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Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Singly Listed...

August 15, 2014



Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Singly Listed Options

August 11, 2014.

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 August 1, 2014, 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.

FOOTNOTE 1 15 U.S.C. 78s(b)(1). END FOOTNOTE

FOOTNOTE 2 17 CFR 240.19b-4. END FOOTNOTE

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

The Exchange proposes to amend Section III of the Pricing Schedule which pertains to Singly Listed Options fees. /3/

FOOTNOTE 3 Singly Listed Options fees includes options overlying currencies, equities, ETFs, ETNs treasury securities and indexes not listed on another exchange. END FOOTNOTE

The text of the proposed rule change is available on the Exchange's Web site at http://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 Section III of the Exchange's Pricing Schedule entitled "Singly Listed Options" to: (1) Amend Options Transaction Charges; (ii) delete NASDAQ OMX Alpha Indexes(TM) ("Alpha Indexes"), /4/ MSCI Index Options, /5/ and Treasury Securities /6/ pricing; (iii) adopt new pricing for FX Options /7/ (currencies); and (iv) make other technical amendments to the Pricing Schedule to clarify text and remove outdated text.

FOOTNOTE 4 Alpha Indexes measure relative total returns of one stock and one exchange-traded fund share ("ETF") underlying options which are also traded on the Exchange (each such combination of two components is referred to as an "Alpha Pair"). The first component identified in an Alpha Pair (the "Target Component") is measured against the second component identified in the Alpha Pair (the "Benchmark Component"). Alpha Index Options contracts will be exercised European-style and settled in U.S. dollars. See Securities Exchange Act Release No. 63860 (February 7, 2011), 76 FR 7888 (February 11, 2001) (SR-Phlx-2010-176). END FOOTNOTE

FOOTNOTE 5 The Exchange filed to list options on the MSCI EM Index. The MSCI EM Index is a free float-adjusted market capitalization index consisting of large and midcap component securities from countries classified by MSCI as "emerging markets," and is designed to measure equity market performance of emerging markets. The index consists of component securities from the following 21 emerging market countries: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey. See Securities Exchange Act Release No. 66420 (February 17, 2012), 77 FR 11177 (February 24, 2012) (SR-Phlx-2011-179) (an order granting approval of the proposal to list and trade options on the MSCI EM Index). The Exchange also filed to list options on the MSCI EAFE Index. The MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI EAFE Index consists of component securities from the following twenty-two (22) developed market countries: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom. See Securities Exchange Act Release No. 66569 (March 9, 2012), 77 FR 15409 (March 15, 2014) (SR-Phlx-2012-28). END FOOTNOTE

FOOTNOTE 6 Subsection (a)(1) of Phlx 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). END FOOTNOTE

FOOTNOTE 7 For purposes of pricing of Singly Listed FX Options, this includes the following U.S. dollar-settled foreign currency options: XDB, XDE, XDN, XDS, XDA, XDM, XEH, XEV, XDZ, XDC and XDV. END FOOTNOTE

Today, the Exchange assesses an Options Transaction Charge for Customers of $0.40 per contract, for Professionals, /8/ Firms /9/ and Broker-Dealers /10/ of $0.60 per contract and for Specialists /11/ and Market Makers /12/ of $0.40 per contract. These fees apply to options overlying currencies, /13/ equities, exchange-traded notes ("ETNs"), /14/ exchange-traded fund ("ETF") /15/ and indexes. /16/ Today, these fees do not apply to Alpha Index Options, MSCI Index Options or Treasury Securities, which have separate pricing listed in Section III of the Pricing Schedule. The Exchange proposes to increase the Professional, Broker-Dealer and Firm Options Transaction Charges from $0.60 to $0.70 per contract for Singly Listed Options. The increase aligns these fees with electronic Non-Penny Pilot fees in Section II of the Pricing Schedule. /17/ Despite the fee increase, the proposal will allow the Exchange to incentivize market participants to transact Singly Listed Options.

FOOTNOTE 8 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). END FOOTNOTE

FOOTNOTE 9 The term "Firm" applies to any transaction that is identified by a member or member organization for clearing in the Firm range at The Options Clearing Corporation. END FOOTNOTE

FOOTNOTE 10 The term "Broker-Dealer" applies to any transaction which is not subject to any of the other transaction fees applicable within a particular category. END FOOTNOTE

FOOTNOTE 11 A Specialist is an Exchange member who is registered as an options specialist pursuant to Rule 1020(a). END FOOTNOTE

FOOTNOTE 12 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)). END FOOTNOTE

FOOTNOTE 13 U.S. dollar-settled foreign currency options include XDB, XDE, XDN, XDS, XDA, XDM, XEH, XEV, XDZ, XDC and XDV. END FOOTNOTE

FOOTNOTE 14 ETNs are also known as "Index-Linked Securities," which are designed for investors who desire to participate in a specific market segment by providing exposure to one or more identifiable underlying securities, commodities, currencies, derivative instruments or market indexes of the foregoing. Index-Linked Securities are the non-convertible debt of an issuer that have a term of at least one (1) year but not greater than thirty (30) years. Despite the fact that Index-Linked Securities are linked to an underlying index, each trade as a single, exchange-listed security. Accordingly, rules pertaining to the listing and trading of standard equity options apply to Index-Linked Securities. END FOOTNOTE

FOOTNOTE 15 An ETF is an open-ended registered investment company under the Investment Company Act of 1940 that has received certain exemptive relief from the Commission to allow secondary market trading in the ETF shares. ETFs are generally index-based products, in that each ETF holds a portfolio of securities that is intended to provide investment results that, before fees and expenses, generally correspond to the price and yield performance of the underlying benchmark index. END FOOTNOTE

FOOTNOTE 16 The following index symbols will be assessed the Options Transaction Charges in Section III for Singly Listed Options: SOX, HGX and OSX. END FOOTNOTE

FOOTNOTE 17 Professionals, Broker-Dealers and Firms are assessed a $0.70 per contract electronic Options Transaction Charge in Multiply Listed Options. END FOOTNOTE

The Exchange proposes to delete pricing related to Alpha Indexes, MSCI Index Options and Treasury Securities because the Exchange no longer lists options on Alpha Indexes, MSCI Index Options or Treasury Securities. The separate pricing related to these products is not relevant to any product currently listed on Phlx. The Exchange proposes to remove the words "treasury securities" from the title of Section III.

--This is a summary of a Federal Register article originally published on the page number listed below--

Citation: "79 FR 48269"

Document Number: "Release No. 34-72806; File No. SR-Phlx-2014-51"

Federal Register Page Number: "48269"

"Notices"


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Source: Securities and Exchange Commission Documents & Publications


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