatory to continue to require that all fee cap strategies, which combine executions for purposes of the Monthly Strategy Cap, must be traded in a member’s own proprietary account. The Exchange is not amending the calculation of the Monthly Strategy Cap which will continue to impose the same requirements on members for all 12 See NYSE Arca General Options and Trading Permit (OTP) Fees. 13 See NYSE Amex Options Fee Schedule. 14 See CBOE’s Fees Schedule. 15 The term ‘‘Customer’’ applies to any transaction that is identified by a member or member organization for clearing in the Customer range at The Options Clearing Corporation (‘‘OCC’’) which is not for the account of broker or dealer or for the account of a ‘‘Professional’’ (as that term is defined in Rule 1000(b)(14)). Customers are not assessed options transaction charges in Section II of the Pricing Schedule. VerDate Mar<15>2010 16:50 May 01, 2013 Jkt 229001 strategies to qualify for the Monthly Strategy Caps. The Exchange’s proposal to continue to exclude Firm floor options transaction charges related to reversal and conversion strategies from the Monthly Strategy Cap is reasonable because these fees would be capped as part of the Monthly Firm Fee Cap, which applies only to Firms. The Exchange believes that the exclusion of Firm floor options transaction charges related to reversal and conversion strategies from the Monthly Strategy Cap is equitable and not unfairly discriminatory because Firms, unlike other market participants, have the ability to cap transaction fees up to $75,000 per month. The Exchange would include floor option transaction charges related to reversal and conversion strategies in the Monthly Strategy Cap for Professionals, and Broker Dealers, when such members are trading in their own proprietary accounts, because these market participants are not subject to the Monthly Firm Fee Cap or other similar cap. While Specialists and Market Makers are subject to a Monthly Market Maker Cap on both electronic and floor options transaction charges, reversal and conversion transactions are excluded from the Monthly Market Maker Cap.16 For the reasons described above, the Exchange believes including reversal and conversion strategies in the Monthly Firm Fee Cap is reasonable, equitable and not unfairly discriminatory because the cap provides an incentive for Firms to transact floor transactions on the Exchange, which brings increased liquidity and order flow to the floor for the benefit of all market participants.17 The Exchange believes that its proposal to amend the applicability of the strategy fee caps to orders originating from the Exchange floor is reasonable because members pay floor brokers to execute trades on the Exchange floor. The Exchange believes that offering fee caps to members executing floor transactions would defray brokerage costs associated with executing strategy transactions and continue to incentivize members to utilize the floor for certain executions.18 16 The reversal and conversion strategy executions are excluded from the Monthly Market Maker Cap. See Section II of the Pricing Schedule. 17 Firms are eligible to cap floor options transactions charges and QCC Transaction Fees as part of the Monthly Firm Fee Cap. QCC Transaction Fees apply to QCC Orders as defined in Exchange Rule 1080(o) and Floor QCC Orders as defined in 1064(e). See Section II of the Pricing Schedule. 18 The Exchange’s proposal would only apply the fee cap to options transaction charges where buy and sell sides originate from the Exchange floor. See PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 25773 The Exchange believes that its proposal to amend the applicability of the fee caps to orders originating from the Exchange floor is equitable and not unfairly discriminatory because today, the fee caps are only applicable for floor transactions. The Exchange believes that a requirement that both the buy and sell sides of the order originate from the floor to qualify for the fee cap constitutes equal treatment of members. 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 because the proposed changes apply uniformly to all members that incur transaction charges.19 Further, the proposed changes are substantially similar to those found on other options exchanges; therefore, the Exchange believes the proposal is consistent with robust competition and does not provide any unnecessary burden on competition. Further, floor members pay floor brokers to execute trades on the Exchange floor. The Exchange believes that offering fee caps to members executing floor transactions and not electronic executions does not create an unnecessary burden on competition because the fee caps defray brokerage costs associated with executing strategy transactions. Also, requiring that both the buy and sell sides of the order originate from the floor to qualify for the fee cap constitutes equal treatment of members. 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 levels at a particular venue to be excessive or rebates to be inadequate. Accordingly, the fees that are assessed and the rebates paid by the Exchange, as described in the proposal, are influenced by these robust market forces and therefore 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. proposed rule text in Section II of the Pricing Schedule. 19 Customers are not assessed options transaction charges in Section II of the Pricing Schedule. E:\FR\FM\02MYN1.SGM 02MYN1 25774 Federal Register / Vol. 78, No. 85 / Thursday, May 2, 2013 / Notices 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.20 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: sroberts on DSK5SPTVN1PROD with NOTICES 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–2013–40 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-2013–40. 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 such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–Phlx– 2013–40 and should be submitted on or before May 23, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–10352 Filed 5–1–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–69464; File No. SR– NASDAQ–2013–036] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order Approving a Proposed Rule Change, as Modified by Amendment No. 2 Thereto, Relating to the Listing and Trading of the Shares of the First Trust Senior Loan Fund of First Trust Exchange-Traded Fund IV April 26, 2013. I. Introduction On February 21, 2013, The NASDAQ Stock Market LLC (‘‘Exchange’’ or ‘‘Nasdaq’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to list and trade shares (‘‘Shares’’) of the First Trust Senior Loan Fund of First Trust Exchange-Traded Fund IV (‘‘Fund’’). On March 7, 2013, the Exchange filed Amendment No. 2 to the proposed rule change, which superseded the original filing. The Commission published for comment in the Federal Register notice 21 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 20 15 U.S.C. 78s(b)(3)(A)(ii). VerDate Mar<15>2010 16:50 May 01, 2013 Jkt 229001 PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 of the proposed rule change, as modified by Amendment No. 2, on March 13, 2013.3 The Commission received no comments on the proposed rule change. This order approves the proposed rule change, as modified by Amendment No. 2. II. Description of the Proposed Rule Change The Exchange proposes to list and trade Shares pursuant to Nasdaq Rule 5735, which governs the listing and trading of Managed Fund Shares.4 The Exchange deems the Shares to be equity securities, rendering trading in the Shares subject to the Exchange’s existing rules governing the trading of equity securities.5 The Shares will be offered by the First Trust Exchange Traded Fund IV (‘‘Trust’’), which is organized as a Massachusetts business trust and is registered with the Commission as an investment company.6 First Trust Advisors L.P. is the investment adviser (‘‘Adviser’’) to the Fund. First Trust Portfolios L.P. is the principal underwriter and distributor of the Shares (‘‘Distributor’’). The Bank of New York Mellon Corporation will act as the administrator, accounting agent, custodian and transfer agent to the Fund (‘‘Custodian’’). The Adviser is affiliated with the Distributor, a broker-dealer. As required by Nasdaq Rule 5735(g),7 the Adviser has implemented a firewall with respect to its broker-dealer affiliate 3 See Securities Exchange Act Release No. 69072 (March 7, 2013), 78 FR 16006 (‘‘Notice’’). 4 Under Nasdaq’s Rules, a Managed Fund Share is a security that (a) represents an interest in a registered investment company (‘‘Investment Company’’) organized as an open-end management investment company or similar entity, that invests in a portfolio of securities selected by the Investment Company’s investment adviser consistent with the Investment Company’s investment objectives and policies; (b) is issued in a specified aggregate minimum number in return for a deposit of a specified portfolio of securities and/ or a cash amount with a value equal to the next determined net asset value; and (c) when aggregated in the same specified minimum number, may be redeemed at a holder’s request, which holder will be paid a specified portfolio of securities and/or cash with a value equal to the next determined net asset value. See Nasdaq Rule 5735(c)(1). 5 See Notice, supra note 3, 78 FR at 16017. 6 The Trust is registered under the Investment Company Act of 1940 (‘‘1940 Act’’). See PostEffective Amendment No. 15 to Registration Statement on Form N–1A for the Trust, dated December 14, 2012 (File Nos. 333–174332 and 811– 22559) (‘‘Registration Statement’’). In addition, the Exchange represents that the Trust has obtained certain exemptive relief under the 1940 Act. See Investment Company Act Release No. 30029 (April 10, 2012) (File No. 812–13795) (‘‘Exemptive Order’’). 7 Nasdaq Rule 5735(g) also requires that Adviser personnel who make decisions regarding the Fund’s portfolio be subject to procedures designed to prevent the use and dissemination of material, nonpublic information regarding the Fund’s portfolio. E:\FR\FM\02MYN1.SGM 02MYN1

Agencies

[Federal Register Volume 78, Number 85 (Thursday, May 2, 2013)]
[Notices]
[Pages 25771-25774]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-10352]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69465; File No. SR-Phlx-2013-40]


Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Strategy Fee Caps

April 26, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on April 17, 2013, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III, below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
---------------------------------------------------------------------------

    \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 Strategy Fee Caps.
    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 April 18, 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 purpose of this filing is to amend the Strategy Fee Caps which 
are currently located in Section II, entitled ``Multiply Listed 
Options.'' \3\ Today, the Exchange caps certain dividend, merger, short 
stock interest and reversal and conversion floor option transactions. 
The Exchange is proposing to reformat the manner in which the caps are 
presented by first defining each strategy and then creating a table to 
display the caps. The Exchange also proposes to also amend the reversal 
and conversion cap.
---------------------------------------------------------------------------

    \3\ This includes options overlying equities, ETFs, ETNs and 
indexes which are Multiply Listed.
---------------------------------------------------------------------------

    First, the Exchange proposes to relocate the definitions of the 
various

[[Page 25772]]

strategies, which are currently in Section II, and define them under a 
heading ``Strategies and Definitions.'' Today, the Exchange defines a 
dividend strategy as transactions done to achieve a dividend arbitrage 
involving the purchase, sale and exercise of in-the-money options of 
the same class, executed the first business day prior to the date on 
which the underlying stock goes ex-dividend. The Exchange defines a 
merger strategy as transactions done to achieve a merger arbitrage 
involving the purchase, sale and exercise of options of the same class 
and expiration date, executed the first business day prior to the date 
on which shareholders of record are required to elect their respective 
form of consideration, i.e., cash or stock. The Exchange defines a 
short stock interest strategy as transactions done to achieve a short 
stock interest arbitrage involving the purchase, sale and exercise of 
in-the-money options of the same class. The Exchange defines reversal 
and conversion strategies as transactions that employ calls and puts of 
the same strike price and the underlying stock. Reversals are 
established by combining a short stock position with a short put and a 
long call position that shares the same strike and expiration. 
Conversions employ long positions in the underlying stock that 
accompany long puts and short calls sharing the same strike and 
expiration. The Exchange is not proposing to amend the definitions 
which are currently in the rule text of the Pricing Schedule. The 
Exchange is proposing to simply relocate these definitions.
    Today, Specialist,\4\ Market Maker,\5\ Professional,\6\ Firm \7\ 
and Broker-Dealer \8\ floor option transaction charges in Multiply 
Listed Options are capped at $1,250 for dividend, merger and short 
stock interest strategies executed on the same trading day in the same 
options class, and option transaction charges in Multiply Listed 
Options are capped at $750 for reversal and conversion strategies 
executed on the same trading day in the same options class when such 
members are trading in their own proprietary accounts. Floor option 
transaction charges in Multiply Listed Options for dividend, merger, 
short stock interest and reversal and conversion strategies combined 
are further capped at $35,000 per member organization, per month when 
such members are trading in their own proprietary accounts (``Monthly 
Strategy Cap''). Reversal and conversion strategy executions are not 
included in the Monthly Strategy Cap for a Firm. To qualify for a 
strategy fee cap, the buy and sell side of a transaction must originate 
from the Exchange floor.
---------------------------------------------------------------------------

    \4\ A ``Specialist'' is an Exchange member who is registered as 
an options specialist pursuant to Rule 1020(a).
    \5\ 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.
    \6\ 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).
    \7\ The term ``Firm'' applies to any transaction that is 
identified by a member or member organization for clearing in the 
Firm range at OCC.
    \8\ The term ``Broker-Dealer'' applies to any transaction which 
is not subject to any of the other transaction fees applicable 
within a particular category.
---------------------------------------------------------------------------

    The Exchange will continue to offer a fee cap of $1,250 for 
dividend, merger and short stock interest strategies that are executed 
on the same trading day in the same options class when such members are 
trading in their own proprietary account on the Exchange's trading 
floor. With respect to the reversal and conversion fee cap, the 
Exchange will amend the fee cap to: (i) Lower the $750 fee cap to $700; 
and (ii) continue to offer such a rebate on floor options transactions 
executed on the same trading day in the same options class, but will 
not require transactions to be in a member's own proprietary account, 
as is the case today.
    Floor option transaction charges in Multiply Listed Options for 
dividend, merger, short stock interest and reversal and conversion 
strategies combined will continue to be capped at $35,000 per member 
organization, per month when such members are trading in their own 
proprietary accounts (``Monthly Strategy Cap''), except for Firm. As is 
the case today, reversal and conversion strategy executions will not be 
included in the Monthly Strategy Cap for a Firm. The Exchange proposes 
to note for purposes of clarity in the Pricing Schedule that, as is the 
case today, reversal and conversion strategy executions (as defined in 
this Section II) are included in the Monthly Firm Fee Cap.\9\
---------------------------------------------------------------------------

    \9\ Firms are subject to a maximum fee of $75,000 (``Monthly 
Firm Fee Cap''). Firm Floor Option Transaction Charges and QCC 
Transaction Fees, as defined in this section above, in the 
aggregate, for one billing month may not exceed the Monthly Firm Fee 
Cap per member organization when such members are trading in their 
own proprietary account. All dividend, merger, and short stock 
interest strategy executions (as defined in this Section II) are 
excluded from the Monthly Firm Fee Cap. Reversal and conversion 
strategy executions (as defined in this Section II) are included in 
the Monthly Firm Fee Cap. QCC Transaction Fees are included in the 
calculation of the Monthly Firm Fee Cap.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal to amend its Pricing 
Schedule is consistent with Section 6(b) of the Act \10\ in general, 
and furthers the objectives of Section 6(b)(4) of the Act,\11\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among Exchange members.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that creating a strategy definition section 
in the Pricing Schedule and relocating all of the definitions to this 
section is reasonable, equitable and not unfairly discriminatory 
because the definitions are not being amended, but rather simply 
grouped together for ease of reference. The Exchange also believes that 
it is reasonable, equitable and not unfairly discriminatory to display 
the strategy fee caps in a table format for ease of reference. The 
Exchange is not amending the dividend, merger and short stock interest 
fee caps nor is the Exchange amending the Monthly Strategy Cap, but 
will display those strategy fee caps in a table format on the Pricing 
Schedule.
    The Exchange believes that amending the reversal and conversion 
strategy to offer a lower fee cap and eliminate the requirement that 
the transaction must be executed in a member's own proprietary account 
is reasonable because the Exchange believes that a greater number of 
market participants will be incentivized to transact a greater number 
of reversal and conversion strategies on the Exchange's trading floor 
to benefit from the lower fee cap and ability to apply all reversal and 
conversion strategies executed on the same trading day in the same 
options class on the Exchange's trading floor. The Exchange believes 
that offering a lower fee cap for reversal and conversion strategies 
and not requiring that the transactions be executed in a member's own 
proprietary account, as compared to other dividend, merger and short 
stock interest strategy executions which have a higher cap ($1,250) and 
require members to execute transactions in their own proprietary 
accounts, is reasonable because the Exchange desires to specifically 
incentivize market participants to transact reversal and conversion 
strategies and believes this proposal offers market participants 
competitive fee caps. In addition, the Exchange believes that it is 
reasonable to continue to require that all fee cap strategies, which 
combine executions for purposes of the Monthly Strategy Cap, must be 
traded in the member's

[[Page 25773]]

own proprietary account. The Exchange believes that it reasonable to 
continue to impose the same requirements as today on all members for 
purpose of qualifying for the Monthly Strategy Cap. In addition, other 
options exchanges offer similar fee caps, namely NYSE Arca, Inc. 
(``NYSE Arca''),\12\ NYSE Amex, Inc. (``NYSE Amex'') \13\ and the 
Chicago Board Options Exchange, Incorporated (``CBOE'') \14\ for 
strategies.
---------------------------------------------------------------------------

    \12\ See NYSE Arca General Options and Trading Permit (OTP) 
Fees.
    \13\ See NYSE Amex Options Fee Schedule.
    \14\ See CBOE's Fees Schedule.
---------------------------------------------------------------------------

    The Exchange believes that amending the reversal and conversion 
strategy to offer a lower fee cap and eliminate the requirement that 
the transaction must be executed in a member's own proprietary account 
is equitable and not unfairly discriminatory because the Exchange is 
proposing to continue to offer the reversal and conversion fee cap to 
all market participants, except for Customers.\15\ All market 
participants that are assessed transaction fees will have an 
opportunity to cap floor option transaction charges in Multiply Listed 
Options. The Exchange believes that offering a lower fee cap for 
reversal and conversion strategies and not requiring that the 
transactions be executed in the member's own proprietary account, as 
compared to other dividend, merger and short stock interest strategy 
executions which have a higher cap ($1,250) and require members execute 
transactions in their own proprietary accounts, is equitable and not 
unfairly discriminatory because the Exchange believes this incentive is 
necessary to create further trading opportunities for members on the 
Exchange's trading floor and is being offered uniformly to all floor 
members. The Exchange believes a similar incentive is not necessary for 
dividend, merger and short stock interest strategies. In addition, the 
Exchange believes that it is equitable and not unfairly discriminatory 
to continue to require that all fee cap strategies, which combine 
executions for purposes of the Monthly Strategy Cap, must be traded in 
a member's own proprietary account. The Exchange is not amending the 
calculation of the Monthly Strategy Cap which will continue to impose 
the same requirements on members for all strategies to qualify for the 
Monthly Strategy Caps.
---------------------------------------------------------------------------

    \15\ The term ``Customer'' applies to any transaction that is 
identified by a member or member organization for clearing in the 
Customer range at The Options Clearing Corporation (``OCC'') which 
is not for the account of broker or dealer or for the account of a 
``Professional'' (as that term is defined in Rule 1000(b)(14)). 
Customers are not assessed options transaction charges in Section II 
of the Pricing Schedule.
---------------------------------------------------------------------------

    The Exchange's proposal to continue to exclude Firm floor options 
transaction charges related to reversal and conversion strategies from 
the Monthly Strategy Cap is reasonable because these fees would be 
capped as part of the Monthly Firm Fee Cap, which applies only to 
Firms. The Exchange believes that the exclusion of Firm floor options 
transaction charges related to reversal and conversion strategies from 
the Monthly Strategy Cap is equitable and not unfairly discriminatory 
because Firms, unlike other market participants, have the ability to 
cap transaction fees up to $75,000 per month. The Exchange would 
include floor option transaction charges related to reversal and 
conversion strategies in the Monthly Strategy Cap for Professionals, 
and Broker Dealers, when such members are trading in their own 
proprietary accounts, because these market participants are not subject 
to the Monthly Firm Fee Cap or other similar cap. While Specialists and 
Market Makers are subject to a Monthly Market Maker Cap on both 
electronic and floor options transaction charges, reversal and 
conversion transactions are excluded from the Monthly Market Maker 
Cap.\16\ For the reasons described above, the Exchange believes 
including reversal and conversion strategies in the Monthly Firm Fee 
Cap is reasonable, equitable and not unfairly discriminatory because 
the cap provides an incentive for Firms to transact floor transactions 
on the Exchange, which brings increased liquidity and order flow to the 
floor for the benefit of all market participants.\17\
---------------------------------------------------------------------------

    \16\ The reversal and conversion strategy executions are 
excluded from the Monthly Market Maker Cap. See Section II of the 
Pricing Schedule.
    \17\ Firms are eligible to cap floor options transactions 
charges and QCC Transaction Fees as part of the Monthly Firm Fee 
Cap. QCC Transaction Fees apply to QCC Orders as defined in Exchange 
Rule 1080(o) and Floor QCC Orders as defined in 1064(e). See Section 
II of the Pricing Schedule.
---------------------------------------------------------------------------

    The Exchange believes that its proposal to amend the applicability 
of the strategy fee caps to orders originating from the Exchange floor 
is reasonable because members pay floor brokers to execute trades on 
the Exchange floor. The Exchange believes that offering fee caps to 
members executing floor transactions would defray brokerage costs 
associated with executing strategy transactions and continue to 
incentivize members to utilize the floor for certain executions.\18\ 
The Exchange believes that its proposal to amend the applicability of 
the fee caps to orders originating from the Exchange floor is equitable 
and not unfairly discriminatory because today, the fee caps are only 
applicable for floor transactions. The Exchange believes that a 
requirement that both the buy and sell sides of the order originate 
from the floor to qualify for the fee cap constitutes equal treatment 
of members.
---------------------------------------------------------------------------

    \18\ The Exchange's proposal would only apply the fee cap to 
options transaction charges where buy and sell sides originate from 
the Exchange floor. See proposed rule text in Section II of the 
Pricing Schedule.
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act because the proposed changes 
apply uniformly to all members that incur transaction charges.\19\ 
Further, the proposed changes are substantially similar to those found 
on other options exchanges; therefore, the Exchange believes the 
proposal is consistent with robust competition and does not provide any 
unnecessary burden on competition. Further, floor members pay floor 
brokers to execute trades on the Exchange floor. The Exchange believes 
that offering fee caps to members executing floor transactions and not 
electronic executions does not create an unnecessary burden on 
competition because the fee caps defray brokerage costs associated with 
executing strategy transactions. Also, requiring that both the buy and 
sell sides of the order originate from the floor to qualify for the fee 
cap constitutes equal treatment of members.
---------------------------------------------------------------------------

    \19\ Customers are not assessed options transaction charges in 
Section II of the Pricing Schedule.
---------------------------------------------------------------------------

    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 levels at a 
particular venue to be excessive or rebates to be inadequate. 
Accordingly, the fees that are assessed and the rebates paid by the 
Exchange, as described in the proposal, are influenced by these robust 
market forces and therefore 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.

[[Page 25774]]

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.\20\ 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.
---------------------------------------------------------------------------

    \20\ 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-2013-40 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-2013-40. 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 such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-Phlx-2013-40 and should be 
submitted on or before May 23, 2013.
---------------------------------------------------------------------------

    \21\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-10352 Filed 5-1-13; 8:45 am]
BILLING CODE 8011-01-P
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.