Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), and Rule 19b-4 thereunder, notice is hereby given that, on August 12, 2011, 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.
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 the Exchange's Fee Schedule to reflect that the Exchange will not assess a charge for the use of additional Active Specialized Quote Feed (“SQF”) Ports and Order Entry Ports in limited circumstances.
The text of the proposed rule change is available on the Exchange's Web site at http://nasdaqtrader.com/micro.aspx?id=PHLXRulefilings,, at the principal office of the Exchange, at the Commission's Public Reference Room, and on the Commission's Web site at http://www.sec.gov.
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 the proposed rule change is to allow member organizations to utilize additional Active SQF Ports and Order Entry Ports in very limited circumstances, at no additional charge, to accommodate member organizations that are attempting to colocate or otherwise change their technology and require extra ports during these transitions. The Exchange is proposing this rule change to offset costs for member organizations that are transitioning technology and require additional ports as back-up ports only while the transition is occurring.
Members require extra ports during certain technology transitions to ensure that they have functioning ports if they experience difficulties during the transition and need to send messages.
Specifically, the Exchange would not assess the Active SQF Port Fee or the Order Entry Port Fee on member organizations for the use of additional Active SQF Ports and/or Order Entry Ports for ten (10) business days in the following limited circumstances where a member organization is: (i) Colocating to another facility; or (ii) changing technology. The member organization would be required to provide the Exchange with written notification of the date it would commence the transition and the number of additional Active SQF Ports and/or Order Entry Ports that it would require during the transition. The member organization would not be assessed a fee for the use of additional Active SQF Ports and/or Order Entry Ports for the ten business days. If the member organization required additional ports beyond the ten business day period, it would be assessed the applicable monthly fee for the applicable ports. The member organization would continue to be assessed Active SQF Port Fees and Order Entry Port Fees for the ports that it requested, and the Exchange provided to it, prior to the transition.
Member organizations would be required to contact the Exchange to retain ports beyond the ten business day period as the Exchange intends to remove additional ports acquired at no cost once the ten day business day period has ended.
A member organization is required to complete a form in the manner prescribed by the Exchange in order to acquire access to Active SQF Ports or Order Entry Ports.
For example, a member organization that was utilizing three Order Entry Ports on a monthly basis, notified the Exchange that it would be updating its technology and required use of four additional Order Entry Ports for a ten day period (from September 2, 2011, through September 15, 2011), and completed its transition in ten business days (by September 15, 2011) would only be assessed the Order Entry Port Fee, as applicable, for three Order Entry Ports. If the same member organization, using the same facts, notified the Exchange that it required use of the four additional Order Entry Ports for more than ten business days (beyond September 15, 2011), the Exchange would assess that member organization the Order Entry Port Fee, as applicable, for all seven ports, the three original ports and the four additional ports.
The Exchange currently has a tiered Active SQF Port Fee as follows:
| Number of active SQF ports | Cost per port per month |
|---|---|
| 0-4 | $350 |
| 5-18 | 1,250 |
| 19-40 | 2,350 |
| 41 and over | 3,000 |
Active SQF ports refer to ports that receive inbound quotes at any time within that month. SQF is an interface that enables specialists, Streaming Quote Traders (“SQTs”) and Remote Streaming Quote Traders (“RSQTs”) to connect and send quotes into Phlx XL. Active SQF Port Fees are capped at $500 per month for member organizations that are (i) Phlx Only Members; and (ii) have 50 or less SQT assignments affiliated with their member organization.
For purposes of the Active SQF Port Fee, a Phlx Only Member is a Phlx member that is not a member or member organization of another national securities exchange.
Active SQF Port Fees are capped at $40,000 per month (“Cap”) until December 30, 2011 for all member organizations other than those member organizations who meet the requirements of the $500 per month cap.
The Exchange currently assesses an Order Entry Port Fee of $500 per month per mnemonic. The Order Entry Port Fee is a connectivity fee assessed on member organizations in connection with routing orders to the Exchange via an external order entry port. Member organizations access the Exchange's network through order entry ports. A member organization may have more than one order entry port.
The Order Entry Port Fee is waived for mnemonics that are used exclusively for complex orders where one of the components of the complex order is the underlying security. The fee is assessed regardless of usage, and solely on the number of order entry ports assigned to each member organization.
The Exchange proposes to add text to the Fee Schedule at Section VI entitled “Access Service, Cancellation, Membership, Regulatory and Other Fees” to indicate that: There will be no cost for additional Active SQF Ports or Order Entry Ports acquired for ten business days in connection with a technology transition; notification is required to the Exchange concerning the transition; and the additional ports will be removed from the system at the end of the ten business days.
The additional ports refer to the ports that were acquired at no cost for ten business days. As previously mentioned, ports that were utilized by the member organization prior to the transition will continue to be assessed the current fees.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule is consistent with Section 6(b) of the Act in general, and furthers the objectives of Section 6(b)(4) of the Act in particular, in that it is an equitable allocation of reasonable fees and other charges among Exchange members and other persons using its facilities.
15 U.S.C. 78f(b)(4).
The Exchange believes that its proposal to not assess an Active SQF Port Fee or Order Entry Port Fee for ten business days where a member organization is transitioning technology is reasonable because the Exchange is seeking to accommodate member organizations by not assessing fees for additional ports related to the technology transition. The Exchange believes that ten days is ample time for member organizations to receive additional services at no cost. The Exchange believes this accommodation will assist member organizations in effectively and efficiently transitioning technology and avoiding interruption to their business, which in turn benefits the market place.
The Exchange believes that this proposal is equitable and not unfairly discriminatory because the Exchange is offering the additional ports at no charge to all member organizations that transition technology. These member organizations who would receive the additional ports at no costs are being offered these services because they are in a special circumstance, a transition of technology, and this proposal would prevent additional extraordinary costs related to the transition.
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.
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. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
Electronic Comments
- Use the Commission's Internet comment form ( http://www.sec.gov/rules/sro.shtml ); or
- Send an e-mail to rule-comments@sec.gov. Please include File Number SR-Phlx-2011-117 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-2011-117. This file number should be included on the subject line if e-mail 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 ( http://www.sec.gov/rules/sro.shtml ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Phlx-2011-117 and should be submitted on or before September 21, 2011.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-22219 Filed 8-30-11; 8:45 am]
BILLING CODE 8011-01-P